Pent-up demand. That force is fueling the rising sales, leasing and construction activity in both the multifamily and healthcare sectors in Detroit and its surrounding communities, said David Wilkins, managing director of loan originations with Bloomfield Hills, Michigan-based commercial lender Pillar Financial.
And the best news? There is still plenty of demand for new apartments, medical clinics and medical office buildings throughout Detroit and its suburbs.
“The overall economy took such a significant hit during the recession, and then it came back so slowly. That left a great deal of pent-up demand,” Wilkins said. “And in addition to that pent-up demand, you have new demand. Baby Boomers are getting older. They want to downsize and move into apartments. The Millennials at the same time are choosing to rent at a faster pace. So these demands are providing a boost to multifamily.”
And when it comes to healthcare? Changing demographics are providing their own best to this sector.
“As the Boomers age, there are more demands on the healthcare side, as well,” Wilkins said. “People want to make it as easy as possible to get medical services. They don’t want to go to a central hospital. They want closer, more convenient options. And that is changing the way medical providers are expanding and the types of facilities they are operating.”
These trends, then, point to a bright future for both the apartment and healthcare markets in Detroit. And that can only be good news to the brokers and developers working in these sectors in this key Midwest city.
Housing changes power apartment market
Wilkins said that the aging of Millennials has brought significant changes to the housing market. Many of these young adults watched their parents struggle to make their mortgage payments during the recession. Others watched as their parents lamented the falling values of their homes during this same time.
“This led many of them to believe that apartment living not only fits their lifestyles, but is also a good economic choice,” Wilkins said.
Wilkins said that this has been especially true in states such as Michigan, which were particularly hard hit by the recession and its slow recovery.
“The recession arguably began here eight years before it started in the rest of the country,” Wilkins said. “Michigan started doing poorly in the early 2000s. The amount of pent-up demand for new apartments and for apartment living in general, then, is even more significant here. There were a lot of upper- and middle-income neighborhoods and suburbs in Michigan that haven’t had new construction in 20 years. People looking for a new apartment building had nowhere to go. The developers are now starting to facilitate that need.”
At the same time, older residents are starting to downsize. They might have children who have moved off to college. It makes sense for these older homeowners to make the move from single-family homes to apartments, which come with far less maintenance demands.
Wilkins said he, himself, is facing this choice. He has one child in college and one getting ready to enroll. He might no longer need a 3,000-square-foot home.
And Wilkins isn’t alone. Plenty of Baby Boomers are looking at their large, suddenly rather empty homes, and making the decision to move onto a smaller, maintenance-free apartment.
Developers are responding to these two trends by building. Wilkins said that new apartment buildings are rising in Detroit itself, of course, but also in surrounding markets such as Birmingham, Rochester Hills and Auburn Hills.
And what do renters want today from these new-construction buildings? Wilkins said that renters looking for new construction in the Detroit area want granite countertops, marble floors, stainless-steel appliances, large master bathrooms and big walk-in closets.
“They are all watching HGTV like the rest of us,” Wilkins said.
The healthcare market is a busy one, too, in the Detroit area. The trends here mirror those across the country; A growing number of medical providers are expanding their networks of free-standing clinics and emergency rooms.
Patients today prefer receiving treatments at smaller facilities located close to them. They don’t want to drive to a centralized hospital, dealing with traffic and parking issues as they do so. They don’t want to face the long wait times that often come with receiving care at major hospitals.
The trend, then, is for major, central hospitals to handle the most serious and complicated medical cases, and for smaller outpatient facilities to take over much of the rest of patient care.
This is a trend in the Detroit area, too.
Seniors housing, too, is a busy sector in the Detroit market, Wilkins said.
There is an especially big need for modern seniors housing facilities in the city of Detroit itself, Wilkins said. Yes, the city has lost population over the years. But those seniors who want to live in seniors housing here will find that most of the facilities in the city itself are older and lack the amenities that today’s seniors and their families want.
“There is a need for more senior-care options in Detroit,” Wilkins said. “The facilities in the city tend to be older and of an older style. Let’s face it, in many instances, healthcare in the independent- and assisted-living model is far more about the family than the individual who is actually going to be living in the facility. That’s why the marketing of these facilities is so often aimed at the family members of the residents and not the residents themselves. These family members are searching for more modern facilities with better amenity packages.”
What does Pillar look for when determining to whom to give their lending dollars? Wilkins said that lenders at Pillar first look at the experience of their borrowers.
“We look at their experience in ownership, development and management,” Wilkins said. “Those are the areas we are keying in to. What is their experience? We don’t deal with first-time developers. That is for the banks.”
Pillar lenders also look at the fundamentals of each individual project before deciding to loan money.
“We are not looking for a ‘build it and they will come’ situation,” Wilkins said. “We are looking to work with projects that match with successful projects that are already in the marketplace. Can you make your numbers work based on established revenue and expenses? Your numbers have to be on target with what we are seeing in the marketplace.”