Newmark Knight Frank (NFK), a commercial real estate advisory firm with its U.S. headquarters in New York and a Detroit office, reported that Detroit’s office market vacancy rate fell 30 basis points to 15.2 percent during the first quarter of 2019. More than 261,000 square feet of previously unoccupied space now is being used.
Detroit continues to see new investments in development and tenant migration. Demand also is showing up in Farmington Hills, Troy, and Ann Arbor, and vacancies are either idle or trending up in Novi, Livonia, and Southfield.
“The level of new construction activity in Detroit is testament to the confidence in the downtown market,” says Fred Liesveld, managing director of NKF’s Detroit office. “We are now seeing demand spread from the city’s (central business district) into the New Center area.”
Detroit’s overall vacancy rate fell 80 basis points to 13.1 percent during the first quarter. Vacancy in the New Center corridor fell to 15.3 percent from 25.6 percent during the previous quarter, as more than 101,000 square feet were absorbed. PricewaterhouseCoopers and Davenport University leased 30,000 square feet and 12,000 square feet, respectively, of the New Center One building. United Way for Southeastern Michigan leased 36,000 square feet in the Fisher Building.
The Detroit central business district office vacancy rate fell 10 basis points to 12.8 percent during the first quarter. More than 123,000 square feet were absorbed. There were new vacancies from Brewery Park II on Brewery Park Boulevard and the Francis Palms Building at 2111 Woodward Ave., but Universal McCann expanded into 20,000 square feet in the First National Building at 660 Woodward Ave. LinkedIn moved into 76,000 square feet at 1523 Woodward Ave.
Construction activity in the area also is growing. Warner, Norcross, and Judd pre-leased 30,000 square feet on Olympia Development Co.’s 2715 Woodward Ave. The five-story, 110,000-square-foot office building will be located between Little Caesars Arena and Wayne State University’s Mike Ilitch School of Business. Construction continues at the former Hudson’s Department Store site on Detroit’s tallest skyscraper. The nearly $1-billion construction project, which is being developed by Bedrock, will feature residential units, retail space, and an estimated 263,000 square feet of office space. Bedrock also is adding a 310,000-square-foot expansion to the One Campus Martius building.
Little Caesars is expected to complete its $150-million, nine-story, 234,000-square-foot world headquarters at Woodward Avenue and Columbia Street by the end of the second quarter (some workers already have moved in). Chemical Bank is expected to start construction on a 250,000-square-foot, 20-story high rise at Woodward Avenue and Elizabeth Street around the same time. Bedrock is renovating the 160,000-square-foot Corktown Lofts into a mixed-use development with 71,000 square feet of new office space. Coyote Logistics plans to move into the building. Ford Motor Co.’s 1.2 million-square-foot Michigan Central Station campus renovation is planned for the district over the next five years.
Southfield’s office vacancy rate increased 110 basis points to 21.4 percent during the first quarter, while Bloomfield Hills’ office vacancy rate increased 40 basis points to 7.6 percent. Novi’s also jumped from 6.6 percent to 9.9 percent, and Livonia’s office market vacancy rate increased by 50 basis points to 12.6 percent.
Troy’s office market vacancy rate fell 40 basis points to 17 percent, while the Farmington Hills rate fell 120 basis points to 10.4 percent. The Birmingham central business district’s office vacancy rate fell 70 basis points to 12.9 percent.
Ann Arbor’s Briarwood corridor saw a vacancy drop as the University of Michigan moved into 120,000 square feet at 777 E. Eisenhower Parkway. Mercedes-Benz Research and Development North America moved into 20,000 square feet at 3959 Research Park Drive. The corridor’s vacancy rate fell from 13.6 percent to 5.5 percent, the city’s central business district corridor vacancy rate stayed at 3.4 percent, and its northeast corridor had a 1.4 percent vacancy rate.
The full report is available here.