Economist Predicts Strength In Commercial Market for '04

MACOMB TOWNSHIP, MI-A prominent Detroit economist is predicting a significant upswing in commercial construction in the region in 2004.

Sam Kahan, senior economist for the Detroit branch of the Federal Reserve Bank of Chicago, said an increase in demand for durable goods likely should translate into greater demand for manufacturing and other types of commercial space.

Over the past two years, “as demand has declined, prices have declined dramatically in this segment,” he said. “But we have seen several months of increasing orders for durable goods. This is a sign that demand for space to produce goods should begin to increase. I expect commercial construction to pick up as 2004 unfolds.”

Kahan made the statements during a recent luncheon here sponsored by the Central Macomb County Chamber of Commerce and Macomb Community Bank.

He said given budgetary troubles at virtually all levels of government, governmental construction projects likely will dry up over the intermediate term.

Kahan also said that while rising long-term interest rates may cool the red-hot residential construction market somewhat, it is by no means in danger of collapsing. “We have significant numbers of new immigrants who are looking to buy their own homes and we have the demographic of the baby boomlet now of home buying age,” he said.

Kahan said he sees the overall economy showing signs of recovery and said that recovery appears to be gaining strength. He pointed to several factors, including strong car sales — August sales for the Big Three domestic car sales are expected to show an annualized sales rate of 18 million units — and several positive months of reports from the leading economic indicators as key signs that a recovery has taken hold.

Real estate firm Grubb & Ellis also sees evidence suggesting an upturn in the industrial market, it said in a September market report.

“While the average office lease has continued to shrink in 2003, the average industrial lease has expanded as large tenants, particularly warehouse-distribution users, re-enter the market, pushed by an improving economy and pulled by attractive rental rates and concessions,” G&E said in the report.