Newmark Grubb Knight Frank (NGKF) released its fourth quarter 2016 industrial trends data for the Detroit region this week. According to the reports, the industrial market remains robust across Metro Detroit.
The U.S. auto industry saw its production figures for 2016 on par with those from 2015, when 17.8 million units were produced. The market may have peaked as automotive inventories are beginning to rise. Regardless, production levels remain at historic highs, as they have surpassed the 17.5 million unit mark for three years running. The rapid growth of the automotive industry after the end of the recession has transformed the Metro Detroit industrial market. Vacancies dropped from nearly 16% when production was 12 million units to 5.3% with over 17.5 million units produced in 2016. The added efficiencies that resulted after the industry’s bankruptcies have made the industry stronger, while the explosion of demand for greater capacity and more modern facilities has resulted in an unprecedented construction boom that has added 35 new major industrial facilities totaling 4.5 million square feet over the past three years. By the end of 2017, an additional 33 industrial facilities will be added to the market, totaling another 5.8 million square feet.
“2016 was a robust year for Metro Detroit’s industrial market; vacancy rates have never been lower, year-over-year absorption levels are up 20 percent and the number of new construction starts grew nearly 40 percent,” said John DeGroot, research manager director of NGKF’s Detroit office.
“The automotive industry is firing on all eight cylinders and fueling Metro Detroit’s industrial real estate market,” said Fred Liesveld, managing director of NGKF’s Detroit office. “As we look ahead to 2017, automotive companies will be adding billions in new investments into the area which is likely to keep vacancies at their historic lows.”
Western Wayne County
The Western Wayne County industrial market vacancy rate fell 50 basis points to an all-time low of 3.7% during the fourth quarter, as just over 354,000 square feet was absorbed. One of the largest transactions of the quarter was Roush’s 135,000-square-foot lease at 12100 Inkster Road in Redford. Absorption for the year totaled 2.5 million square feet, a substantial increase from the 1.5 million square feet absorbed in 2015. The spike in absorption was attributed to several larges leases, such as Ford Motor Company’s 754,000-square-foot lease at the Livonia Corporate Center; Fuyau’s purchase of the 526,000-square-foot 909 North Sheldon Road facility in Plymouth; and KuKa Systems North America’s 384,000-square-foot lease at the Livonia Distribution Center. The spike in demand for large block space has nearly exhausted the supply for users in the market. For example, at the beginning of 2016, the real estate development firm Ashley Capital retrofitted the formerly vacant, 1.0 million-square-foot General Motors Co. Powertrain Engine Plant in Livonia to accommodate multiple bulk users; the facility is near 100% occupied. Construction in Western Wayne is ratcheting up to meet strong demand, especially for large-block space. Ashley Capital is currently building a 1.0 million-square-foot regional warehouse distribution center for Amazon in Livonia at the corner of Eckles and Amrhein roads. The project is projected to be completed late 2017. Ashley Capital just announced it is also in the planning stages for building the 1.0 million-square-foot Livonia Corporate Center Buildings I & II off I-96 between Middlebelt Road and Inkster Road. One other construction project planned for 2017 is Oerlikon Metco’s 70,000-square-foot build-to-suit in Plymouth Township.
Southern Wayne County
Southern Wayne County’s vacancy rate fell 20 basis points to a historic low of 2.5% during fourth-quarter 2016, as just over 124,000 square feet was absorbed. The bulk of absorption came from The Hearn Group’s 108,000-square-foot purchase and move into 13500 Huron Street in Taylor. Market activity during the quarter consisted mostly of relocations within the submarket, such as DB Schenker relocating from Aeroplex II into Distriplex Metro One and DeHaan Tile & Floor Covering, Inc. backfilling into Aeroplex II in Romulus. Limited vacancies decreased 2016 overall absorption levels, which totaled 1.2 million square feet compared with 2.3 million square feet in 2015. Just as in the Western Wayne submarket, demand for bulk warehouse remains very strong, while the available supply is severely limited. The only option for companies with significant space requirements is a build-to-suit. Fiat Chrysler announced it is building a new, 500,000-square-foot parts distribution center at I-275 and Pennsylvania Road in Romulus. No other active construction projects are underway, although developers have secured land and planning approval for several potential projects. One such development is the Romulus Commerce Center, a four-building complex totaling1.0 million square feet near the intersection of I-275 and Eureka on Wahrman Road.
Macomb County’s vacancy rate fell 40 basis points to 2.0% during fourth-quarter 2016, as just over 343,000 square feet was absorbed. Notable deals included Anchor Bay Packaging Inc.’s 78,000-square-foot lease on Russell Schmidt Boulevard in Chesterfield, Wico Metal Products Company’s purchased two buildings for a total of 62,383 square feet on Mound Road in Warren, Cosworth LLC’s 56,000-square-foot lease in the Cherry Creek Corporate Park and Tunker’s 23,540-square-foot lease on Mound Road in Sterling Heights. For 2016, absorption for the submarket totaled just over 1 million square feet, compared with 2.4 million square feet in 2015. On the construction front, two new facilities were completed in 2016: a 73,000-square-foot building for AGM Automotive, LLC and a 25,000-square-foot building for Amarr Garage Doors, both located on Progress Drive in Sterling Heights. With just six new construction completions over the past two years and a vacancy rate of 2%, it was only a matter of time before developers rushed to add new inventory to the market. The submarket now has 11 construction projects totaling just over 1.0 million square feet, set to be completed in 2017. Seven of those construction projects are speculative developments. The largest is Titan Group’s development of nearly 266,000 square feet of speculative construction in Shelby Township’s Cherry Creek Corporate Park. The balance of construction projects are build-to-suits. Among the major build-to-suits are Lipari Foods’ 252,000-square-foot building on Bunert Road in Warren, Mitchell Plastics’ 220,000-square-foot facility at the Enterprise Industrial Park in Sterling Heights and Flex-N-Gate’s 134,000-square-foot building at the Cherry Creek Corporate Park in Shelby Township.
Southwest Oakland County
Southwest Oakland County vacancy fell 20 basis points to 5.0% during fourth-quarter 2016, as just over 202,000 square feet was absorbed. Adept Plastic Finishing Inc.’s completion of its new, 110,000-square-foot facility on Alpha Drive in Wixom accounted for the bulk of absorption for the quarter. Other notable deals during the quarter were Bluewater Technologies’ 26,000-square-foot lease on Interchange Drive in Farmington Hills and OSRAM Opto Semiconductors’ 25,000-square-foot lease on Cabot Drive in Novi. For 2016, the submarket absorbed a total of just over 1 million square feet, compared with 1.1 million square feet in 2015. Southwest Oakland is one of the most active submarkets in terms of the number of construction projects. In 2016, five projects were completed. Most notable of these, aside from Adept Plastic Finishing Inc.’s aforementioned build-to-suit, were Cosma Body Assembly’s 150,000-square-foot facility on Grand River Avenue in New Hudson and American Expedition Vehicles’ 110,000-square-foot build-to-suit on Lakeview Drive in Wixom. In 2017, nine other construction projects for companies including Magna Seating of America, Inc., ATI Technologies, Autoneum North America, Inc. and Daifuku North America are scheduled to be completed, totaling 771,000 square feet.
Southeast Oakland County
Southeast Oakland County’s vacancy fell 20 basis points to 4.3% during fourth-quarter 2016, as just over 198,000 square feet was absorbed. Notable deals during the quarter were Edscha Automotive’s 100,000-square-foot lease at 2800 Superior in Auburn Hills, SONIMA US Corporation’s 55,000-square-foot lease in the Orion Commerce Center and Roush Enterprises’ 43,000-square-foot lease at 1960 Ring Drive in Troy. For 2016, the submarket absorbed a total of 1.6 million square feet, compared with 1.9 million square feet in 2015. 2016 was an active year for new construction in Southeast Oakland County, as five build-to-suit construction projects for FedEx, TI Group Automotive Systems, Recaro Child Safety, Shield Material Handling and Hydra-Zorb were completed, totaling just over 712,000 square feet. Meanwhile, three more build-to-suit projects are scheduled to be completed during 2017. In Auburn Hills, Louca Mold is completing a 124,000-square-foot facility on Taylor Road, and Martinrea International Inc. is completing a 108,000-square-foot facility on Opdyke Road. In Rochester Hills, Jenoptik Automotive will finish its 100,000-square-foot building on Hamlin Road.
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank is one of the world’s leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF’s 14,100 professionals operate from more than 400 offices in established and emerging property markets on six continents.
With roots dating back to 1929, NGKF’s strong foundation makes it one of the most trusted names in commercial real estate. NGKF’s full-service platform comprises BGC’s real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets. BGC’s common stock trades on the NASDAQ Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC also has an outstanding bond issuance of Senior Notes due June 15, 2042, which trade on the New York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please visit http://www.bgcpartners.com/.