It didn't take long — Detroit, Michigan's industrial sector is already suffering as a result of tensions between the U.S.'s largest trading partners. Particularly, it's scaring away investment activity in the market. If unresolved, the trend will likely continue.
Total leasing in the first quarter for industrial in Detroit was about 1.75 million square feet lower than 12 months prior at over two million square feet, a market report from Newmark finds.
"The potential implementation of tariffs on Canada and Mexico has contributed to a stalemate in Detroit's industrial real estate market, as a large portion of Michigan's imports are tied to the automotive industry.
"This uncertainty has already led to a decline in leasing activity."
Plus, some of the tariffs imposed by the Trump administration didn't take place in the first quarter, as many of them were announced on April 2, also known as the so-called "Liberation Day." So challenges could continue.
"If the tariffs persist, short-term leasing activity may remain subdued," Newmark cautioned.
Along with leasing taking a hit, vacancy spiked by 20 basis points to 4.6 percent. That came as 300,976 square feet of unoccupied space entered the market.
"The vacancy rate is nearing the long-term average for the first time since 2017, as both new construction projects and existing buildings are introduced to the market," Newmark said.
Right now, there's a construction boom in the industrial sector in Detroit with build-to-suits. They are accounting for 87 percent of the building. In 2025, Newmark projects that more than two million square feet of build-to-suit product will be delivered.
Also, net absorption was negative for the second straight quarter, hitting nearly -301,000 square feet. And lastly, rents are down 3.11 percent both year-over-year and from the previous three months to $7.44 per square foot.
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