During the next four years, Detroit’s economy should generate 6,700 more jobs This growth will be fueled by several new developments, including Fiat Chrysler’s new assembly plant and the Gordie Howe International Bridge between Detroit and Windsor, both of which are under construction today.
These new workers will need somewhere to live. And that is good news for the already strong multifamily market in Detroit.
Ryan Kirby, senior vice president for developer and property management firm Village Green, said that there is still room for plenty of new apartment construction in Detroit and its surrounding suburbs. And Kirby should know. Village Green has been an active player in the Detroit multifamily market. An example? Construction last year wrapped at Village Green’s The Corner, a mixed-use development built at the former site of Tiger Stadium at Trumbull and Michigan Avenue. This development features 111 residential units and is nearly fully leased out.
Expect more projects like The Corner. Detroit’s urban core and its surrounding neighborhoods are in need of modern apartment units. A growing number of people want to live in the center of the city. And there simply isn’t enough housing stock in the city yet to meet this need.
Kirby said that 61 percent of the apartment units in Detroit were built before 1980 and only 10 percent since the year 2010.
“There is certainly a desire for newer housing in Detroit,” Kirby said. “You see this with Gen Z and the Millennials. They want that walkability. They are not getting married when they are younger. They are staying in apartments longer. They want that urban experience and walkability. As fast as they can build the apartments, they will fill up.”
Kirby points to the experience Village Green has had at The Corner. The first units at this development became available in August. It took less than six months for these first units to lease up. Kirby said that is an indicator of just how great the demand is for new apartment housing in Detroit’s core.
Developers see this. Kirby said that in 2019, about 1,400 new apartment units were delivered in Detroit and its suburbs. In 2020, that number is expected to rise to more than 2,700.
And additional development is coming with these new apartments. Bedrock is developing a mixed-use development on the site of the old J.L. Hudson’s flagship retail store on the 1200 block of Woodward Avenue. The new development will rise 912 feet in the air to become the tallest building in Michigan’s history.
On the manufacturing side, a new $1.6 billion Fiat Chrysler plant is under construction on Detroit’s east side. At the same time, Google is expanding in Michigan, adding new jobs in Detroit and Ann Arbor. And the District Detroit development, which encompasses 50 blocks, six theaters, five neighborhoods and all four of Detroit’s major sports teams, continues to generate excitement in the downtown area.
“A lot of things are happening at the same time,” Kirby said. “You are seeing more development trickle in all the time. The demand, then, for new multifamily is going to be there for a while. It’s still such a largely blank palette in Detroit.”
What makes downtown Detroit so attractive for so many? Kirby points to a host of factors. Younger people, of course, are drawn to the excitement of living an urban lifestyle. They want to walk to theaters, sporting events, stores and restaurants.
But downtown Detroit is attractive to older adults, too. Kirby said that many are drawn to downtown because of nostalgia. They used to visit downtown Detroit when they were younger. They, then, are excited about the resurgence in the center of the city.
“Everyone is longing for it to go back to what it used to be,” Kirby said. “There is that sentimental value there.”
Detroit, though, faces a challenge common to many Midwest cities: Much of the new apartment stock being built in the city is too expensive for many potential renters. There isn’t enough affordable multifamily housing to meet the demand for it.
It’s not easy for developers to earn a solid profit when creating affordable housing. They need incentives from local and state governmental agencies to make affordable work. These incentives and partnerships are happening in Detroit, but they might not be happening often enough to meet the rising demand for workforce housing.
Some of the challenges with providing workforce housing, of course, are similar to the challenges developers face when they take on any project. Kirby pointed to rising construction costs and the shortage of skilled, specialized labor.
“But as we know, if there is money to be made and a building to be built, it will get figured out,” Kirby said. “And when that building is built, the renters will come.”
While downtown Detroit is seeing a surge in new apartment buildings, it’s not the only slice of the area that is experiencing rising demand for multifamily units. Kirby said that the suburbs surrounding Detroit are strong, too, with many renters choosing those suburban areas that also contain some walkability features.
Kirby said that the occupancy rates are even stronger in some suburban communities than they are in certain parts of the city.
“You are often looking at 2 percent vacancy rates in the C-Class properties in some of the suburbs,” Kirby said. “On the affordable, workforce housing side, demand is extremely strong.”
How strong will the multifamily market remain in 2020 and beyond? No one can predict that, of course. But Kirby does say that he expects demand to remain strong for apartments in and around Detroit. The number of new units coming online might slow the rate of monthly rent growth, he said. But even that dip will be a small one.
“I can see the multifamily market staying strong for a long time in Detroit,” Kirby said. “We had tariffs to deal with. We had to deal with GM going on strike in 2019. These events didn’t hurt the multifamily market. Now we have new developments coming up, new plants coming in. The sky is the limit in Detroit. I expect a continued trend of positive activity in our multifamily market.”