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DETROIT-Investment in the metropolitan area office market is still going at the same pace, according to a third quarter report from Paragon Corporate Realty Services of Farmington Hills, MI. Matthew Fenster, the firm’s executive director, says owners areusing incentives to keep tenants through an uncertain economy.

Fenster says there are many variables involved in keeping Motor City offices humming.

“It’s a combination of factors. First, there are few, if any, distressed owners this time around because overbuilding wasn’t the problem it was in the late ‘80s–so there are really no foreclosures or fire sales. Second, people burned by the stock market consider real estate a safer investment today,” Fenster says in a statement. “As a result, there remains a fair amount of investment dollars looking for buildings. But few landlords are selling,so we’re seeing hardly any deals.”

To retain the value of their assets, many owners were renewing tenants at discounted rental rates for just one or two years, intending to renew at healthier rents when the market revives, he reports.

Other property owners offered generous tenant improvement packages and concessions to attract and retain tenants, and then gave tenants free rent for unspent TI money.

“By essentially ‘buying up’ tenants’ rents, these owners hoped to keep occupancy levels up and protect their asking rental rates–and thus maintain the value of their buildings,” Fenster says.

Conditions are unchanged from the second quarter, he says. The overall vacancy rate stood at 12.9% in the class-A market and 19.7% in the class-B sector. Average class-A asking rental rates were $24.72 per sf, while class-B rents averaged $20.78 per sf.

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