Large Users Fueling Industrial Absorption in Detroit

DETROIT—User demand for large-block space has played a key role in elevating industrial activity in the Detroit region to heights not seen in decades. The metro area's vacancy rate fell 40 bps to just 5.6% during the third quarter of 2016, as just over 1.8 million square feet was absorbed, according to a new report from Newmark Grubb Knight Frank.

The region is not just having one great quarter. Year-to-date absorption of 7.3 million square feet is on par with the 7.7 million square feet seen for the first three quarters of 2015. And even though user demand for modern bulk warehouses fuels most of the industrial activity in many US metro areas, the demand here is for both distribution buildings and large block manufacturing facilities. In fact, any firm looking for more than 100,000 square feet has few if any options.

“Metro Detroit's industrial market continues to suffer from under capacity,” says John DeGroot, vice president of research in NGKF's Detroit office. “New construction over the past three years has produced 33 pre-leased facilities totaling 4.3 million square feet and industrial users are still demanding more space. We expect another four million square feet of new construction to come online by the end of 2017.”

“The construction numbers we are seeing are truly profound and is a testament to the strength of Detroit's industrial sector,” adds Fred Liesveld, managing director of NGKF's Detroit office.

The vacancy rate in Southern Wayne County recently sank to just 2.7%, and that has focused the attention of bulk industrial users on the Western Wayne County submarket, NGKF found. And the latter submarket's vacancy rate has taken a nosedive, falling 170 bps to 4.4% during the third quarter, as nearly 1.8 million square feet was absorbed.

The Ford Motor Co.'s new 754,000-square-foot lease at the Livonia Corporate Center is a good example of what's happening in the submarket. NGKF handles leasing for Ashley Capital, the center's owner, and senior managing director Dan Labes told GlobeSt.com that he was “able to secure a full-building tenant with a long-term lease even before the expiration of the current lease, and that hardly ever happens. Some landlords have to wait years. But right now we have historically low vacancy rates and there is still great demand from users for high-quality buildings.”

The robust demand has helped repair a lot of the damage that the recession did to the regional economy. In 2016, for example, Ashley Capital retrofitted the formerly vacant, one million-square-foot GM Powertrain Livonia Engine Plant to accommodate multiple bulk users. Tenants now occupy 80% of the complex, NGKF reports.

DETROIT—User demand for large-block space has played a key role in elevating industrial activity in the Detroit region to heights not seen in decades. The metro area's vacancy rate fell 40 bps to just 5.6% during the third quarter of 2016, as just over 1.8 million square feet was absorbed, according to a new report from Newmark Grubb Knight Frank.

The region is not just having one great quarter. Year-to-date absorption of 7.3 million square feet is on par with the 7.7 million square feet seen for the first three quarters of 2015. And even though user demand for modern bulk warehouses fuels most of the industrial activity in many US metro areas, the demand here is for both distribution buildings and large block manufacturing facilities. In fact, any firm looking for more than 100,000 square feet has few if any options.

“Metro Detroit's industrial market continues to suffer from under capacity,” says John DeGroot, vice president of research in NGKF's Detroit office. “New construction over the past three years has produced 33 pre-leased facilities totaling 4.3 million square feet and industrial users are still demanding more space. We expect another four million square feet of new construction to come online by the end of 2017.”

“The construction numbers we are seeing are truly profound and is a testament to the strength of Detroit's industrial sector,” adds Fred Liesveld, managing director of NGKF's Detroit office.

The vacancy rate in Southern Wayne County recently sank to just 2.7%, and that has focused the attention of bulk industrial users on the Western Wayne County submarket, NGKF found. And the latter submarket's vacancy rate has taken a nosedive, falling 170 bps to 4.4% during the third quarter, as nearly 1.8 million square feet was absorbed.

The Ford Motor Co.'s new 754,000-square-foot lease at the Livonia Corporate Center is a good example of what's happening in the submarket. NGKF handles leasing for Ashley Capital, the center's owner, and senior managing director Dan Labes told GlobeSt.com that he was “able to secure a full-building tenant with a long-term lease even before the expiration of the current lease, and that hardly ever happens. Some landlords have to wait years. But right now we have historically low vacancy rates and there is still great demand from users for high-quality buildings.”

The robust demand has helped repair a lot of the damage that the recession did to the regional economy. In 2016, for example, Ashley Capital retrofitted the formerly vacant, one million-square-foot GM Powertrain Livonia Engine Plant to accommodate multiple bulk users. Tenants now occupy 80% of the complex, NGKF reports.