The Detroit Commercial Real Estate Market

As the largest city in Michigan, Detroit benefits from years of urban revitalization and is now ripe with opportunities for commercial real estate investment.

Known as the Motor City due to its history as a hub for the automotive industry, Detroit hosts the three big car manufacturers: General Motors, Ford, and Chrysler. Situated on the Detroit River and bordering Windsor, Canada, the city features a strong, diverse economy and a vibrant cultural scene.

Brokers, buyers, sellers, and tenants in Detroit and beyond look to VidTech.com’s commercial property marketing videos to speed up and enhance their CRE transactions. VidTech.com proudly serves Detroit, Dearborn, Warren, Livonia, Southfield, Taylor, Troy, Farmington Hills, Pontiac, and the surrounding communities as the region’s fastest-growing CREvideo marketing  platform.

The State of Detroit Commercial Real Estate

Located in the southeastern region of Michigan, Detroit embodies resilience and innovation. As the largest city in the state and the 14th largest metropolitan area in the United States, Detroit holds a significant place in the national landscape.

Lying on the Detroit River, this city is a major port connecting Lakes Erie and St. Clair. With its deep roots in the automotive industry, Detroit is often fondly referred to as the world’s auto capital.

The economy of Detroit is as diverse as it is robust. While the automotive industry continues to be a key player, the city has also seen growth in healthcare, finance, and technology sectors. Its strategic location and skilled workforce have attracted many employers, contributing to its economic resilience. The city’s cultural vibrancy, marked by classic cars, an innovative culinary scene, and new music, adds to the eclectic experiences that make Detroit a thriving urban center.

Whether you’re considering leasing commercial space in the area or looking to invest, Detroit offers a dynamic blend of opportunities.

Detroit Regional Breakdown

While Detroit has experienced population declines in the past, the city is witnessing a trend shift. The decline rate is slowing down, and the metropolitan area continues to be a hub of activity, attracting people with its economic opportunities and vibrant lifestyle. The region’s resilience and adaptability illustrate the city’s enduring appeal, even in the face of change.

• Detroit is home to more than 620,000 residents in the city and nearly 4.4 million in the metropolitan area.
• The Detroit Urban Area is the 12th most populous in the country and includes the cities of Detroit, Pontiac, and Mt. Clemens.
• Per capita income is $40,496, and median household income is $71,265, both figures slightly higher than in Michigan.
• The cost of living in Detroit is 8% less than the US average.
• The median age is 40.4, with 38% of residents between the ages of 20 and 49, according to CensusReporter.org.

Detroit Job Market

The economy of Detroit and its metropolitan area is a dynamic mix of traditional industries and emerging sectors. The area has long been recognized as the epicenter of the automotive industry. However, it’s also becoming a hotspot for high-tech jobs, making it one of the fastest-growing regions in the US for tech jobs. The local economy continues to grow steadily, marked by job gains and wage increases.

• Total GDP for Detroit-Warren-Dearborn MSA is nearly $284 billion, growing by 40% over the past ten years.
• Key industry clusters in the Detroit region include automotive and mobility, defense, transportation and distribution, logistics, healthcare, and information technology.
• The Detroit region employs over 2.3 million people across 11 counties, including Wayne, Oakland, Macomb, and Washtenaw.
• The largest employers are Ford Motor Co., Stellantis NV, General Motors Co., the University of Michigan, Corewell Health, and the U.S. Government.
• The fastest-growing job sectors are construction, professional and business services, education and health services, and government, according to the U.S. Bureau of Labor Statistics (BLS).
• The unemployment rate is 4.5% as of September 2023.
• The Detroit region is home to several Fortune 500 companies, including Ford Motor Company in Dearborn, General Motors in Detroit, and Penske Automotive Group in Bloomfield Hills.
• The three most prominent universities in the Detroit metro area are the University of Michigan-Ann Arbor, Michigan State University, and Wayne State University, based on student enrollment numbers.
• Nearly 35% of residents hold a bachelor’s degree or higher, a rate about 10% greater than in Michigan.
• The metro area boasts a well-connected transportation infrastructure, featuring key interstates like I-75 and I-94, the Detroit Metropolitan Wayne County Airport (DTW), one of the busiest airports in the US, and the Port of Detroit, the largest seaport in the state of Michigan, all supported by comprehensive public transit systems.

Detroit Industrial Market

The Detroit industrial market is showing a slight increase in vacancy rates due to the delivery of new inventory. However, absorption remains strong, indicating a healthy demand for space. Most of the new deliveries were build-to-suits for major companies, while the rest were speculative developments, more than half of which have already been leased. Despite the increased available space, the market is maintaining a steady activity level.

Detroit Industrial Market Overview (Cushman & Wakefield Q3 2023):

• Inventory: 498,478,667 SF
• Vacancy rate: 3.0%
• Absorption: 1,054,358 SF (YTD)
• Key leases by tenant: Evans Distribution, Target, LX Pantos America
• Completions: 1,335,762 SF (YTD)
• Under construction: 4,647,195 SF
• Largest submarkets: Western Wayne, Detroit, Dearborn/Downriver

Crexi Insights:

• For Lease (active):
  • Asking rate/SqFt (median): $8 per year
  • Median SqFt/listing: 7,750
  • Days on market: 248
  • Total listings on Crexi: 88 spaces
• For Sale (active):
  • Median asking price: $799,000
  • Price/SqFt: $45
  • Asking cap rate: 7.2%
  • Days on market: 293
  • Total listings on Crexi: 116
• Sales Comps (past 12 months):
  • Median sold price: $200,000
  • Sold price/SqFt: $27
  • Total sales volume: $46.5 million
  • Sold cap rate: 8.7%
  • Median SqFt sold/transaction: 10,400
  • Total SqFt sold: 1.28 million
  • Days on market (median): 176

Detroit Office Market

The Detroit office market has faced rising vacancy rates and continued negative net absorption. Most of the vacant space is in Class B buildings, and there has been a slowdown in both construction and leasing activity. However, the slow pace of leasing could signal a potential upturn in the market in future quarters.

Detroit Office Market Overview (Cushman & Wakefield Q3 2023):

• Inventory: 102,042,981 SF
• Vacancy rate: 19.9%
• Absorption: -3,025,242 SF (YTD)
• Key leases by tenant: Dinsmore, TKS Industrial, RBC Capital Markets
• Under construction: 713,600 SF
• Largest submarkets: Central Business District, Southfield/Bingham Farms, Troy

Crexi Insights:

• For Lease (active):
  • Asking rate/SqFt (median): $20 per year
  • Median SqFt/listing: 3,428 SF
  • Days on market: 234
  • Total listings on Crexi: 414 spaces
• For Sale (active):
  • Median asking price: $660,000
  • Price/SqFt: $70
  • Asking cap rate: 7.0%
  • Days on market: 181
  • Total listings on Crexi: 52
• Sales Comps (past 12 months):
  • Median sold price: $135,000
  • Sold price/SqFt: $39
  • Total sales volume: $27.4 million
  • Sold cap rate: 8.7%
  • Median SqFt sold/transaction: 4,742 SF
  • Days on market (median): 270

Detroit Retail Market

The metro Detroit retail market continues to show steady performance, with positive net absorption and robust leasing activity in various submarkets. The overall vacancy rate has remained consistent. The average asking rate has decreased year-over-year, although there is a disparity in asking rents across different submarkets.

Detroit Retail Market Overview (Colliers Q2 2023):

• Inventory: 308,400,000 SF
• Vacancy rate: 5.1%
• Absorption: 179,400 SF (current quarter)
• Key leases by tenant: Total Wine & More, Henry Ford OptimEyes, Kids Empire
• Under construction: 1 million SF
• Largest submarkets: Macomb, West Wayne, Detroit/The Pointes

Crexi Insights:

• For Lease (active):
  • Asking rate/SqFt (median): $20 per year
  • Median SqFt/listing: 2,891 SF
  • Days on market: 257
  • Total listings on Crexi: 346 spaces
• For Sale (active):
  • Median asking price: $345,000
  • Price/SqFt: $100
  • Asking cap rate: 8.0%
  • Days on market: 162
  • Total listings on Crexi: 191
• Sales Comps (past 12 months):
  • Median sold price: $131,000
  • Sold price/SqFt: $41
  • Total sales volume: $84.2 million
  • Sold cap rate: 8.6%
  • Median SqFt sold/transaction: 3,120 SF
  • Days on market (median): 74

Detroit Multifamily Market

Detroit’s multifamily market presents a varied landscape. Rent growth, which experienced some stagnation in the first quarter, has shown signs of recovery, even exceeding the national rate. However, occupancy rates have significantly dropped nationwide and in Detroit, possibly due to economic uncertainty. Development activity has slowed, with a considerable decrease in completions compared to the previous year. However, many units are under construction or in the planning stages, indicating potential future growth.

Detroit Multifamily Market Overview (Friedman Real Estate 2023 Mid-Year Report):

• Total housing units: 1,916,090
• Multi-unit inventory: 350,000 units
• Vacancy rate: 7.5%
• Effective rent per unit: $1,225
• Annual rent growth: 3.1%
• Units under construction: 8,300
• Key sales by property: Sherwood Heights $20.5 million, Washington Place $8.3 million, Taylor Gardens $4.1 million
• Largest submarkets: Macomb, Dearborn/Downriver, Ann Arbor

Crexi Insights:

• For Sale (active):
  • Median asking price: $595,000
  • Price/SqFt: $71
  • Price/Unit: $57,600
  • Asking cap rate: 8.0%
  • Days on market: 159
  • Total listings on Crexi: 81
• Sales Comps (past 12 months):
  • Median sold price: $77,500
  • Sold price/SqFt: $52
  • Sold price/unit: $30,000
  • Total sales volume: $17.7 million
  • Sold cap rate: 9.7%
  • Total SqFt sold: 324,000
  • Days on market (median): 73

For more information on how VidTech.com can help you close more deals in the Detroit commercial real estate market, visit VidTech.com.