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DETROIT – The Detroit retail market is expanding despite warning signs, said research officials from Marcus & Millichap. The company has a branch office in Southfield. Steve Chaben, regional manager, and Sean Hamilton, research manager, say the Detroit retail market is in the midst of a building boom as the area attracts new retailers and local stores expand to gain market share. With retail sales slumping over the last quarter and signs that the economy is beginning to slow, it appears that the well-laid plans of he last two years are going to be implemented past the peak of the economic cycle.

The two men say that although the market will feel the effects of the cooling economy and slight overbuilding, its overall strength will result in a relatively stable environment typified by small increases in vacancy and declining rent increases. Some benefits of the expansion include retailers moving back into the Detroit area, such as Kmart, grocers Kroger and Farmer Jack, and other mixed-use projects in the Central Business District and along Woodward.

Other research results presented in the report include:

o Automotive sales slowing will hurt the local economy, but not as much as before thanks to diversification of local businesses.

o Retail construction completions will increase by 62% this year to just more than 4.1 million sf. About 5.5 million sf will enter the market in 2001.

o Retail rents currently average $13.47 psf, triple net, representing a modest 1.4% increase over the last 12 months.

o Single tenant construction is dominated by small build-to-suit projects of less than 20,000-sf for drugstores, restaurants and automotive-related businesses. The last nine months have seen 74 single-tenant sales for a total of just more than $102 million.

The two men said the Detroit retail market will see vacancy climb in 2001 as construction surges to more than 5.5 million sf, and the national and local economies slow down. The combination of higher vacancy and a reduction in retail spending will limit rent increases to only 2.5% over the next 12 months.

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