Retail Moving in the Right Direction

Metro Detroit and Ann Arbor’s retail market posted a positive but relatively sleepy third quarter for 2016. Quoted rental rates checked in at $12.54 per SF, a small increase from $12.50 in the second quarter. The market also reported 837,594 SF of positive absorption, and ended the quarter with a 7.4% vacancy rate—a 20 basis point improvement from the previous quarter’s 7.6% vacancy rate.

The third quarter reflects a longer-term trend in Metro Detroit’s overall retail market. While the trends have been positive, the gains have been slow and incremental, with the exception of a few hot submarkets. Similar to Big Ten Football—the market has opted for three yards and a cloud of dust as opposed to big gains on flashy passing plays. The upshot is that new developments are well thought out, and are not hitting the market with competition that simply cannibalizes sales. This careful approach will serve the Detroit area well when the market cools off.

Moving forward, expect Metro Detroit’s retail market to continue the positive momentum in the final quarter of 2016. Michigan’s signature automotive industry continues to perform, and overall consumer confidence remains positive. As 2017 approaches, expect the slow-but-sure approach to growth to continue, and expect more national tenants to expand into the Metro Detroit market.