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MichiganOffice

Detroit numbers are stark: Office market still struggling as work-from-home continues

Dan Rafter January 28, 2021
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The numbers are grim: The Detroit office market recorded nearly 780,000 square feet in net vacancies in 2020. That’s a level not seen here in 10 years. To no one’s surprise? COVID-19 is to blame.

That’s the big takeaway from the fourth quarter Metro Detroit Office Market Report released Jan. 27 by Newmark. Office markets across the country have been gutted by the pandemic. Detroit’s office sector is no exception.

According to Newmark’s report, the office vacancy rate in the metropolitan Detroit area rose 80 basis points to 16.2 percent during the fourth quarter of 2020. Just more than 548,000 square feet in net vacancies were added to the market during the quarter.

The big cause of this was the pandemic, which forced companies to enact work-from-home policies that are largely still running. This has led to far less demand for office space, especially in the urban center of the city.

The pandemic, though, isn’t the only cause of the rising vacancies. Large chunks of newly renovated office space also came back on the market in Detroit, boosting vacancies. Then there was Mercedes-Benz, which vacated a large block of space in suburban Farmington Hills as it began building a new headquarters facility.

While vacancies rose, sublease space trended up 7 percent to more than 1.06 million square feet from the moment when stay-at-home measures were ordered in the first quarter of the year to the end of the fourth quarter of 2020.

The good news? The pandemic, as difficult as it can be remember, is only temporary. Workers will return to the office, maybe as soon as late spring or early summer depending on how quickly vaccines are dispensed. This means that the future for the Detroit office market — and markets across the country — should be brighter.

“2020 was a challenging year for the metro Detroit office market,” said Fred Liesveld, managing director of Newmark’s Detroit office. “The effects of COVID-19 significantly reduced market activity. However, we are confident as more and more companies return their employees to the workplace that the office sector will see a return to normal market conditions.”

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