HEARTLAND SNAPSHOT, OCTOBER 2005

Detroit Retail Market

The predominant trend within the metropolitan Detroit retail community is the ongoing expansion of in-fill developments located in densely populated communities, according to Ronald Goldstone, senior vice president of Southfield, Michigan-based NAI Farbman. “These infill developments have been spurred in part by today's retailers and the physical requirements they demand for their concepts,” he says.

Despite Detroit's inclement weather, another major trend has been the development of open-air shopping centers. “With the success of The Village of Rochester Hills, developed by Robert B. Aikens & Associates, we expect the open-air concept to be much more prevalent in the near future,” Goldstone says. Metropolitan Detroit's five major counties account for 26 new developments with approximately 7 million square feet of new retail space. Retailers commonly found in these projects include Wal-Mart, Target, Meijer, The Home Depot, Lowe's Home Improvement Warehouse, Kohl's, T.J. Maxx, Best Buy, and Petco.

In the Livonia area, a suburb of Detroit, Schostak Companies will demolish an enclosed mall and redevelop an open-air concept. The development, formerly Wonderland Mall, is scheduled for demolition this fall and will include retailers such as Target, Super Wal-Mart, an additional big box and small retail space. “This revitalization is an example of developers continuing to move away from the 500,000-square-foot enclosed mall and toward the open-air regional shopping concept that continues to be successful in the metropolitan Detroit area,” Goldstone says.

Taubman Companies has started construction of its newest lifestyle center in Clinton Township by breaking ground on the residential portion of the $600 million mixed-use development. “This lifestyle center will feature high-end restaurants, entertainment venues and trendy stores,” Goldstone says.

In Rochester Hills, an affluent, stable suburb of Detroit, two new retail developments are being proposed that will add approximately 1.3 million square feet of retail to the area. Both projects are scheduled to provide big box, mid-box, small shop space and outlots.

Fairlane Green, a 500,000-square-foot power center developed by Archon Group, will have its grand opening this fall. “This project will serve the Wayne County communities of Dearborn, Dearborn Heights, Allen Park, Lincoln Park and Melvindale as well as other surrounding suburbs,” Goldstone says. Retailers for the project will include Target, Barnes & Noble, Bed Bath & Beyond, Cost Plus World Market, Michael's, Pier 1 Imports, Dress Barn, Old Navy and a variety of other large and mid-sized boxes. In addition, there will be up to 65,000 square feet of small shop space and five restaurant/bank outparcels.

Developers continue to build new retail centers to keep pace with residential expansion throughout the metropolitan Detroit area. “Livingston and Macomb County are the areas with the largest population growth and, subsequently, where a large amount of the retail construction is taking place,” Goldstone says. “These two counties currently have proposals for eight new developments with a combined total square footage of approximately 2.4 million square feet.”

Developers continue to recognize the benefit of redeveloping the outdated, poorly designed malls located in dense areas. These projects continue to be repositioned and are attracting big box retailers with great success.

There are several developers in the metropolitan Detroit area that are known for their specialization in the retail sector. Among them are Grand Sakwa, Taubman Companies, Robert B. Aikens & Associates, Lormax Stern and Schostak Properties.

Metropolitan Detroit is a well-established area that continues to expand with national tenants including The Home Depot, Lowe's Home Improvement Warehouse, Wal-Mart, Kohl's, BestBuy, Target, Bed Bath & Beyond, TJX Companies and Gap.

However, consumers in Detroit have had little in the way of new retail concepts to explore. Cabela's has been an exception and recently opened in the Detroit area with great success. Last year alone, more than 6 million patrons visited the outdoor concept store. “The area also looks forward to the IKEA store scheduled for opening in the summer of 2006,” Goldstone says.

While new retail concepts have been sparse, new restaurants are plentiful across metropolitan Detroit. Notable national eateries that have entered the market include P.F. Chang's China Bistro and J. Alexander's. Demand for quick-serve eateries also is strong.   These restaurants include Starbucks Coffee, Panera Bread, Cosi, Qdoba Mexican Grill, Baja Fresh and many others.

According to CoStar's most recent vacancy report for Oakland, Macomb and Wayne Counties, the retail vacancy rate has leveled off to 12.1 percent. During the past few years, the Detroit markets were experiencing retail vacancy rates of more than 14 percent, which have since been stabilized and have been running in the 12 percent area for approximately 1 year. “Office vacancy rates have also declined and stabilized, which is a sign that business is moving back into the Detroit metropolitan area,” Goldstone says.

In the near future, Livingston County will see major retail expansion as Detroit area residents continue to move west. The Interstate 96 corridor is already home to some major retail developments, and other future developments are planned. “Livingston County has long been the fastest growing county when measured by population,” Goldstone says. “And this trend looks to continue in the near future.”

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