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DETROIT-The national hub of the automotive industry continues to decline. As GlobeSt.com reported earlier in the month, the industrial sector has seen an increase in availability. And now, the latest statistics for the office industry show similar signs of trouble. Grubb & Ellis Co.’s Q1 report states, “overall transaction velocity throughout the local market has slowed, available sublease space has increased dramatically and vacancy rates rose as the troubles in the automotive industry continue to paralyze the region’s commercial real estate market.”

During Q1, office vacancy rose to 23.9%, an 80-basis-point rise over the previous quarter. The class A market, which had previously faired better due to companies taking advantage of lower lease rates to upgrade, saw an 80-point increase. Vacancy for that class is now at 18.8%. Class B space is 27.2% unoccupied, while class C space is 25.4% vacant.

“One of the real problems with commercial real estate in southeastern Michigan is the high degree of uncertainty,” Fred Liesveld, EVP and managing director for Grubb & Ellis, tells GlobeSt.com. “At this point in time, tenants are seeking out short-term renewals and consolidating their space where possible because they are uncertain.”

With talk of GM potentially declaring bankruptcy by June and taking into account the shaky relationship Chrysler now has with Fiat, Detroit industry leaders are holding their breath.

“No matter what reorganization option is put into play for the automakers, the commercial real estate market will only rebound after some degree of tenants’ confidence is restored,” Liesveld tells GlobeSt.com. “That being said, many in Michigan hope the automakers can stabilize outside of bankruptcy-protected reorganization, which could cause the office market to contract further as automotive suppliers and other businesses associated with the industry are impacted and uncertainty is extended.”

The Pontiac market has fared the worst, holding the highest office vacancy at 37.9%. The Troy market as well as the CBD saw vacancy rates rise to 29.2%. For all of Q1, Detroit saw only 6,438 square feet of absorption. Troy, on the other hand, accounted for more than half of the quarter’s negative absorption with 177,000 square feet.

Auburn Hills posted the best vacancy rate at 8.7% but Grubb & Ellis points out this number is misleading as more than 40% of the leased space is on the market for sublease now that Volkswagen has moved to Virginia.

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