Report: New Construction in Metro Detroit Highest Since 2003

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New construction continues to soar in the southeast Michigan region at a level not seen since 2003 says a new report released today by Newmark Grubb Knight Frank, a global commercial real estate advisory firm.

“It isn’t surprising to see construction booming because quite frankly, in many parts of metro Detroit there are virtually no vacancies,” says Fred Liesveld, managing director of the firm’s Detroit office. “With limited land options for development in the suburbs, developers are taking advantage of areas to build within the city of Detroit.”

Liesveld says during the third quarter of 2015, overall vacancy fell 50 basis points to 6.7 percent, as more than 2.5 million square feet were absorbed. He says metro Detroit has not recorded an industrial vacancy rate this low in nearly 20 years. With available space growing scarcer each quarter, construction activity is virtually doubling every other quarter. Active projects now total 23 with over 3.3 million square feet. The city has 800,000 square feet of new construction activity, up from 300,000 square feet in the previous quarter.

Liesveld predicts by mid-2016, more than 1 million square feet of new inventory will be added to the market. As examples, he cites Crown Enterprises is building one of the largest facilities, a 500,000-square-foot distribution facility for its Universal Truckload Services; Stuart Frankel Development Co. putting up a 300,000-square-foot facility on Oakland Park Boulevard, which will be half occupied by Android; Revitalizing Automotive Communities Environmental Response Trust is developing a 190,000-square-foot logistics center for FCA US (Chrysler), and  YFS Automotive Systems Inc. has announced plans to build a 150,000-square-foot manufacturing facility beginning in early 2016.

Southeast Oakland

In Southeast Oakland County, the industrial vacancy rate fell 10 basis points to 4.2 percent during the third quarter of 2015, as a little over 459,000 square feet were absorbed. The largest source of positive absorption was the completion of two major build-to-suit construction projects in Auburn Hills. Hirotec America completed and moved into its new 213,000-square-foot facility at 3000 High Meadow Drive, and Visioneering, Inc. completed an 181,000-square-foot facility on Taylor Road. Liesveld says leasing and sales activity remains strong in Southeast Oakland County with notable leases to Nexteer Automotive for 54,000 square feet on Doris Road in Auburn Hills, Greenblendz, Inc. for 44,000 square feet on Silverbell Road in Orion and Stant USA for 41,000 square feet on Enterprise Drive in Rochester. The submarket has also become attractive to investors. Recently, American Realty Capital purchased 1700 Atlantic Boulevard, a 112,000-square-foot facility, for $10 million.

Low vacancies are also spurring construction activity. More than 400,000 square feet of new construction were completed during the third quarter of 2015. Recaro recently announced it is building a new 95,000-square-foot facility in Auburn Hills. The city of Auburn Hills is rife with activity, with three other major construction projects underway: TI Group Automotive Systems’ 143,000-square-foot facility, Ralco Industry’s 124,000-square-foot facility on Taylor Road, and Total Filtration’s 30,000-square-foot facility on Commercial Drive. The largest construction project underway remains FedEx’s 350,000-square-foot facility in Oak Park.

Macomb
Industrial users in Macomb County absorbed more than 200,000 square feet during third-quarter 2015, pushing the submarket’s vacancy rate down 20 basis points to 3.0 percent. The submarket is currently experiencing increased construction activity due to the limited supply of available space. The latest project is AGM Automotive, Inc.’s 78,000-square-foot build-to-suit at 5980 Progress Drive in Sterling Heights. Other ongoing build-to-suit construction projects include a 166,000-square-foot facility for Paslin and a 154,000-square-foot facility for TransForm Automotive in Shelby Township’s Cherry Creek Corporate Park. A few notable third-quarter deals were ICR Services’ lease of a 61,340-square-foot facility at 7047 Murthum Avenue in Warren, Andoor Distributors, Inc.’s purchase of a 44,160-square-foot building at 34401 Groesbeck Highway in Clinton Township and Sequoia Tool’s 35,600-square-foot lease at 340 Hubbard Street in Mount Clemens.

Western Wayne
Western Wayne County’s industrial vacancy rate fell 50 basis points to 4.8 percent during the third quarter of 2015, as more than 360,000 square feet were absorbed. A few sales accounted for a large share of the absorption: D & B Foods Inc.’s purchase of a 108,000-square-foot warehouse at 35400 Central City Parkway, Ultimate Property II LLC’s purchase of a 60,000-square-foot facility at 35455 Veronica Street in Livonia, and Daimay North America Automotive Inc.’s acquisition of a 50,000-square foot facility at 12025 Dixie in Redford. Dynamic Diagnostics, Inc.’s 80,000-square-foot lease at 800 Junction Avenue in Plymouth was one of the submarket’s largest leases of the quarter. Construction is also expanding in Western Wayne. CW Bearing USA Inc. announced it will invest $25.9 million to build a new headquarters in the United States and technical center in Northville Township. Schostak Brothers & Company also has plans for a redevelopment at the old Home Depot site on Inkster Road. Meanwhile, RACER Trust recently sold a 116-acre block of land on the former GM Delco Chassis property.

Southern Wayne
Southern Wayne County is seeing vacancy rates tumble, as demand picks up for bulk warehouse and distribution space. Nearly one million square feet of bulk warehouse/distribution space were absorbed during the third quarter alone. Since the first quarter of 2013, the submarket has absorbed more than 4.5 million square feet, pushing the vacancy rate from 12 to 5.3 percent. The bulk of leasing activity this quarter was in the Brownstown Business Center, a 4.4 million-square-foot facility, now more than 90 percent occupied. The largest deal was with Hollingsworth Logistics Group, which signed a renewal for 550,000 square feet. Meanwhile, Keystone Automotive leased 360,000 square feet, Amazon leased 210,000 square feet, Protrans leased 78,000 square feet, and MXD Group leased 50,000 square feet.

Elsewhere in Southern Wayne County, Piston Properties LLC leased 51,000 square feet in the Van Buren Business Center. With the supply of available Class A warehouse and distribution space becoming scarce, companies such as Costco are turning to new construction. The wholesale company recently began construction of a 347,720-square-foot distribution center at 5860 Belleville Road in Van Buren Township. Ferrous CAL Company is also redeveloping the former 600,000-square-foot McLouth Steel plant in Rockwood.

Southwest Oakland
Southwest Oakland County’s industrial vacancy rate fell 20 basis points to 7.1 percent during third-quarter 2015, as a little over 105,000 square feet were absorbed. Notable deals include Garage Gurus’ 24,000-square-foot lease at the Riverwood Research Center in Southfield, Sungard Availability Services, LP’s 15,000-square-foot lease on Interchange Drive in Farmington Hills and Boldt’s 16,000-square-foot lease at the Century Industrial Park in Wixom.

Construction activity for large block space has shot up to nearly one million square feet in less than a year. Currently, there is roughly 861,000 square feet of mostly build-to-suit space under construction. A few of the largest construction projects underway include Harman/Becker Automotive Systems’ 188,000 square-foot building on Cabot in Novi, Henrob Corporation’s 165,000-square-foot building on Grand River Avenue in New Hudson, Cosma Body Assembly’s 150,000-square-foot building on Milford Road in Milford, a 110,000-square-foot speculative building going up on Lakeview Drive in Lyon Township and ATI Technologies’ 107,000-square-foot building on Meadowbrook Road in Novi.

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