The overall office vacancy rate in the Detroit market climbed to 22.67% in the fourth quarter of 2022. And CRE firm Signature Associates says that this rate will climb even higher throughout this year.
This news isn’t surprising, but it isn’t exactly welcome, either. The office sector throughout the country has struggled since the start of the COVID-19 pandemic. Detroit is no exception.
Companies are still struggling to bring their workers back to the office. Many are debating how much office space they’ll need as the hybrid work model becomes more popular. It has led to uncertainty in this sector, and a lot of empty office space.
In the Detroit market, the overall office vacancy rate rose from 21.5% in the fourth quarter of 2021 to 22.67% in the fourth quarter of last year, according to Signature Associates’ most recent research.
At the same time, office asking rents have remained stagnant. Signature Associates reported that in the fourth quarter of 2022, the average direct asking rent for office space in the Detroit market stood at $18.96 a square foot. A year earlier, that figure was a nearly identical $18.98 a square foot.
These sluggish numbers, though, don’t mean that there wasn’t any office activity in Detroit’s commercial real estate market in the fourth quarter. In Livonia, Michigan, Cabinetworks Group signed a lease for 89,543 square feet of Class-B office space at 20000 Victor Parkway. In Bingham Farms, Michigan, Hondros College of Nursing signed a lease for 48,053 square feet of Class-B space at 30700 Telegraph Road in the Bingham Office Center.
And in Ann Arbor, Tetra Tech leased 21,890 square feet of office space at 1136-1138 Oak Valley Drive in the Valley Ranch Business Park.
There were some investment sales during the fourth quarter, too. Signature Associates reported that the 11-story Regent Court office building at 16800 Executive Plaza Drive in Dearborn, Michigan, sold. Ford Motor Company sold the 659,082-square-foot, 34-acre property to Mike Shehadi, chief executive officer of Farmington Hills-based PharmaScript.
Redevelopment plans for the building are being discussed now, including a plan for a mixed-use development of residential and office space.
In Ann Arbor, the 116,984-square-foot, seven-story Ashley Mews sold as an investment to Mansour Companies, LLC. The property at 414 S. Main St. sold for $21 million.
Signature Associates says that the landscape of the metropolitan Detroit office market might soon be undergoing significant change. In Detroit, a proposed $1.5 billion development planned for 10 properties in the District Detroit, including 695 residential units, 1.2 million square feet of commercial office space, 100,000 square feet of retail and two hotels.
Also in Detroit, the Westin Book Cadillac Hotel announced it will undergo a $20 million renovation with completion expected in the early summer of 2023.