Detroit February 2021- Key Takeaways
- David Hart reports that construction disputes are in full bloom. He also reports that courts are not holding traditional trials yet, but doing it over Zoom, and the scheduling seems more on track with the dockets.
- Martin Lavelle of the Federal Reserve Bank of Chicago indicated that the national economy for 2020 was up approximately 4%, which was in line with the forecasts. As vaccinations continue to be administered and the economy opens up, unemployment should decrease, even as recovery will be ragged and slow.
- Mike Sabrowsky of Oliver/Hatcher Construction reports that steel and lumber prices are very high and steel in particular is continuing to climb, making building estimates difficult and off target sometimes.
- Nick Maloof of Associated Environmental Services indicates that transactions have slowed down and rates are low. Retail work has ground to a halt for his company.
- John Godwin of Marcus Millichap told the group that people are anticipating a rise in capital gains taxes in the coming months/years and many are trying to dump their 1031 properties now. Also, larger hotel companies that receive government subsidies should eventually be alright. Smaller hotels are likely to suffer given the length of the pandemic. John anticipates that suburban office space will become the darling in the market soon.
- Brad Rosenberg of Mid-America Real Estate says that there are still retailers filing for bankruptcy. Small strip centers are still being built, even as construction costs are going up. The furniture industry is strong and aggressively backfilling the empty retail spaces. There is still plenty of space for the newcomers too.
- Dan Stys of Professional Engineering Associates reports that things are picking up for his company. They are enjoying projects with townhomes, apartments and industrial. Nothing big on the retail side, but BJ’s, Chic-fila, and Blaine’s are all doing well.
- David Dismondy of District Capital has suffered a bit of a slow-down. He says that it is easy to do re-finances right now. Other deals are difficult because while there is plenty of capital, everyone is overpaying for properties now and it is challenging to figure out a way to get a return. Industrial and multi-family is easy now, life companies jump on those. Retail is difficult.
- Matt Fenster of Etkin Real Estate Solutions is working on new business developments. Independent physicians are not moving well on lease renewals, and some want to monetize their assets. The medical industry has not been adversely affected by the pandemic like other sectors.
- Bradley Carver of Ten-X Commercial Real Estate works with buyers and brokers in his auction platform. Due diligence on deals are completed before they are put up for auction. They had a big year in 2020. Nick Maloof is interested in possibly working with Bradley, and Bradley is interested in hearing what he has to say about his niche. Ten-X has evolved a lot in the last 7 years.
- Phil Seaver of ATA National Title Group indicates that the residential market is on fire. While more people are interested in buying a new home, the supply is low right now. Phil indicated that there are only 60,000 homes on the open market right now, and they sell in under 2 weeks. He says this data is being impacted by Uber and Lyft businesses that allow seniors to remain in their homes for another 3 to 5 years. Phil also says that there is a rise in domestic disputes now since everyone is home all day every day. On the commercial side, Amazon is doing a lot.
- Tom Barrett of The State Bank reports that the second round of PPP loans is in full swing. SBA is reviewing documents submitted this time before granting an approval of funding. Funding will take a little longer this time. There are a lot of deals and buyers are overpaying. Restaurants and hotels have been hurt the worst. Banks will likely be patient with the loans through most of 2021, and move on repayment probably at the end of 2021. Reopening of hotels will seem like they are starting from scratch.
- Elizabeth Ptacek of Costar Group reports that Detroit’s multi-family market outperformed the entire nation in 2020. Detroit had record numbers for apartments, out-performing all of the United States. The “work from home” shift is also a “work from anywhere” and people are moving from expensive small apartments in New York to the spacious, less expensive apartments in Detroit. Suburban markets are enjoying high demand now. The Detroit transaction market hit a 9% low in 2020. That should recover nicely soon. Returns are higher in Detroit. Not great news for retail space in Detroit or anywhere in the U.S. Store closures will remain high this year. While pricing in retail remains strong, vacancies are rising.
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