National news coverage seldom shows Detroit in its best light, but a closer look reveals the city’s potential even in the face of notorious problems. “The national perspective of Detroit is not at all what is actually happening at ground level,” says Marc Nassif, BBG’s Midwest region managing director.
The real estate market has been picking up dramatically in an L-shaped corridor loosely defined by Woodward and Jefferson avenues, including Detroit’s downtown core. Investment and job growth in the area are fueling the surge, helped along by recent hospital expansions, an emerging tech industry, and Wayne State University’s financial and marketing commitment to position Midtown as the “cultural center of Detroit.”
Immediately south of Midtown and north of the central business district, a new $650 million Detroit Red Wings arena and entertainment district slated for completion by September 2017 will transform the look of downtown and fill the “gaping hole” in a 45-block area bordered by Charlotte Street to the north, Grand River to the west, Grand Circus Park to the south and Woodward Avenue to east. The plans call for housing and retail.
Some 2,000 multifamily units already have been added along the corridor in the past 24 months. Yet rents are ever on the rise, because the residential occupancy rate in and around Detroit’s central business district hit 98 percent in April, according to a KGNS TV report dubbing Detroit a “money maker for landlords.”
In the same period, the vacancy rate in downtown Detroit’s “most prized office buildings” dropped 7.7 percentage points, from 19.2 percent in 2012 to 11.5 percent.
Detroit as a whole has seen steep declines in industrial property availability, as well, positioning the aptly nicknamed Renaissance City as “the next area of opportunity for developers.”
Mayor Mike Duggan’s involvement is notable. In March, when he officially chaired a Downtown Development Authority meeting, mlive.com called it “an unusual step for a sitting mayor that shows Duggan’s hands-on approach to redeveloping the city.”
There are challenges, of course. “The capital coming into Detroit is mostly on the equity side, not the debt side,” Nassif says. And since many hopefuls have been anticipating Detroit’s comeback for decades, recent projects could be fulfilling pent-up demand and instead of signaling long-term, sustainable demand, he adds.
There is also some concern that rising rents and shifting demographics will force out the first influx of young professionals who sparked the city core’s revival five years ago. In a residential project headed to Rivertown, 20 percent of the units will be low-income. It doesn’t solve the issue, but it seems to at least acknowledge it.
Retail development in the corridor is lagging, but the arena project is expected to spur a huge retail revival. Nassif believes once the multifamily properties are leased up, retailers will fill out other parts of the corridor as well. The demand already is “close to being there,” he says, and the infrastructure already exists.
Challenges notwithstanding, recent projects suggest that investors, developers and employers see beyond Detroit’s battle scars. Alongside these visionaries, BBG has a close-up view as Detroit’s comeback story unfolds. For more information about the Detroit market, call Marc Nassif at 248-496-6787.