No Vacancy

The region’s apartment sector is surging, having recovered from the 2008 global financial crisis and Detroit’s successful run through bankruptcy in 2014.

Trying to rent an apartment in downtown Detroit can be like driving along the main drag of a summer beachfront community dotted with flickering “No Vacancy” signs. Lucky for fall vacationers, by the time summer is out of reach, the “No” on most of those signs is turned off. That’s not the case in Detroit, however, where apartment demand now outstrips supply, resulting in the area’s highest monthly rents.

Multifamily housing shortages — stretching from the central business district to Midtown, New Center, Corktown, Mexicantown, and along the east riverfront — are only partially explained by Detroit’s late arrival in keeping pace with the national trend toward urban living.

As other Midwest cities raced out of the gate following the 2008 global financial crisis, Detroit was stuck in the starting blocks, mired in political embarrassment that was closely followed by the nation’s largest municipal bankruptcy (the city exited bankruptcy in late 2014). Now, as apartment equilibrium comes to Kansas City, Chicago, Minneapolis, and Pittsburgh, Detroit is attracting more of everything: national retailers, transplanted businesses, and trendy restaurants. Everything, it seems, except enough newly-built apartments.

“The city of Detroit alone could absorb 5,000 apartments a year,” says Jonathan Holtzman, CEO of City Club Apartments in Farmington Hills, which acquired and renovated two of downtown’s high-rise apartment buildings — the former Trolley Plaza and Millender Center apartments — in the last decade. “If what has been talked about is built, it’s maybe 1,000 apartments a year.”

Integra Realty Resources in Birmingham, which tracks local and national real estate leasing and occupancy markets, estimates the pipeline for new central business district apartments at 2,255 units between now and 2022. Add Midtown, New Center, Corktown, West Village, and a few other neighborhoods on the fringe of downtown and the total more than triples to 7,564 units.

Holtzman, whose nearly century-old business owns and manages 40,000 apartments in eight states, says there’s a disconnect between the announcement of new apartment projects, actual construction, and when the first tenants take occupancy. “In the city, the suburbs, and Ann Arbor, there’s stuff in the stages of talk or development, but there’s no supply,” he says. “The supply is a 40-unit, an 80-unit, or a 100-unit building. The media says there’s a lot going on. There’s not.”

The number of completed and fully renovated downtown and Midtown apartment projects since 2010 totals about 2,000 units, according to Integra Realty Resources.

Throughout metro Detroit, the shortage of Class A apartments — defined as the most prestigious property offering multiple amenities in any market — has led to a 17.2 percent increase in monthly rents since 2011, according to apartment data-tracker Reis Services. The current vacancy rate in the region is 2.6 percent, compared with 5.4 percent in 2011.

The city of Detroit alone could absorb 5,000 apartments a year.
— Jonathan Holtzman, CEO, City Club Apartments, Farmington Hills

Currently, there are 18 pending apartment projects in some form of development downtown: four near completion, two under construction, and a dozen others that have been proposed. That doesn’t include Dan Gilbert’s Bedrock Detroit, which is developing three acres of mainly empty space on the Monroe Block, just east of Campus Martius Park, and creating Detroit’s tallest building on the former Hudson’s site. It’s also renovating the historic Book Tower and Book Building into a hotel, apartments, offices, and ground-floor retail space, and adding apartments at the David Stott Building and the Detroit Free Press building.

“These high-rises take three years,” says Holtzman — who, like many, credits Gilbert with accelerating the city’s comeback, which normally would have played out more slowly. “He’s not delivering until 2020 or 2021. When you’re talking about development, it’s not when you start talking or building; it’s when you start delivering places to live. So 2018 to 2020 is insignificant compared with demand.”

Later this year, Holtzman will open his third downtown high-rise, the ultra-luxury 288-unit City Club Apartments, on the site of the former Statler Hotel at Washington Boulevard between Park Avenue and Clifford Street. Downtown Detroit’s first mixed-use, mid-rise building in 30 years will have a 24-hour concierge, valet service for 400 underground parking spaces, and 12,000 square feet of retail including a world-class restaurant, a pet store, and a gourmet market.

Such tony additions contribute to higher average rents in the city, yet some people who have chosen to live downtown consider the city’s burgeoning activity and nightlife a fair tradeoff. “You’re paying more than you would to live in Sterling Heights, but you’re getting some additional value for it,” says Saad Hasan, who moved into the Lofts at Merchant Row along Woodward Avenue in late 2016, when he joined General Motors Co. as a battery system designer and developer. “I like being able to walk places. That’s a big part of it.”

The 32-year-old Hasan reverse-commutes to and from GM’s Warren Technical Center, driving north when the majority of commuters are driving south in the morning, and south when evening traffic backs up heading north. Other than periodic rush hour slowdowns where I-75 and I-696 meet, he rarely encounters serious traffic.

“I had looked around Sterling Heights to be close to the Tech Center, and I looked at Royal Oak, but I wanted to be where there was a lot to do,” he says. “I don’t have to drive for everything downtown. As much as possible, I shop for groceries and go to Target on my way home from work.”

Hasan is a confirmed urbanite. He lived in an apartment on Waveland Avenue near Wrigley Field on Chicago’s north side before moving to Detroit. Prior to that he lived in The Flats, the trendy Cleveland enclave on the Cuyahoga River, just west of downtown.

City Club Apartments, along Washington Boulevard in downtown Detroit replaces the Statler Hotel, one of the city’s grand lodges that was built in 1915. City Club Apartments will open later this year.

Midtown, home to the city’s cultural and historic landmarks as well as the College for Creative Studies, the Detroit Medical Center, and Wayne State University, has 3,046 apartments that are under construction and are expected to be complete by 2020 — the highest concentration in metro Detroit.

In fact, downtown and Midtown are attracting renters who, five or 10 years ago, would have chosen the quaint environs of downtown Plymouth, Northville, or Royal Oak, where walking to restaurants, coffee shops, bars, and restaurants is enhanced by seasonal art shows, festivals, and concerts.

Now that the Tigers, Lions, Pistons, and Red Wings are all located in The District Detroit, the 50-block area that encompasses Comerica Park, Ford Field, Little Caesars Arena, and dozens of other properties, more and more people are beginning to appreciate the synergies of having four professional sports franchises within walking distance of each other. The recent growth in the office market — Gilbert’s Quicken Loans family of companies now employs more than 17,000 workers downtown, up from 2,800 employees in 2010 when he moved his businesses from the suburbs — is attractive to many people, too.

Darri’n Hardy, who grew up in West Los Angeles and attended California State University in Long Beach, lives 1.5 miles from her communications job at GM’s Global Headquarters in the Renaissance Center. She drives from River Place Apartments along East Jefferson most days — “a two-minute commute” — but rarely beyond that. “I take an Uber or a Lyft, but I typically stay downtown,” she says. “If I was going to commit to moving to Detroit, I wanted to live in the city. Coming from a large urban area where there were lots of things to do, I would not want to live in a strip mall type of area.”

Neither Hasan nor Hardy rule out living in the suburbs someday, but neither sees it happening anytime soon. “I really feel it’s a generational philosophy,” says Don Selvidge, a senior director at Integra Realty Resources and a member of the Appraisal Institute. “Many young adults don’t see the value in homeownership the way their parents did. They saw what their parents went through during the recession, when some of them lost their homes.”

In multifamily housing properties within or near urban areas, it’s all about amenities, rather than size. For example, Bedrock’s 28Grand project north of Capitol Park (Grand River Avenue and Griswold Street) offers 218 micro-apartments averaging 260 square feet of space. It was the first new downtown apartment building in more than a decade when it opened in 2017. The units are equipped with wall-mounted TVs, Rocket Fiber internet service, full-size refrigerators, two-burner stoves, microwaves, and walk-in showers.

What the units lack in individual space, 28Grand covers on the second of its 13 floors, with communal spaces featuring a kitchen, a community lounge, a fitness center, and an outdoor terrace. “It’s just me, and I don’t need a whole lot of space,” says Preston Preucil, who was 28Grand’s first tenant when he moved in last September. He had applied months earlier, when he knew he would be relocating from Chicago. The 28-year-old financial analyst at GM thought he would be walking to work at the RenCen, but instead has the same reverse commute to and from the GM Tech Center as Hasan.

Downtown and Midtown are attracting renters who, five or 10 years ago, would have chosen the quaint environs of downtown Plymouth, Northville, or Royal Oak.

One of the city’s newest apartment communities is The Scott at Brush Park, a $63-million mid-rise with 199 Class A luxury units along Woodward Avenue, just north of Little Caesars Arena. Opened late last year, the building features a mixture of studio and larger apartments, common amenities, and retail offerings. The Broder and Sachse property is 97 percent occupied by business professionals, retirees, former suburbanites, and students. Its completion to stabilization — a measurement the multifamily housing industry calls absorption — took 9.4 months.

Amenities include a second-floor swimming pool constructed from 800 pieces of stainless steel, a communal coffee machine capable of distributing 200 types of java to residents, and a large lounge. A ski lodge-style gas-powered fireplace warms the room, which includes a billiard table and 24-hour access to a 927-square-foot fitness center with a techno-gym offering virtual private exercise classes.

The Scott, named for architect Scott Booney, offers street-level enclosed parking with fast-track roll-up doors. About 60 percent of The Scott’s residents have vehicles; a few have more than one. The ground-floor retail space includes a bakery called For the Love of Sugar, a pet groomer, and a bicycle repair shop.

A rooftop terrace, The Sixth, has an outdoor bar facing downtown; residents congregate there during the warmer months. One floor below is The Stacks, a private reading room. On the floor below that is The Table, a conference room where residents can work away from their offices. The apartments feature industrial-chic appointments, and rent starts at $949 a month for a studio and tops out at $2,850 a month for a three-bedroom unit. A few two-bedroom units were available at the time of a recent tour, but studios and one-bedroom units had waiting lists.

As Holtzman notes, new construction is limited for now — although East Jefferson Development Co. in Detroit, a partnership between Lormax Stern Development Co. in Bloomfield Hills, Dennis Archer Jr., and Marcel Burger, will soon start work on a five-story residential building along East Jefferson, just east of I-375, that will offer 213 apartments, a 42,300-square-foot Meijer store, other amenities, and on-site parking.

What’s not being built from the ground up is being renovated. For example, all of the buildings bordering Capitol Park, a triangular-shaped public enclave located behind the Westin Book Cadillac Hotel, have been turned into 244 lofts and apartments over the last seven years. Four more apartment buildings are in the renovation pipeline.

Existing rentals range from 20 units in the former Security Trust building to 127 units in The Albert, the former Griswold Building renamed for its famed architect, Albert Kahn. The Broder and Sachse-owned circa-1929 building was added to the National Register of Historic Places in 1980.

The Scott at Brush Park in Detroit offers 199 luxury apartments. The $63 million project opened last year along Woodward Avenue, and is located just north of Little Caesars Arena. // Photograph Courtesy of John D’Angelo.

Capitol Park Partnership in Detroit, which in 2015 completed a renovation of the Detroit Savings Bank building into 56 loft apartments and office space, and is currently renovating two other historic structures — Capitol Park Lofts and the Farwell Building — plans to replace a former restaurant it owns in the downtown district with a mid-rise residential apartment building that includes ground-floor commercial space.

The partnership plans to add another building on a surface parking lot it owns immediately south of the Farwell Building, located at 1249 Griswold St. The addition of the two structures would leave one remaining surface parking lot in Capitol Park.

“Over the last decade, the east side of downtown has largely been transformed, while the west side took a bit longer,” says Richard Karp, a partner in Capitol Park Partnership with Richard Hosey and Kevin Prater. “With the demand we’re seeing for new and renovated residential apartments, office space, and retail and restaurant locations, the timing is right to start the process of building new structures.”

With Bedrock making so many early downtown acquisitions, the competition is fierce for older buildings that can be renovated. Paul Silva, owner of Silva Property Management (SPMLiving) in Detroit, began expanding what were 55 apartments in his portfolio almost a decade ago to more than 200 units. Lately, though, finding inventory has been difficult. “It’s definitely more of a challenge now,” he says. “By the time something gets on the market, it’s been picked over by the big players. The opportunities are the deals that aren’t listed for sale yet. I’ve met people who live and work downtown, and they’re paying over $2,000 a month in rent. I’ve picked up tenants in Midtown who got priced out of downtown.”

Beyond Midtown, Silva recently secured a property in West Village, where he’s renovating an older residential building into 38 apartments at 1000 Van Dyke. He describes the area as “one of those pockets that’s blossoming and has a great neighborhood.” SPMLiving also has 35 units under contract in New Center near the West Grand Boulevard terminus of the QLine light rail system, which travels 3.3 miles north and south on Woodward Avenue.

One of Silva’s personal favorites is The Isabelle, at 51 Palmer Street in Midtown. He acquired the circa-1894 building, located a block from the Wayne State University Law School, in 2016 for $800,000. Silva has since purchased the carriage house next door. Jaime Nelson, who pays $950 a month for a studio in The Isabelle, says she decided to “bite the bullet and pay more in rent” after living in New Center. “I wanted to live in a newer apartment,” and the seven–minute walk to her job as a graduate assistant at the Wayne State University Department of Criminal Justice sealed the deal.

“It’s like living in a dorm right next to where you have classes,” says Nelson, who will graduate from the law school in 2019. With its stainless steel kitchen appliances and Smart TV for instant access to streaming services, The Isabelle is a few levels above campus housing.

Many young adults don’t see the value in homeownership the way their parents did. They saw what their parents went through during the recession, when some of them lost their homes.
—Don Selvidge, senior director, Integra Realty Resources

Apart from local developers, the city is starting to attract outside interest. The Platform, a development group with national investors led by Peter Cummings and Dietrich Knoer, is planning to build a 10-story apartment building on the site of a former Big Boy restaurant along East Jefferson across from the Belle Isle Bridge. “That’s a location that, 10 years ago, no one would have thought of,” Selvidge says. “It’s an eastward move, further away from the core, (but) you can go (farther) east and still have the riverfront.”

In New Center, The Platform is building a $50-million apartment complex called Third and Grand just west of the Fisher Building. It’s set to open later this year and will offer 231 apartments, 20,000 square feet of commercial space, and a parking deck with around 350 spaces.

Last May, Detroit-based Soave Enterprises and its Soave Real Estate Group unveiled a $150-million, multiphase plan to transform a 4.5-acre, five-block area of Corktown bounded by Michigan and Trumbull avenues, I-75, and the Lodge Freeway.

The centerpiece is the former Checker Cab headquarters along Trumbull, just north of Michigan. Built in 1927, the three-story, 120,000-square-foot structure, along with the business of Checker Cab, was acquired by Soave Enterprises in 1998 to take advantage of the city’s emerging casino market and nightlife offerings, as well as the soon-to-open Comerica Park and Ford Field.

In recent months, Soave has relocated Checker Cab to Lafayette Park on the city’s east side to make way for Elton Park, a development of 420 residential apartments (20 percent affordable), up to 30,000 square feet of retail space, a public area called Checker Alley, streetscape improvements, and parking. The project is expected to be completed over the next three to four years; the first phase of 151 apartments and 13,400 square feet of retail space will open later this year.

At the former Tiger Stadium site, the Detroit Police Athletic League, or PAL, a nonprofit organization, is nearing completion of a $20-million youth sports complex highlighted by a baseball diamond called the Willie Horton Field of Dreams. The facility includes 2,500 stadium seats, a banquet center, office space, and room for other activities. Some 13,000 children will benefit from the complex when it opens, says Tim Richey, CEO of Detroit PAL.

On the same site, Larson Realty Group has started work on The Corner, which will include 110 apartments and 26,000 square feet of ground-floor retail space set in a four-story building that will span both Michigan and Trumbull avenues. In addition, there will be a second phase of 35 for-sale townhomes with two-car garages along Trumbull and the I-75 Service Drive. The $39-million project will take two years to complete.

The current multifamily vacancy rate in metro Detroit is 2.6 percent. The vacancy rate has fallen by 280 basis points since 2011, according to figures from Reis Services and Integra Realty Resources in downtown Birmingham.

The greatest boost for more apartments in Corktown may be Ford Motor Co.’s announcement last December that it’s bringing more than 220 employees who work on automated and electrified vehicles to The Factory, a pair of buildings at Michigan Avenue and Rosa Parks Boulevard. “It’s more challenging west of Corktown, but there’s a natural progression of growth,” Selvidge says, adding that Mexicantown in southwest Detroit will soon start drawing new apartment construction.

All of which adds to the storyline that Detroit has recovered and is expanding rapidly. Such news should grab the attention of some 3,000 global real estate professionals who are coming to Cobo Center in downtown Detroit May 1-3 for the Urban Land Institute’s Spring Meeting; it’s the first visit by the influential real estate association to Detroit in 30 years. “We’re saying to the whole country and the world, ‘Look how great our city is,’ ” Holtzman says. “Come and invest.”

Downtown Dreaming

As a teenager growing up in Southern California, Jennifer Korail had a Robert Wyland poster of whales on her bedroom wall. When the assistant communications manager moved downtown to the Broderick Tower from Ann Arbor last fall, she rediscovered Wyland — his Whaling Wall mural adorns the east side of the 34-story apartment building renovated in 2012.

“I didn’t know it was out there until a couple weeks after I moved in. Pretty funny,” Korail says.

As for living in downtown Detroit, the city’s makeover “doesn’t make for a quiet experience in the evening hours, but I hope that’s going to be a good thing in the long term,” she says.

Korail briefly considered moving to Royal Oak because of “a few intriguing locations,” but settled on the circa-1928 Broderick and its neoclassical design that is neither a square nor a parallelogram. “The Broderick Tower stood out for me because it offered an interesting balance of history — it’s the center of Detroit and it’s different, from a perspective of design.”

Then there’s the lack of a driving commute. Korail loves walking to her job at the Renaissance Center. “If it wasn’t for the weather, I would walk every day,” she says. The People Mover stop at Grand Circus Park is close by, though, and the elevated light rail arrives at the RenCen station in roughly five minutes. Korail effectively traded her 100-mile daily round-trip commute for “maybe a mile and a half.”

She has her favorite places — HopCat, Founders Brewing Co., and Apparatus Room are among them — but as a University of Michigan graduate who spent Saturdays in Michigan Stadium watching Wolverine football, she’s excited to have three professional sports venues so close. And her apartment affords a fairly good view of Comerica Park’s outfield.

“Anywhere you turn, there’s something interesting to do. I don’t think you could say that about Detroit 10 years ago,” she says.

Korail has both small-city and suburban living experience, and says her cost of living is about a wash with what she paid in Ann Arbor when commuting costs are included. She also owns a home in Sterling Heights, which is “more quiet but is away from everything. I wanted to experience something a little more busy and exciting,” she says.