The first quarter of the year was a strong one for the industrial market in the Detroit area, with Newmark Knight Frank reporting that the vacancy rate for this sector stood at a low 4 percent during the first three months of 2020. The challenge? What happens next now that the much of the country is under orders to stay at home to stop the spread of COVID-19?
As Newmark Knight Frank writes in its first quarter Detroit industrial report, all real estate forecasts have suddenly been thrown into speculation mode. It will take weeks and months to understand just how big of an impact COVID-19 will have on even strong commercial real estate sectors, such as Detroit’s industrial market.
Newmark pointed to the halt in automobile and automotive parts production as one of the biggest possible threats for Detroit’s commercial real estate market.
“After 10 years in expansion mode, the Detroit industrial market may experience some challenges as we move forward,” said Fred Liesveld, managing director of Newmark Knight Frank’s Detroit office. “However, the performance of the industrial market during the first quarter in terms of positive absorption and construction activity illustrated the underlying strength of metro Detroit’s manufacturing and logistics sectors.”
The start of the year was certainly a strong one for Detroit’s industrial sector. New construction completions accounted for nearly half of the quarter’s 780,000 square feet of overall absorption. Most submarkets continued to see falling vacancies and quick re-leasing time. Construction was also robust. More than 605,000 square feet of construction was completed, and another 4.6 million square feet is underway.
John DeGroot, research director of Newmark Knight Frank’s Detroit office, said that the future looks busy for this sector, unless the economic impact of COVID-19 halts construction on planned projects.
DeGroot said that 13 major industrial firms are scheduled to move into new build-to-suit developments totaling more than 2 million square feet in the coming months in the Detroit area. In addition, eight speculative developments are scheduled for completion so far this year. These projects will add 2.4 million square feet of new supply to the market.
