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Demand for Industrial Warehouse Space On the Rise In Detroit

Posted by The Ruthvens on January 29, 2016

Although Detroit is known historically as one of America’s biggest warehousing and distribution cities, the economy has struggled greatly in recent years, leading to a lack of commercial real estate development. As all things in life tend to ebb and flow, that might be starting to change.

New reports and information on the industrial warehouse space in Motor City indicate developers see an increasing demand and ample opportunity for leasing commercial property and manufacturing warehouse space, according to the Detroit advertising agency and related news source Overall, the U.S. storage and warehouse leasing industry is worth an estimated $26 billion.

“Developers are still pretty cautious, but they are also optimistic,” said Dan Labes, a senior managing director for Newmark Grubb Knight Frank (NGKF), which earlier this year closed on 2.3 million square feet of industrial deals in just 45 days. “That’s why they are buying land and proposing spec projects.”

The multinational real estate firm based in New York City released new data from the fiscal third quarter that noted there is currently about 369.7 million square feet of industrial warehouse space, which includes warehouse/distribution, light industrial, research and development, and flex space, in the five Detroit counties: Wayne, Oakland, Macomb, Livingston, and Washtenaw.

One of the reasons experts are expecting new developments is because many of the spaces are large buildings that don’t necessarily fit the contemporary needs of new businesses. In order to counteract this some developers are beginning to buy up big chunks of real estate with the plan of putting in multiple, smaller commercial warehouse buildings.

Overall, the city has a 6.7% vacancy rate in these kinds of spaces, which is the lowest it’s been in 20 years, according to NGKF. It’s this presumption of rising demands that’s led to at least 23 new construction projects totaling more than 3.3 million square feet.

This sort of speculative building is actually quite common. In fact, about 62% of the 59 million square feet under construction by the end of the third quarter in 2013 was being constructed without signed tenants. It might seem risky, but things like E-commerce, which is expected to grow at a compounded annual average rate of 10% over the next five years, is creating tremendous opportunities for owners and developers of distribution and industrial warehouse space.

When asked if this growth trend can be expected to continue, at least one industry expert was emphatically optimistic.

“Hell yes, we can,” said Dennis Bernard, founder and president of Southfield-based Bernard Financial Group Inc. “Everything is demand-driven right now, and there is demand for it. There is not a lot of unused, great space.”

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