Limited Supply is Driving New Construction
Metro Detroit’s industrial sector closed the quarter with a 3.4% vacancy rate. The industrial vacancy rate in the metro area has hovered in the mid 3-percent range for the past year. What we know is that the industrial sector lacks available good, quality buildings in any size range which is making it challenging to do deals. Traditionally, the cost and risk associated with new construction has slowed speculative development in our region, but the lack of good supply is driving the number of build-to-suit and speculative buildings that we see under construction today. Significant investments being made in Metro Detroit further validate our improving economy.
Amazon made several announcements to expand its fulfillment operations throughout the metro area, adding thousands of jobs and just under 3 million square feet to the industrial foot print in Shelby Township, Livonia and Romulus. In Detroit, Flex-N-Gate, an automotive supplier, broke ground on a 600,000-square -foot manufacturing plant on Detroit’s east side at the I-94 Industrial Park. Detroit hasn’t experienced new construction of this caliber in decades, but remains competitive in its effort to win new business. The Cherry Creek Corporate Park in Macomb County and the Tri-County Commerce Center in Oakland County are two new speculative projects both of which have experienced a great deal of preleasing activity and will have occupancies of 60% or greater upon completion. The Oakland Technology Park in Oakland County remains an attractive option for many companies choosing Auburn Hills as their North American Headquarters. Most recently, Hutchinson North America announced plans for a 60,000 square-foot headquarters which it expects to complete in June 2018.