Cautious. That’s how Savills describes the approach that developers are taking when it comes to adding new industrial buildings in the Detroit market.
This isn’t surprising. The threat of tariffs is impacting Detroit’s auto industry. And that is giving developers pause as they determine their plans for new industrial product in this market.
That’s one of the key takeaways from the third quarter Detroit industrial report released earlier this month by Savills Research & Data Services.
According to the report, the Detroit industrial market continued to show signs of moderation during the third quarter of 2025, as vacancy rates edged higher and leasing activity slowed.
Savills reported that the region’s industrial vacancy rate climbed to 5.2% in the third quarter, up from 4.7% a year earlier. Despite this increase, Detroit’s industrial fundamentals remain solid compared to national averages, reflecting the market’s resilience amid shifting economic and manufacturing trends.
Savills reported that year-to-date net absorption fell to negative 0.6 million square feet in the third quarter. That makes four quarters of negative absorption in Detroit-area industrial market in the past five quarters, according to Savills.
While that may suggest a slowdown in demand, Savills reported that much of the pullback is driven by uncertainty in the automotive sector, particularly among suppliers navigating regulatory changes and evolving production plans tied to electric vehicle manufacturing.
Rents dip for a second straight quarter
As vacancy ticked higher, average asking rents also declined, marking the second consecutive quarterly dip. Asking rents averaged $6.54 per square foot in the third quarter, down from $6.75 a square foot one year ago.
The softness, however, is not uniform across the market. Older, less functional properties, including those lacking modern logistics capabilities, are feeling the greatest pressure. These spaces face longer marketing timelines and sharper pricing discounts as tenants gravitate toward higher-quality facilities.
In contrast, Class-A industrial buildings in the Detroit market continue to draw interest from advanced manufacturers and distribution users, Savills reported. The company added that landlords of newer properties are mostly holding firm on face rents but are offering more concessions and flexible deal terms to keep deals moving.
Sublease availability, meanwhile, remains elevated across several Detroit submarkets, increasing competition for second-generation space and giving tenants more leverage in lease negotiations.
Modest momentum for development activity
Even as leasing activity softened, construction volume ticked upward in the third quarter. Savills reported 3 million square feet of industrial space under construction in the metropolitan Detroit, market the highest level in five quarters and up from 2 million square feet during the same period last year.
Still, development activity remains restrained by historical standards. Much of the new construction is concentrated in build-to-suit projects tied to specific tenants rather than speculative developments. Year-to-date deliveries totaled 1.1 million square feet, behind last year’s pace.
A brighter future?
Savills expects occupier activity in Detroit’s industrial sector to remain steady but cautious through the remainder of 2025 and into early 2026. The automotive industry, which has long been a key driver of the region’s industrial market, remains in a state of transition as producers and suppliers adjust to evolving emissions standards and a change in electric vehicle production strategies.
In its report, Savills predicted that asking rents will likely remain flat or post modest declines in the near term, particularly for older or less-efficient industrial product. The firm also anticipates that build-to-suit development will continue to dominate new construction activity, with speculative projects remaining rare.
