Suburban Office Market Quieter, Says Paragon

DETROIT – The Metropolitan Detroit suburban office market was quieter in the third quarter, continuing a trend started in January, according to the Paragon Corporate Realty Services Third Quarter in Review. However, notes Matthew Fenster of the company, with pent-up demand satisfied by new construction, the market has achieved a balance. If developers continue at the current rate, he says, some suburbs may be threatened with overbuilding.

Developers started nearly 280,000 sf of new construction in Farmington Hills, the I-275 corridor, Bingham Farms and Auburn Hills. “The scarcity of vacant, buildable land for sale persists in all submarkets except Auburn Hills, which limits new construction,” he says. The report also said: o Tenants continued to lease vacant space, absorbing nearly 540,000 sf of space in the third quarter.

o Technology-based companies, such as telecommunication firms, software companies and application providers, continue to make up much of the demand for space.

o Rental rates remained stagnant, averaging $24.72 psf for suburban class A space and $20.88 psf for class B.

o Occupancies held firm, with the suburbs posting a 6.8% vacancy rate in the combined Class A and B markets.

o In sales, few properties changed hands, continuing an 18-month drought of available product.

Fenster says that plenty of interested buyers still exist, mainly local investors, pension fund advisors and a few REITS seeking property for 1031 exchanges.