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DETROIT-Though many think the industrial market in the Southeast Michigan area is at its lowest point, there are a few factors that are actually keeping activity somewhat steady–like in Detroit–according to local experts. They include aggressive incentive packages by communities and the state, an attempt at diversification of the reliance on domestic automotive firms and an almost complete halt to new construction.

The vacancy rate, according to three separate Q2 market reports released Wednesday, hovers around 14%, unchanged from Q1 and even somewhat down from the second quarter in 2007. Rental rates also have remained steady at around $4.75 per sf. One glaring trend, however, is made clear by a Colliers International data sheet – there was virtually no new construction delivered in the second quarter or year-to-date, 48,010 sf and 118,716 sf respectively, and only about 400,000 sf is under construction across the entire 440 million sf market.

“That’s the silver lining, right there,” says Steve Chaben, FVP and regional manager for Marcus & Millichap. “There’s been no demand, so we’ve held off building anything. Once the demand returns, the existing space will get absorbed, and we tan return to health much quicker.”

Add this to the outflow of incentive packages to attract new types of jobs in an area almost completely dependent on the auto industry, and there could be that demand return, he says. “Forever our community has talked about diversifying our economy, and we never figured it out. Now with the auto industry changing, we’re being forced to figure it out,” Chaben tells GlobeSt.com.

And even though the local Ford, Chrysler and General Motors companies are cutting jobs to stay afloat in an economy where big-ticket-item spending is down and gas prices are high, foreign firms, including the automotive industry, are flocking to the US, and Michigan, to invest. “The slowdown in domestic-auto production has caused problems, but you’re going to continue to see an increase in activity from the foreign suppliers, it’s a very competitive market out there,” says John Boyd, an EVP with Signature Associates. Also, while the local firms are losing auto sales in the US, they’re gaining on the foreign sales market, such as Wednesday’s report that though GM sales declined 5% in the first half of the year, they grew a record 10% in foreign countries.

Deals are still getting done, such as Technicolor Videocassette of Michigan signing for almost 400,000 sf in the Pinnacle Logistics Park, and NAI Welsh buying a 212,758-sf distribution center on Guenther Drive in Warren, MI. This movement amounts to little more than musical chairs, Chaben says, but any new jobs are good jobs, such as the recent Michigan Economic Growth Authority Grants to bring firms like Harman Becker Gibbs Technologies Inc. here over other states. “We have not really seen positive job growth this century, so seeing these new jobs is like water in the desert. We’re hoping it’s a kick toward movement,” Chaben says.

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