The third quarter continued the leasing slowdown that the Detroit-area industrial market has seen for the last two years, according to the most recent research from Newmark.
Newmark earlier this month released its third-quarter Detroit Industrial Market Fundamentals report, a report that highlighted the still-sound fundamentals of this sector.
According to Newmark, the industrial vacancy rate in the Detroit-area market rose 40 basis points in the third quarter of this year. Even with this increase, though, the local industrial vacancy rate still stood at a low 4.2%.
Why the rise in vacancy? Newmark pointed to an influx of new industrial space. According to Newmark’s research, direct available industrial space rose by 6% to 24.3 million square feet, while available sublease space expanded by 26% when compared to the second quarter.
Newmark found that leasing activity has dipped significantly during the last two years, dropping from more than 7.2 million square feet in the third quarter of 2022 to just 1.5 million square feet in the third quarter of this year.
This marks the third consecutive quarter in which leasing activity has fallen below the Detroit market’s 10-year industrial average.
The bulk industrial market especially is seeing a slowdown in activity. Newmark says that year-to-date 404,259 square feet of net vacant space has been added to this slice of the sector, with the vacancy rate for bulk industrial climbing to 5.5%.
Class-A bulk warehouse space has a vacancy rate of 7.6%. Newmark cites slow-to-fill speculative industrial developments as the reason for this higher rate.
Asking rents for Detroit-area industrial space continue to grow, but they are growing at a slower pace. Newmark reported that the year-over-year increase in industrial asking rents here stood at 2.6% in the third quarter. That is lower than the rates that Newmark had charted in previous years: Asking rents rose on a year-over-year basis by 6.83% in 2023.
