Industrial Still in Overdrive

Over the past five years, the silent success story in Metro Detroit is the recovery of the region’s industrial real estate market. Current trends are effectively in unchartered waters for the Detroit market. The market currently reports a 3.8% vacancy rate—a 10 basis point improvement from the previous quarter and yet again, the lowest reported vacancy rate on record.

The rock bottom vacancy rate is not the only positive indicator. 1,430,086 SF of space was absorbed in quarter 4 of 2016, which is an excellent follow-up to the third quarter’s 1,227,163 SF. Rental rates posted a modest increase as well—climbing from $5.25 per SF to $5.29. Although new construction deliveries climbed from 470,588 SF to 649,685 SF, new construction continues to lag behind other markets across the United States.

Looking back on 2016, Detroit’s industrial market had plenty to celebrate—vacancy declined and rents grew, given the lack of new construction in the pipeline, we do not see the market slowing down in a significant manner, and barring a major economic slowdown, 2017 will be another year of low vacancy rates and positive absorption, with any new construction getting snapped up almost immediately upon delivery.