HEARTLAND SNAPSHOT, APRIL 2008

Detroit Industrial Market

Still heavily reliant on the fluctuating automotive industry, the Detroit area is seeing very little new industrial development. But some submarkets are still seeing activity, including the Downriver submarket, which boasts the largest amount of recent and planned construction. Prime examples of this activity include the completion of 267,500 square feet at Brownstown Business Center; the development of the 260,000-square-foot Distriplex Metro I facility; and the construction of 63,000 square feet at Metro Airport Center. Additionally, six industrial buildings totaling more than 370,000 square feet were completed in the Detroit area, with an estimated 460,000 square feet under construction in the fourth quarter of 2007.

Industrial property owners are seeking high-tech and manufacturing tenants to fill the abundance of space left vacant by the downsizing or relocation of large companies. The area’s overall industrial vacancy rate stood at 12.6 percent at the end of 2007, while overall rental rates averaged $5.12 per square foot.

Some of the larger lease transactions recorded in the area include LePage’s 2000 leasing of 346,000 square feet on Huron River Drive in Romulus, and a 137,000-square-foot lease on Oak Creek Drive in Wixom by Caraco Pharmaceutical Laboratories Ltd.

Michigan’s statewide unemployment rate of 7.6 percent is almost 3 percent higher than the national average of 4.9 percent. Because of this, the state government has been working on programs to diversify the state’s business base and educate its workforce in anticipation of the area’s economic future. Developed in April 2007, the No Worker Left Behind initiative promises to assist more than 100,000 displaced workers by providing up to 2 years of free tuition at any Michigan community college or other approved training program, allowing displaced workers to receive needed training in high-demand skills while receiving unemployment benefits. Additionally, this program offers entrepreneurial training for individuals looking to start new businesses within the state.

Diversification is still the buzzword heard most often, as the state’s government aggressively offers tax advantages and various corporate incentives to businesses; provides business real estate availability information; and targets initiatives in the emerging sectors of life science, homeland security, automotive engineering and advanced manufacturing.

Rather than focusing on metro Detroit alone, the state’s attention is on exploiting the potential for bringing new investors and businesses into the area. Through the new incentives and initiatives available and its unique economic climate, Michigan could become the land of opportunity for local businesses seeking to expand, as well as out-of-state business wishing to move into the state and secure market share, or diversify with less burden to their real estate budget. With economic recovery on the horizon, the time to purchase more for less is now.

— Jon Savoy is the president of Novi-based Lee & Associates of Michigan.

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