X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

DETROIT-With the cost of home ownership continuing to outpace average rental rates, apartment buildings in the Detroit market will remain a strong investment vehicle, according to a report by Marcus and Millichap of Southfield, MI. The apartment market in the Detroit MSA is ripe for substantial rent increases, which will increase property values as well as provide new owners with healthy long-term returns, says Frank Kupiec, who wrote the report.

He says the revitalization of Downtown Detroit, with new casinos andstadiums, have added to the visitors and employment base and will increase interest in apartment living in Detroit. Construction starts have been sluggish, however.

“Condominium conversions Downtown and in the suburbs are becoming increasingly popular, with owners choosing to sell off units for quick profits rather than deal with property management headaches sometimes associated with rental units,” Kupiec says.

The Rochester and North Oakland areas are experiencing the most apartment construction activity due mainly to the creation of new jobs along Automation Alley, Kupiec says, which has seen new businesses springing up to support the nearby automotive industry.

He says the pricey Troy, Birmingham and Farmington submarkets have beenactive in condominium conversions, but with a lack of developable landand rents at their peak, new apartment construction has stalled. Vacancies in the Detroit area have approached 3% over the past 12months, and should remain at that level because of so many condominiumconversions, Kupiec says.

Rent increases, although not spectacular, have continued to outpace inflation, with gains averaging 3% to 4% per year, he says.

Kupiec adds average monthly rents across the Detroit area finished 2000 at $695, a figure he said will increase by approximately 4% to $720in 2001. The average mortgage payment was $1,050 per month, a sizabledisparity that has kept the area a strong renters’ market.

“This is the time for owners to get more aggressive with rents before lower interest rates begin to make home ownership more attainable,” Kupiec says.

Apartment ownership in the Detroit MSA has traditionally been by individual and private local investors, a trend that will continue into the foreseeable future.

“With the baby boomers, who represent a significant ownership interest in the market transitioning into retirement, sales velocity should increase as they look to cash out of their long-term investments. New buyers should be plentiful in 2001, attracted by low vacancies and the potential for solid rent growth,” he adds.

Three of the top sales in the market starting this year include the 488-unit Fairland Meadow Apartments in Dearborn for $34 million, the 776-unit Chesterfield Arms Apartments in New Baltimore for $30 million and the 400-unit Lake Village of Auburn Hills for $22.9 million.

Kupiec says falling interest rates should fuel increased sales velocity this year, and the apartment market in particular will provide a strong investment option as investors look for more conservative, long-term gains, he adds.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. Apartments 2020Event

Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.