Metro Detroit’s Commercial Real Estate Markets: A Local Perspective January 2012

During recent conversations with my colleagues in the Southeast Michigan’s commercial real estate brokerage community; the common message is that they are experiencing increased activity on their listings; on both office and industrial buildings. This activity is not only from larger corporate firms but from locally based firms looking to relocate their operations to take advantage of today’s reduced rental rates and/or accommodate their changing needs. None the less, this activity is showing that these companies are demonstrating confidence in their businesses by making new commitments for their companies. This is evidence that Optimism abounds for 2012!

Over the past three years, leasing activity had been greatly reduced from activities seen in previous years. With the collapse of the financial markets, bankruptcies of General Motors, Chrysler and several Tier One auto suppliers; most small, medium and large companies took a wait and see attitude and put off any significant financial decisions for fear of not knowing what might come next. Over the past year, we have seen a resurgence of the automotive industry with Ford, General Motors and Chrysler all showing gains in sales and profitability.

The industrial markets in the suburbs have seen increased activity with automotive suppliers absorbing space to accommodate new contracts. The larger well located buildings have experienced increased interest while activity in smaller buildings is expected to filter down in 2012. 2012 will also see the development of new industrial buildings on a build-to-suit basis; companies who cannot find suitable facilities and will have to opt for a building constructed to fit their requirements.

On the residential front, we are starting to see construction of new housing in the most desirable areas. While construction financing is still hard to come by, the better capitalized builders are able to start construction out of capital reserves. With few spec homes available on the market these builders are hoping to fill a gap albeit a relatively small gap in the market. The best improved lots have also been snapped up by builders: some are even talking about having to go back into the land development business so that they have buildable sites in locations they believe will sell.

As the Southeastern Michigan real estate markets slowly climb out of the recession of the past few years, we are looking at 2012 with cautious optimism. 2012 will prove to be a year of transition as we are in an election year. In the meantime Optimism abounds for 2012!

Sincerely,

Matthew B. Fenster, CCIM, MCR

mfenster@paragoncrs.com