The largest space taken was by the US Attorney's Office, which renewed its lease for 10 years and expanded by 2,500 sf to 112,000 sf. Another government agency, the US Department of Labor, renewed another 10-year renewal for 17,797 sf on an entire floor. The leases had to go out for bid, as per US General Services Administration rules, says Fred Klugman. "These agencies prefer to be in an urban CBD whenever they can,"
Kelly Services signed a five-year extension for 3,904 sf, and Racine & Associates added 1,334 sf to their 3,172 sf space. Also, the Detroit Economic Club upgraded from a sublease to a 4,000-sf space, Klugman says. "They worked out a deal to expand a little bit as well."
The sixth lease was just telegraphed through an award letter, Klugman tells GlobeSt.com. It's for 16,100 sf, but he says he can't reveal the name of the tenant yet.
The 26-floor building is 85% occupied, Klugman says. The average lease in the building would be about $21.50 per sf, but the government leases are slightly higher, pushing the average rate to about $23 per sf, he says.
Klugman says for the first time in a long time, Downtown Detroit office is leasing better than space in the suburbs. The city still has one of the highest vacancy rates of the region, at about 30%, but had the best absorption rate in Southeast Michigan in the fourth quarter. "There's a ton of stuff going on, with cranes everywhere. It's my opinion the Michigan economy is shrinking, and we'll end up with a healthy economy that is smaller than before. The class C buildings that aren't well located will be eventually vacated and reused or torn down," he says. "Downtown is really poised to take off and make a strong comeback, as soon as the Michigan economy returns."
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