‘Pent-up demand’: Detroit area industrial sites see leasing boom
Posted By: The Detroit News on February 9, 2025. For more information, please click here to read the source article.
Greg Hudas and Joe Hamway of Signature are proud to represent NorthPoint Development on the leasing at Eastland Commerce Center. Scott Elliott and Joe Hamway of Signature represented DTE in their lease at Romulus Trade Center. Brad Viergever and Chris Calvano of Signature were excited represent LuxWall in the deal in Detroit.
When NorthPoint Development entered the Metro Detroit market several years ago, the firm hit the ground running, developing industrial complexes in cities including Harper Woods and Romulus.
By the end of last year, the company saw a surge in leasing activity, signing five tenants across both developments.
“I think there was delayed decision-making, but there is definitely pent-up demand in the Detroit market,” said Marc Werner, regional vice president for NorthPoint Development, which has several industrial complexes in the state.
Following a slow start to the year, the industrial real estate market in Detroit experienced a rebound in the final quarter of 2024, a trend industry experts are optimistic will continue in 2025. The area has low vacancy rates and stable rents, and experts expect continued demand, particularly for Class A properties.
“We’re really bullish on this asset class in particular for the next couple of years,” said Ryan Brittain, vice president of Colliers’ Detroit office. “There’s still a little bit of a pain in the office world. Retail, multi-family (are) kind of still adjusting. But the industrial market is very much at equilibrium. We didn’t get overbuilt like maybe some of the other markets around the country.”
Brittain noted that Metro Detroit has fared better than other markets like Chicago and Dallas.
Colliers’ reported the industrial site vacancy rate edged down from 4.3% in the third quarter of 2024 to 4.2% across Wayne, Oakland, Macomb, Genesee, Washtenaw, Monroe, Lapeer and St. Clair counties, compared with the national average of 6.8%. Locally, average asking lease rates edged up from $7.76 per square foot in Q3 to $7.84 in Q4.
“Chicago is not seeing the rent growth we are,” Brittain said. “They’ve got a lot of empty buildings. You go to the major markets like Dallas, there are 15 million-square-foot buildings sitting. We just aren’t that market.”
During the fourth quarter, Metro Detroit’s industrial market recorded 408,169 square feet of net absorption, bringing the 2024 total to 2.7 million square feet, according to the Colliers report. There were 135 leases signed, totaling more than 2.1 million square feet.
The key submarkets included Airport/I-275, I-96 Corridor, Macomb, and I-75 Corridor, which accounted for 104 leases and more than 1.4 million square feet.
The Colliers report points to notable deals in the fourth quarter, including DTE Energy’s lease of 349,492 square feet at the Romulus Trade Center, Avancez Assembly’s 224,589-square-foot lease at Eastland Commerce Center in Harper Woods and Wipro PARI Inc.’s 104,280-square-foot lease on Rex Boulevard in Auburn Hills.
Marc Werner with NorthPoint Development said Eastland Commerce Center is more than 50% leased after the arrival of Avancez Assembly and Tenco Logistics, which leased 104,000 square feet during the fourth quarter. The three-building complex, on the site of the former Eastland Center shopping mall, was completed last spring.
“We’re really excited about that,” he said. “We’ve got three tenants there now, which is wonderful, and we’re just working on leasing the rest of the building up. So given the volume in the market, I probably would expect that we’ll have the park leased in full here by the end of this year.”
At the Romulus Trade Center, Werner said that in addition to DTE Energy, NorthPoint welcomed during the fourth quarter DO & CO, a supplier for Delta Airlines that signed a lease for a 131,000-square-foot space. Ernest Packaging also signed a lease in the fourth quarter for 57,000 square feet.
Werner said the company is preparing for additional tenants by constructing speculative office space at both Eastland and Romulus that is being designed for immediate occupancy.
Sean Cavanaugh, executive vice president and industrial expert for JLL’s Detroit office, said he was pleased to see leasing activity spike during the fourth quarter.
“We went through about five quarters of relative stagnation from the end of ‘23 until the fourth quarter, which we attributed to common themes: the interest rates, the UAW strike, the election,” he said. “And then, obviously, we saw a somewhat expected post-election boom of leasing that was certainly in line with national trends. Locally, we saw about 1.2 million square feet just in new-construction absorption, which was welcomed.”
Cavanaugh said he doesn’t expect to see any speculative construction until the third quarter of this year, at the earliest.
“If tenant demand rebounds, which I think we’re expecting, we could absolutely see occupancy tighten over the course of the year and even a possible shortage of space at the end of the year, maybe going into the first quarter of ’26 as construction catches up with demand.”
As of the fourth quarter of 2024, 33 industrial projects were under construction totaling 3.4 million square feet, with the majority of activity taking place in the northwest Oakland County, Macomb County and Washtenaw County submarkets, according to Colliers. The report also notes that the construction pipeline has slowed considerably, falling below the historical annual average of 6.3 million square feet.
This decline is largely attributed to the high cost of construction and land constraints in the Detroit Metro area.
“I don’t think we’ll see a lot of speculative construction this year, maybe next,” Brittain said. “But there are still built-to-suit deals out there where folks have a very specialized need, whether it’s EV or battery-related or something that requires heavy power or certain clear heights. Those projects are still going. … I would say five years ago, we were tracking maybe 8 million feet of construction a year in the industrial space. We might be down three or four now, but it’s not like it’s trickled down to nothing despite the headwinds with the cost.”
There’s still industrial construction underway in Metro Detroit. For example, in Detroit, Bedrock is developing a facility at its Fort Street industrial campus for a new tenant, glass manufacturer LuxWall.
When it opens in 2026, the 276,000-square-foot facility is expected to mirror LuxWall’s first production site that began operations in 2024 in Hillsdale County’s Litchfield. The facility will be the world’s first high-volume production plant for vacuum-insulating glass, considered a clean-energy manufacturing breakthrough.
At the time of the announcement in December, LuxWall Co-Founder and CEO Scott Thomsen said there was a growing demand for the company’s products.
“This project will support the city, brings jobs to Detroit and Michigan, and help our customers improve the environment,” Thomsen said.
LuxWall will join two other tenants at Bedrock’s Fort Street industrial campus: LM Manufacturing, a complete seat manufacturer for the automotive and mobility industries, and Diversified Synergies LLC, a packaging and distribution company that serves the pharmaceutical, food and consumer goods sectors.
“Bedrock has, and continues to, engage with several potential companies interested in establishing manufacturing space in Detroit,” said Naumann Idrees, senior vice president of leasing at Bedrock.
The companies at the campus are economic drivers in Detroit’s Delray neighborhood, Idrees said. The LuxWall facility will create 277 jobs.
“LuxWall’s investment in Detroit further highlights the demand for modern industrial facilities in Detroit,” Idrees said.
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