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This hidden real estate sector is the healthiest in metro Detroit

Real estate is always in the news. Whether it’s shops and restaurants in Detroit’s Midtown district, new skyscrapers downtown, or the rising cost of condos everywhere, real estate makes headlines.

Industrial real estate, by contrast, rarely gets into the news but for the biggest and most controversial projects. To cite one: Fiat Chrysler’s plan for a new Jeep assembly plant on Detroit’s east side generated debate over the size of public subsidies.

But generally, the world of warehousing, logistics and manufacturing space seems colorless and dull by contrast with other real estate sectors. And that’s strange, given how large and important industrial real estate is in metro Detroit.

With more than five times the amount of square footage as metro Detroit’s office market, industrial real estate also boasts perhaps the healthiest vacancy rate of any sector in metro Detroit. In the third quarter of this year, only 2.1% of metro Detroit’s roughly 519 million square feet of industrial space lacked tenants.

By contrast, about 14% of metro Detroit’s roughly 80 million square feet of office space was vacant in the third quarter — and that’s in what is generally thought of as a healthy office market.

So the demand for new industrial space of all kinds runs well ahead of supply, said Lauren Scarpace, senior vice president in the Detroit office of the CBRE real estate firm.

“The darling of the real estate industry is industrial right now, that’s for sure,” he said. “They bring lots of jobs, lots of tax base to the area. There’s a lot of big national developers looking to start up industrial parks in the metro Detroit market right now.”

The auto industry is a big draw, of course, with supplier firms planting a lot of their research and production facilities within easy reach of General Motors, Ford and Chrysler.

Then, too, logistics firms that schedule and track the increasingly complex world of shipping and order fulfillment are looking for new space here along I-75 and near Metro Airport in western Wayne County.

Who’s building where

Among the biggest recent news makers:


Those projects all represent new construction. Building anew is necessary because so little industrial and warehouse space is vacant, Scarpace said.

“With our vacancy rates where they’re at, it’s really challenging to place some of these users in new homes,” he said. “We simply don’t have the ready-to-go space here that you might find other other markets.”

Impacting other land uses

The demands of the industrial real estate market can shape public policy in interesting ways. Mayor Mike Duggan has proposed eliminating one of the two runways at the Coleman A. Young International Airport (the former City Airport) and using the space for a new industrial park in the city.

Aviation interests oppose the idea, and it’s unclear if the proposal will go anywhere soon.

And rarely does any big industrial project around metro Detroit not seek tax incentives from the state and local communities. Those requests often generate debate similar to what accompanied the controversy over FCA’s Jeep plant in Detroit.

But controversial or not, this much seems clear: Industrial real estate will continue to be a driver in metro Detroit’s real estate game.


Posted By: Detroit Free Press on October 23, 2019.  For more information, please click here to read the source article.

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