Tony Avendt is senior director with the Detroit office of Cushman & Wakefield who specializes in industrial real estate. Midwest Real Estate News asked Avendt three key questions about the state of the Detroit commercial real estate market.
What is it like to see all the real estate activity currently happening in Detroit? Why do you think we are seeing so much happening in the city today?
Tony Avendt: The city is experiencing more activity than it has in the last 50-plus years, and it is invigorating. As a long-time metro Detroiter, it’s exciting to see our community through the eyes of entrepreneurs and investors new to the region. They wonder at the vastness of opportunity. The energy is contagious, and the activity is based on strong underlying fundamentals. The shift toward automation is generating a tremendous amount of demand for new space, engineering talent and supplier base. Meanwhile, a renewed appreciation for American manufacturing has brought to light Detroit’s unique mix of genuine “can-do” grit and revitalization.
How strong is the industrial market in Detroit today, and what are some of the key factors fueling it?
Avendt: The local industrial market is extremely strong. There are three primary contributors:
• The impact of e-commerce was relatively delayed in metro Detroit. We are just now seeing much of the demand that many parts of the country experienced two or three years ago.
• The shift toward autonomous vehicles requires a tremendous amount of research and development, which in many instances requires new facilities.
• The appreciation for American manufacturing (especially FCA’s new assembly plant).
What are the biggest challenges that Detroit’s industrial market faces today?
Avendt: Two challenges repeatedly surface. First, there is a shortage of quality industrial space in metro Detroit. We haven’t experienced anywhere near the amount of speculative construction seen in other markets with our vacancy and rental rate appreciation. As a result, many users are finding it difficult to expand locally in a timely manner.
Second, skepticism is contagious. In what has been a remarkably long period of expansion, it’s natural for people to expect a downturn. Unfortunately, many people are viewing that downturn through the lens of the “Great Recession.” They forget that the typical downturn is nothing like 2008 and 2009 in metro Detroit. The normal cycling is actually healthy, creating opportunities and strengthening the community over time.
