DETROIT-Despite corporate downsizings and bankruptcies in the area, the past two years have seen a stronger office market, according to a report on metro Detroit's office market, issued by Grubb & Ellis Co.'s Southfield office.
The report notes that the overall vacancy rate of approximately 20% and absorption of approximately 217,584 sf is good news, especially in light of continuing unemployment. As a result, class A landlords have offered concessions, such as reduced first-year rates, generous TIs and free rent to bring on tenants. The overall inventory in the area is close to 68 million sf, with 574,167 sf currently under construction.
The lowest vacancy rates could be found in Ann Arbor's northeast submarket, at 4.3%; the Birmingham Hills CBD at 7.5%; and Dearborn, which hovered around 9.1%. Troy and Livonia were on the higher side, reporting vacancy rates of 20.9% and 23.2% respectively.
While the southeast area seems to be climbing out of its slump, albeit slowly, the report warns that cuts by the automakers could have an impact on the Detroit office market if other industries don't expand to take on losses generated by cutbacks and plant closings in the area.
This means good news for tenants, of course, as they can continue obtaining incentives at least during the first half of 2006, while landlords try to attract class B lessors to class A properties. The report estimates that depending on the lease, concessions such as free rent and higher TIs could continue in the near future as well.
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