The office vacancy rate rose 20 basis points in Detroit during the first quarter of 2020 to hit 15.1 percent, according to the latest research from Newmark Knight Frank.
What happens next, though? Thanks to COVID-19, that’s anyone’s guess.
During the first quarter of the year, though, developers added just more than 157,000 square feet of new office space to the Detroit market, according to Newmark Knight Frank.
The rise in office vacancies was felt mostly in the Detroit suburbs. According to Newmark’s first quarter office report, large consolidations and relocations added 175,000 square feet in new vacancies to the suburban market. This pushed the suburban office vacancy rate up 50 basis points to 15.7 percent. Most of the new vacancies came in the core suburban office markets of Southfield, Troy and Farmington Hills.
The Detroit CBD, though, remains the local office market’s hot spot, according to Newmark Knight Frank. Vacancies are falling here, and developers have taken notice. Newmark points to Bedrock’s planned new skyscraper, which will rise at the site of the former Hudson’s department store. This building will be the second-tallest in Detroit, and took a step closer to breaking ground during the first quarter.
But as with everything in commercial real estate, the future of Detroit’s office market is unclear. You can blame COVID-19 for that.
“The first quarter 2020 stats showed us there are strong segments and weak segments in metro Detroit’s office market,” said Fred Liesveld, managing director of NKF’s Detroit office. “However, both the CBD and suburban areas are going to see challenges in the coming months as COVID-19 slows the market. Landlords will have to be creative in maintaining and attracting new tenants.”
