Detroit’s retail sector ended 2022 on a strong note, with its vacancy rate falling and absorption levels returning to positive territory.
That’s the good news from Colliers’ fourth-quarter Detroit retail report.
And this good news suggests that Detroit’s retail sector should have a strong 2023, too, as retailers in Michigan and across the country continue to use the lessons they learned during the COVID-19 pandemic — curbside pick-up, in-store pick-up, enhanced delivery and online options — to thrive today.
According to the report, the Detroit-area retail sector saw its vacancy rate drop to 5% in the fourth quarter. That’s a decrease of 10 basis points from the previous quarter and 10 basis points from the same time a year ago.
Colliers also reported that total net absorption during the fourth quarter stood at 352,000 square feet. That brought the Detroit retail market’s yearly absorptio to 332,000 square feet.
Asking rents showed positive momentum, too. According to Colliers, the overall retail asking lease rate hit $16.07 a square foot in the fourth quarter. That represents a solid increase of 8.9% from a year earlier.
Not all submarkets are created equal, of course, and Colliers pointed to the Southfield market as a particularly strong one. According to Colliers, this submarket accounted for 46% of the total retail space absorbed in the quarter. The Southfield retail market ended the fourth quarter with positive 161,112 square feet of net absorption.
Overall, the Detroit retail market saw 992,856 square feet of leases in the fourth quarter from 278 closed leased. The Macomb submarket experienced the most leasing activity, 155,017 square feet on 55 deals.
The lowest submarket for vacancy rates were Lapeer and St. Clair County, both of which ended the year with a low vacancy rate of 3.1%. The North Oakland and Try submarkets earned the highest rents, $22.67 and $22.56 a square foot, respectively.
There weren’t an exorbitant amount of retail sales during the fourth quarter in the Detroit area, but there were enough to generate $152 million in sales volume at an average of $141.79 a square foo. The largest retail sale in the fourth quarter was a 111,805-square-foot freestanding building occupied by Home Depot at 5951 Mercury Drive in Dearborn. The property traded at $13 million in the sale from Kin Properties to LaneStar Properties.
Other bigger retail sales included Tel-Huron Plaza in Pontiac, which sold for $7 million; a CVS Pharmacy in Shelby Township, which sold for $5.3 million; and a Walgreens in Novi that sold for $4.8 million.
The average cap rate on retail sales in the fourth quarter came in at 6.7%, down from 7.1% at the beginning of 2022.
