Hot Summer, Hot Market
Metro Detroit’s industrial market continues to post blockbuster trends. The market currently posts a 4.2% vacancy rate, which is the lowest reported vacancy rate on record. While rents have not skyrocketed, the greatest challenge in the market today is frequently just finding product—there are very few buildings available at any given time.
For the second quarter, 1,409,003 SF of space was absorbed, an excellent complement to the previous quarter’s 2,340,386 SF. Despite the high occupancy rates, rental rates only grew .8% from the previous quarter—from $5.09 at the end of quarter 1 to $5.13 at the end of quarter 2. With just 139,678 SF of newly constructed space delivered in the quarter, quality product remains extremely difficult to find.
Into the third and fourth quarters of 2016, the key question the market faces is not related to vacancy—vacancy rates will continue to stay low. The real question is if rents will start to grow in a significant manner, and more importantly, grow to a point where new construction is a better alternative than moving into an existing building. In the meantime, Metro Detroit’s industrial market will remain a landlord’s market.