Signature Associates

We're sorry, but our site is built to take advantage of the latest web technologies that Internet Explorer 8 and below simply can't offer. Please take this opportunity to upgrade to a modern browser, like Google Chrome or Internet Explorer 11.

Contact Us


Retail in metro Detroit isn’t dead. It’s just adapting.

These days, consumers actually have more places to shop, not fewer.

Contrary to the common refrain about the death of retail, there has been an increase of nearly 11 percent in the amount of retail space in the five-county area the last 16 years.

Large, but aged and dying, shopping centers like Summit Place Mall in Waterford Township and Eastland Center in Harper Woods have been or are about to be wiped from the regional map, replaced with new uses.

Neiman Marcus, JCPenney, Sears, Toys “R” Us, Circuit City, Guitar Center, Tailored Brands — all went bankrupt in the last two years, to name just a few, according to CNBC. Inc. has built or is building more than 10 million square feet of distribution center space in metro Detroit alone, cementing its physical presence and dominance here and throughout the country as it continues to revolutionize how, when and where people shop.

And still, in spite of a global pandemic and so many other headwinds — including an extremely modest population growth since 2006 — the region has added 25.5 million square feet of retail space, according to data from CoStar Group Inc., a Washington, D.C.-based real estate information service.

“Retail hasn’t gone away; it’s morphed into a service world where brick-and-mortar stores are now fulfillment centers, food-related or experience-related establishments,” said Angela Thomas, an associate broker who is a retail expert for Southfield-based Signature Associates Inc. “When people do shop or dine, it’s all about the experience, which has driven new developments and redevelopments to create first-class shopping experiences. The (Class) B and C centers are suffering, but the A markets and centers are thriving.”

In short, it’s becoming smarter retail driven by consumer demands.

Per capita retail space

Even though the region’s population has remained relatively flat the last 16 years, the amount of retail space per person has increased from about 53 square feet to about 59 square feet.

According to the Southeast Michigan Council of Governments, the five-county region had a little over 4.49 million people as of the first quarter 2006. It is now at about 4.51 million, representing just a 0.48 percent growth in that time.

Yet for each of those 21,585 new residents of the region, we have added 1,182 square feet of retail.

That brings the region’s per capita retail footprint up from about 53 square feet in the first quarter 2006 to about 59 square feet in the first quarter 2022.

And while the economic recovery during the pandemic has been uneven, to say the least, overall spending is increasing.

According to data from Affinity Solutions, as of Nov. 14, consumer spending in metro Detroit is up 16.9 percent since the beginning of 2020. Retail spending is up 38.3 percent and restaurant/hotel spending is up 27.4 percent.

“We had all these bankruptcies and everyone was saying, ‘Oh, no, retail’s dying,'” said Cindy Ciura, principal of Bloomfield Hills-based CC Consulting, which does retail consulting work in Birmingham and elsewhere. “What happened was, it has made the strong stronger and it made the weak — which probably weren’t going to make it anyway — go away.”

Total retail inventory

The amount of retail space in the five-county metro Detroit region has grown by 10.7 percent to nearly 265 million square feet since the beginning of 2006.

The strong thrive

It’s not just the growth in space that illustrates the current complex retail ecosystem.

While there has been an uptick in vacant retail space during the COVID-19 pandemic, notching as high as 5.7 percent in the fourth quarter 2020, according to CoStar data, that is still historically lower than it’s been over much of the last 16 years.

And in the fourth quarter 2021, the vacancy rate was just 4.8 percent — matching lows seen in three of the four quarters in 2019 immediately before the onset of the global health crisis, CoStar data shows.

In short: Millions of square feet are being added to the market, and it is getting leased up.

That, in part, accounts for the first quarter to date having the highest rents since the beginning of 2006, according to CoStar. In the region, overall rents are $15.84 per square foot per year, while triple-net rents are $16.23 per square foot per year, both of which are more than $2 per square foot per year more than they were 16 years ago.

New construction, decreasing vacancy rates and increasing rents all point to a market that, while still grappling with challenges, is generally performing well.

One local real estate investment trust, Bloomfield Hills-based Agree Realty Corp., has had so much success the last several years that it has needed to double its headquarters size.

“COVID-19 has reaffirmed our belief that the strongest retailers with the largest balance sheets are going to get even stronger,” President and CEO Joey Agree said in an interview in January. “Their omni-channel, including buy-online, pick-up in-store, click-and-collect and fulfillment initiatives, helped get consumers essential goods and services during the early days of the lockdown. Now as we emerge from this pandemic, hopefully sooner rather than later, retailers’ focus today is truly on omni-channel execution.”

Vacancy rate

The region’s retail vacancy rate has fallen sharply since 2006 even though some legacy retailers have faced challenges and bankruptcies. It spent several years near or above 9 percent, while today it’s below or near 5 percent.

Filling the space

The story is more complex than just struggling retailers being replaced by stronger ones.

One element is the use of space overall.

Louis Ciotti, managing director for Farmington Hills-based retail brokerage firm Landmark Commercial Real Estate Services, said he has seen shifts in the types of tenants taking space traditionally reserved for more conventional retailers.

Think: Dentists. Physical therapists. Other types of medical and health professionals. Title companies, hair transplant clinics, certified public accountants. All finding value in strip centers and power centers around the region, including in Macomb County, where Ciotti focuses his work.

“Medical has played a role, moving out of maybe medical or office buildings into a more desirable retail storefront,” Ciotti said.

“Those were probably 100 percent in office buildings and they can now eat up some of those other (retail centers), and then graduated tenants move up to either freestanding (buildings) or the newer developments that we see over town,” Ciotti said.

There have been plenty of them.

The number of retail buildings in the region has increased from 25,464 in the first quarter of 2006 to 26,948, a nearly 6 percent increase, according to CoStar data.

And the overall building size is increasing as well, rising from an average of 9,401 square feet 16 years ago to 9,829 square feet, a 4.5 percent bump.

Still a battle

That’s not to say the market hasn’t taken its knocks.

Department stores across the region have shuttered. Malls have fallen prey to various trends, whether population shifts, online shopping or other factors altogether.

Kmart and Sears stores have closed. The Mall at Partridge Creek has lost department stores like Nordstrom and Carson’s. The Lord & Taylor at Fairlane Town Center closed, to be turned into office space for Ford Motor Co. Both malls are now in receivership, and Fairlane is due to be sold this month.

Downtown Detroit retailers like Under Armour, John Varvatos and Détroit is the New Black have closed their physical locations here. Restaurants like Andiamo in Dearborn and Library Sports Pub and Grill in Novi have all called it a day.

But for Ciura, those that remain have fallen into several emerging categories.

Brilliant Earth, Warby Parker and Altar’d State are eco-friendly and give back to the community, she said. Allbirds, ThirdLove and Glossier all are digitally native and “have learned the value of having brick and mortar locations and are actively scouting,” Ciura said. Third, fashion brands like Faherty, Aritzia and State & Liberty Clothing are all making inroads, she said.

Couple that with home goods retailers like RH (formerly Restoration Hardware) and Crate & Barrel coming to places like downtown Birmingham, and the retail market isn’t dying.

It’s just adapting.


Posted By: Crain’s Detroit Business on March 7, 2022.  For more information, please click here to read the source article.

To receive the In The Know from Signature Associates, please click here to be added to our mailing list.

« Back to Insights