Detroit Industrial Real Estate Report Q3 2022

Detroit Industrial Real Estate Report - Box Equities

The Detroit industrial real estate market has rising rent prices, falling vacancy rates, strong construction activity, and a positive absorption rate. It’s on a historic run that’s projected to continue well into 2023.

Market fundamentals are strong across the board. Before we get into those, here’s an overview of Detroit’s current economics and market drivers.

Detroit Economic Overview

The Detroit metropolitan area has a strong economy and is projected to have a faster post-Covid recovery than the rest of Michigan.

Here are a few statistics, courtesy of Statista and the Detroit Economic Outlook for 2021 – 2027.

  • The Detroit metro area had a GDP of $220.77 billion in 2022.
  • There’s strong wage growth expected to increase to 6.6 percent in 2022, then cool to 3.7 percent in 2023.
  • Blue-collar wages are projected to grow at 6.4 percent in 2022.
  • White-collar wages are projected to grow at 8 percent in 2022.
  • Service industry wages are projected to grow at 5.2 percent in 2022.
  • By 2027, the average annual wage for payroll Detroit employees is projected to be $89,500 – 34 percent higher than 2019’s averages.

Detroit’s industrial economic growth is organized, well-funded, and marked by joint public-private participation. Key players include the Michigan Economic Development Corporation, Michigan Strategic Fund, and Detroit Economic Growth Corporation.

There are several notable Detroit industrial real estate properties in development or under construction.

  • The Gordie Howe International Bridge – this international border crossing is under construction and poised to strengthen Detroit’s appeal as an ideal location for both manufacturing and distribution.
  • The Hudson Site – a mixed-use development already in progress in downtown Detroit.
  • Stellantis – multinational automotive manufacturer Stellantis is converting its Mack Avenue Engine Complex into a future-ready assembly site.
  • General Motors – GM is expanding its Michigan operations for EV production. The growth and shift towards EV are already stoking ancillary industrial economic growth. GM is also investing $4 billion in four Michigan plants, further fueling growth across the area.
  • Lear Corporation – an American automotive seat maker is opening an $80 million plant to manufacture seats for General Motors EVs.
  • Amazon – the ecommerce giant purchased Detroit’s 142-acre fairgrounds and is developing it into a $400 million new distribution center.
  • Michigan Automotive Compressor, Inc or MACI – MACI is a DENSO (car parts maker) affiliate and Toyota-DENSO joint venture that manufactures automotive parts. MACI is already the largest manufacturing employer in Jackson City and is expanding its operations.
  • Buick City Site – the state is investing in redeveloping the former Buick City site, turning it from a brownfield into an economic driver. A further $300 million in ancillary industrial development growth is expected.

The state of Michigan has a growing supply of built and build-ready industrial sites – most of which are concentrated in the metro Detroit area.

Detroit Industrial Real Estate Stats Q3 2022 - Box Equities

Detroit Industrial Real Estate Overview

As of Q3 of 2022, Metro Detroit has a thriving industrial real estate market with healthy fundamentals. Long-term positive growth trends are continuing and projected to last well into 2023 and beyond.

Most of Detroit’s industrial assets are concentrated within seven areas – the airport and I-275 corridor, the City of Detroit, Downriver, the I-96 corridor, Macomb, Monroe, the Northern I-75 corridor, and Washtenaw. The airport I-275 corridor and Macomb are usually the most sought-after locations.

The dominant industrial real estate tenants are automotive manufacturers and suppliers. Logistics and distribution companies are other strong market participants. Data shows these tenants displaying a healthy amount of demand and requirements, leading to strong multi-year activity.

Detroit’s industrial real estate tenants are exerting a high level of demand that outmatches the presently available properties. The sector is consequently experiencing soaring construction activity. Over 6 million square feet of industrial assets are in development, with more on the way.

Detroit Industrial Real Estate Square Footage

Quick Stats:

  • Total Metro Detroit Warehousing and Distribution Space: 306,421,479 sq. ft.
  • Total Metro Detroit Manufacturing Space: 233,248,248 sq. ft.

Detroit Industrial Vacancy Rates

Quick Stats:

  • Total Metro Detroit Industrial Real Estate Vacancy Rate: 4.5%
  • Total Metro Detroit Warehousing and Distribution Vacancy Rate 5.6%
  • Total Metro Detroit Manufacturing Vacancy Rate: 3.1%

Vacancies are trending downwards. The total metro Detroit industrial real estate vacancy rate is 4.5%. The warehouse and distribution vacancy rate is 5.6% and the manufacturing vacancy rate is 3.1%.

The airport corridor has significantly less available real estate with an average vacancy rate of 3.2%.

Detroit Industrial Asking Rates

Quick Stats:

  • Total Metro Detroit Warehousing and Distribution Asking Rate: $6.60 per sq. ft.
  • Total Metro Detroit Manufacturing Asking Rate: $6.87 per sq. ft.

Asking rates are slightly more expensive in the highly in-demand airport / I-275 corridor. The average airport corridor asking rate is $6.80 per sq. ft., $7.16 per sq. ft. for warehouses and distribution properties, and $5.65 per sq. ft. for manufacturing assets.

Detroit Industrial Assets Under Construction

Detroit metro has a total of 6,042,997 sq. ft. of industrial assets under construction.

Most of the square footage is concentrated in the Airport I-275 corridor, which has around 2,148,225 sq. ft. under construction. However, those assets are purely for warehousing and distribution purposes.

The Detroit airport corridor has no new manufacturing real estate under construction at this time.

There’s a healthy amount of industrial construction underway and new construction is expected to increase. The amount of new development still falls under demand levels. The metro area has a total year-to-date net absorption of 6,652,853 sq. ft. and a positive 1.2% absorption rate.

Detroit Industrial Real Estate Investments

In our estimation, this is an optimal time to invest in Detroit industrial assets. The greater metropolitan region has retained all its historic strengths as the heartland of American manufacturing.

Political parties and representatives at all levels are favorable to industrial activities and strongly committed to long-term growth and revitalization. There’s close public-private partnership and deep appreciation for large business. Plus, Detroit has the geographical benefits of being located on the border and providing companies with distributive access to the international Canadian market.

Please take a look at our portfolio to see our current investments in metro Detroit industrial assets and contact us for any additional opportunities.