Q4 2022 Office Space 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 home to office headquarters for major businesses like General Motors, Chevrolet, and Cadillac.
The unemployment rate for Detroit in Q4 2022 was 14.7%, down from 16.8% in Q4 2021.
The metro area population of Detroit in 2022 was 3,521,000, a 0.25% decline from 2021.
Detroit’s office space market experienced its highest single-quarter net loss in absorbed office space since 2010 at -1.3 million square feet.
General Area Overview & Demographics
The population of Detroit itself is estimated to be approximately 678,000 people. According to the U.S. Census American Community Survey, the racial composition of Detroit in 2022 was as follows: 77.4% African American; 14% White; 4.9% Asian; and 2.4% Hispanic or Latino (of any race). The median age of Detroit residents was 35 years, with 18.3% under the age of 18 and 16.6% 65 years or older.
Detroit, MI Median Household Income & Population
The median household income in the city of Detroit in 2022 was $32,000. This represented a 3% increase from 2021. Additionally, 12% of households earned incomes below the poverty level and 33.6% of families had incomes below the poverty level. The largest proportion of households earned between $30,000 and $49,999 a year.
Detroit is home to several higher education institutions, including Wayne State University, the largest and most comprehensive university in the city with an enrollment of more than 27,000 students. The University of Michigan-Dearborn was also located within the city limits with a student population of 8,400 in 2022.
Detroit is home to several major attractions. The Detroit Institute of Arts (DIA) is one of the largest art museums in America and contains works by some of history’s most renowned artists. The Detroit Zoo is home to more than 2,000 animals and is one of the most visited zoos in the country.
The weather in Detroit is typically hot and humid during the summer months with temperatures often reaching into the upper 80s (Fahrenheit). Winters can also be quite cold, with average temperatures ranging from the mid-20s to mid-30s (Fahrenheit). Snowfall averages over 40 inches per year.
Summary of Detroit Office Space Performance in Q4 2022
The overall vacancy rate for Detroit office space reached 12.9% in the fourth quarter of 2022.
The highest office space vacancy rates occurred in the Troy submarket at 24.4% and the Southfield submarket at 20.8%.
Detroit’s office space absorption for Q4 2022 reached -1.3 million square feet.
Class B properties had the highest negative net absorption for 2022, while Class A and Class C properties saw some positive absorption.
What are office space rents like in Detroit?
The average asking rental rate for Detroit office space increased to $21.12 per square foot in Q4, a $0.22 increase quarter-over-quarter.
Rents were highest in Lapeer/St. Clair County submarket at $27.43 per square foot.
The Downriver submarket saw the lowest rent in Q4 at $17.11 per square foot.
Class A rent averaged $22.44 in Q4 2022.
Purchase & Leasing Activity
Sales volume for the fourth quarter totaled $101 million. The total sales volume for the year reached $817 million.
The largest sale in Q4 2022 for Detroit office space was a 261,321 square-foot office building which sold at $13 million or $49.77 per square foot.
Leases for the quarter totaled 828,952 square feet across 210 deals. Most of this activity occurred in suburban Class B properties.
Notable Office Space Deals in Detroit in Q4 2022
There were several notable deals for Detroit’s office space properties that took place in Q4 2022:
- Victor Center sold for $5.85 million for 125,000 square feet.
- Novi Medical Center sold for $4.8 million for 23,000 square feet.
- Waste Management leased 18,000 square feet of space.
- Arbor Research Collaborative for Health leased 8,000 square feet.
These are select examples among other activity.
New Office Space Development Activity in Detroit in Q4 2022
New deliveries for 2022 amounted to 997,734 square feet.
Approximately 150,000 square feet of new office space were delivered in Detroit in Q4.
At the close of 2022, there were 1.4 million square feet under construction. Most of that construction was happening in the Detroit/Pointes submarket.
Market Forecast for Detroit’s Office Space Market
The future of the office market remains uncertain as potential economic challenges could arise in the coming years.
This, coupled with a continued slow return to the office by employees after the pandemic, could provide many hurdles for the health of the office market nationally.
While there may be challenges ahead, the US employment rate is expected to continue to grow in the next year.
This could have a positive impact on the office market as employers look for space for their companies’ growth.
Takeaways for Office Space Investors
Vacancy rates for Detroit office space continued to trend upward at the close of 2022.
There is also a large amount in the pipeline for 2023, ready to provide more inventory to the market.
Overall sales volume for Detroit office space saw a significant increase in Q4 2022 from 2021. This trend may potentially continue as employees return to the office.
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