HEARTLAND SNAPSHOT, OCTOBER 2008

Detroit Industrial Market

The first half of 2008 has brought little change for Michigan’s struggling economy. In the midst of these difficult financial times, businesses and residents have been adapting to the circumstances in attempts to secure a successful future.

Taking advantage of the decreased cost of real estate, many companies and residents have opted to purchase property instead of leasing. General Motors Corporation not only celebrated its centennial this year, but made the move to purchase the Renaissance Center in Detroit, which has been its headquarters since 1996. 

New industrial development in Michigan is sluggish, with only properties in the best locations currently being developed. Difficulties with oversupply and financing have limited the number of new development projects to a select handful. 

Larger companies continue to downsize and relocate to smaller facilities, which has left a great deal of vacant industrial space in the marketplace. With vacancy rates at 14.5 percent in Wayne County; 8.4 percent in Macomb County; 15.2 percent in Livingston County; and 10.2 percent in Oakland County, the abundance of available space on the market discourages the prospect of new, unoccupied development projects.

However, the Interstate 96 corridor of Oakland County is still seeing some degree of growth and development. High-tech space in Novi remains a bright spot for the industrial sector. There are multiple projects under construction in the Beck North Corporate Park, as well as some first-generation, flex space available in the US 23 corridor. This area is desirable for buyers and tenants due to its centralized proximity to manufacturing suppliers and major freeway access. 

Although development has slowed in southeastern Michigan, Amson-Dembs Development Company is currently one of the most active developers in the area. The firm currently has two building shells available on Hudson Drive in Novi, a 63,109-square-foot facility and a 33,166-square-foot building, with another 67,000-square-foot building planned for construction this fall.

There are many great opportunities in Michigan for firms looking to relocate and get more for their commercial real estate dollars. Recently, IPG Photonics, a global laser equipment firm headquartered in Massachusetts, purchased a research and development facility on Magellan Drive in Novi, which it will use as its metro Detroit showroom and laboratory for laser-related products. In Wixom, NxtGen Emission Controls, headquartered in Canada, has leased approximately 8,500 square feet of flex space in Schonsheck’s Century Technology Center. 

Notable recent industrial transactions in the southeastern Michigan market include a 60,800-square-foot sale on Veronica Street in Livonia, a 62,809-square-foot lease on Mound Road in Warren and a 137,000-square-foot lease on Oak Creek Drive in Wixom.

Michigan’s economy is definitely struggling. The downsizing and relocation of large companies has left 8.5 percent of the state’s workforce unemployed. Real estate — both commercial and residential — is slow. The hard facts make it easy to get discouraged in this market, but there are bright spots, and many people and organizations working to reignite the regional economy. Incentives and programs have been put in place to ensure the successful rebuilding of Michigan’s economy and business base. Many unique opportunities exist for companies looking to stretch their commercial real estate dollars and grow, which makes it an opportunistic time for developers and businesses to invest in the market.

— Mark T. Schafer is a principal of Lee & Associates’ Novi, Michigan, office.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.