"As the market has absorbed the impact of the economic slowdown, owners and investors in Detroit are not worried," Spiekerman says in a recent apartment research report. "They know that the apartment market will weather this storm."

He said vacancy rates increased 1 percentage point in 2001 due to the slow economy, and predicted that the vacancy rate will continue to increase another 1 to 5 points by the end of 2002.

"Net out-migration, which totaled 15,000 residents in 2000, and increasing home ownership are also contributing to the apartment vacancies," Spiekerman says.

He reports occupancies have been weakest in the high-end luxury apartment market, which endure competition from condominiums and single-family homes. Most new apartments are luxury units, Spiekerman says, which also increases competition.

Condominium sales have been way up in the Detroit area, he says. In Oakland County, condo sales were up 23% during the first quarter of 2002, and 9% in Wayne County.

"They are also more appealing to aging baby boomers who desire a more downsized, low-maintenance lifestyle than single-family home ownership," Spiekerman says.

Apartment rent increases and sales will likely remain flat during 2002, he says. Both should rebound by 2003, Spiekerman adds.

For example, he points out that the city of Detroit is seeing a new multifamily project.

Scripps Park Associates and the Detroit Housing Commission have signed a $97-million development agreement. Woodbridge Estates, a 47-acre mixed-use property, has received approvals from the federal government and the city.

The development will offer 297 senior rental units, 101 new homes, 245 new rental units and a 12,000-sf neighborhood retail center. The community will include a 100-unit enriched senior building to address special needs of residents.

"Although supply is relatively low, and not approaching critical overbuilding, new units are still higher than last year, and vacancies are heading higher," Spiekerman says. "Even with these negatives, the Detroit market will be reasonably good shape when the local economy rebounds, which is anticipated late next year."