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DETROIT-In its most recent Office Research Report, Marcus & Millichap say Detroit isstruggling with the soft national economy.Vacancies continue to rise, projected to 18%, leaving rents on adownward trend another 3% to $17.31 per sf, said thecompany.

As reasoning, the company said the Detroit market is closely tied to theautomotive industry, which has had lackluster results the last two years.The company said recent reports show that there’s sign of furthercontraction in automobile manufacturing as well, which will probably resultin more layoffs, said Marcus & Millichap.

The company also said the Detroit market’s strength lies in its suburbcities of Farmington Hills, Troy, Southfield and Bloomfield, MI. Thesesub-markets, which were doing well pre-Sept. 11, 2001, now have recordedmore than 1.8 million sf of negative absorption.

The largest project nearing completion is Kojaian Cos. second phase ofFarmington Hills Office Center, which will add 235,000-sf of space.Regarding construction, Marcus & Millichap analysts feel developers will add600,000-sf of new office space this year in the region, a 45% declinefrom 2002.

For 2003, the struggling economy will continue to take its toll, says thecompany. Negative absorption of about 750,000-sf is expected in the Detroitmarket this year, the analysts said, and the overall sales price is expectedto drop 5% to $107 per sf.

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