Q4 2022 Industrial Real Estate Report: Detroit, MI
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Detroit is known as the automobile capital of the world and the birthplace of Motown music. Automotive, high-tech, and information technology are major industries for its economy.
Unemployment in Detroit decreased from 3.4% in Q3 to 3.2% in Q4, remaining below the national average at that time of 3.5%.
Its metro area’s population was stagnant in 2022, showing no growth from 2021.
Detroit industrial real estate saw an increase in net absorption, asking rents rise, and vacancy drop in the fourth quarter of 2022.
General Area Overview & Demographics
Detroit has an estimated population of 632,464 residents. The majority of the population is African American (79%), followed by White (9.8%), Hispanic or Latino (4.2%), Asian (2.1%), and Other (2.5%).
Detroit Median Household Income & Population
The median household income in Detroit is $34,762. This figure is lower than both the state of Michigan’s median household income ($59,727) and the national median household income ($57,652).
Approximately 30% of the population is under 18, compared to 22% nationally, while 22% of Detroit’s population is over 65, compared with only 14% nationally. The median age in Detroit is 33.7.
Wayne State University is the largest university in Detroit and is one of the nation’s 50 largest universities. The University of Michigan-Dearborn and Marygrove College are also in Detroit. Additionally, Oakland University is located just outside the city.
One of the most popular attractions in the city is the Motown Museum, a historic museum dedicated to the legacy of Motown music. Other spots include Belle Isle Park and The Detroit Institute of Arts.
In spring and fall, temperatures typically range from the 40s to 70s. In the summer, it can reach up to 90°F with high humidity levels. Winter is usually cold and snowy, with temperatures often dipping below freezing.
Summary of Detroit Industrial Real Estate Performance in Q4 2022
Overall vacancy for Detroit industrial real estate decreased from 4.7% in Q3 to 4% in Q4 2022.
Washtenaw/Ann Arbor posted a 5% vacancy rate, the highest of all submarkets in Detroit. Royal Oak Area and I-96 Corridor were other submarkets to record rates above 4%.
Lapeer and St. Clair Counties had the lowest vacancies in the fourth quarter at 1.4%.
There were two other submarkets below 2% in Q4: Flint at 1.9% and Monroe County at 1.8%
Q4 had the highest net absorption for Detroit industrial real estate in 2022, with 3.7 million square feet. This accounts for more than half of 2022’s annual absorption (6.6 million.)
Oakland County NW had the highest absorption at around 960,000. Downriver went negative by 280,000 square feet.
What are industrial rents like in Detroit?
Rents grew quarter-over-quarter from $7.04 to $7.10 per square foot, reaching a record high.
Washtenaw/Ann Arbor averaged some of the highest industrial rents in the region, with asking rates at $9.98 per square foot. Downriver posted the lowest at $4.95, the only submarket below $5.
Regarding property class, $15.01 per square foot was the average asking rate for flex space in Detroit Area, the highest average for all classes and submarkets.
Purchase & Leasing Activity
Sales volume for Detroit industrial real estate totaled $116 million in Q4 2022. The average sales price per square foot was $58.
This marked a decline from Q3 in both volume ($220 million) and price ($62 per square foot.)
Overall leasing activity reached 3.6 million square feet across 150 leases in Q4. I-96 Corridor accounted for 45 leases, the most of any Detroit submarket.
Notable Industrial Real Estate Deals in Detroit in Q4 2022
There were several deals that took place for Detroit’s industrial real estate in Q4 2022:
- Royal Oak Manufacturing purchased 221,000 square feet for $12.6 million.
- Auburn Hills Corp Center purchased 35,000 square feet for 4.2 million.
- General Motors leased 136,000 square feet.
- VeTech leased 139,000 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Detroit in Q4 2022
2.94 million square feet of new supply came online in the fourth quarter, more than double what Q3 provided.
Completions for Detroit industrial real estate totaled 8.63 million square feet in 2022, with Detriot Area receiving the most at 1.76 million.
Downriver was the only submarket to have no new deliveries for the year.
At the close of 2022, over 9 million square feet of industrial product were in the pipeline.
Market Forecast for Detroit’s Industrial Real Estate Market
Ongoing success for Detroit industrial real estate relies on its construction pipeline.
With over 9 million square feet in development at the end of Q4 2022 being speculative, it’s unclear how much will be pre-leased when delivered. This will influence asking rates and vacancies.
Regardless, given strong market performance throughout 2022 and Michigan’s new program to attract electric vehicle manufacturers, 2023 should continue the market’s momentum.
Takeaways for Industrial Real Estate Investors
Detroit provided healthy indicators of a growing market across most of its metrics. The primary caution to consider is watching how new deliveries perform.
If demand remains stable, the market may contain foreseeable promise for investors.
Stay diligent, do your research, and happy investing.
Find & Connect With Commercial Real Estate Agents & Brokers in Detroit for Free on MyEListing.com
MyEListing.com maintains one of the largest national databases of commercial real estate agents & brokers. Use it for free to find an agent or broker in Detroit, MI.
Other recent articles
Article Search
Share
All Article Categories
