8/3/21 – Detroit Mastermind Group

Detroit August 2021- Key Takeaways

• Steve Sallen reports that business has been crazy busy and attributes the activity to low-interest rates. A lot of acquisitions are being made right now.
• David Hart indicates that courts have reopened recently for the first time in approximately 1.5 years. This has amplified his level of work on clearing title, receiverships, etc. Courts opening means:
o Allows pressure on some real estate cases
o Disputes will finally be resolved
o The eviction moratorium is ending and so evictions will roll in soon
• John Godwin’s office has been very busy. They receive assignments and within days offers are rolling in. New assignments include a lot of multi-family deals. Cap rates are in the sub 6’s for single tenants. A lot of trading activity for some retail shops like Pet Supplies and Long John Silver’s. Industrial properties are hard to find, especially for single tenants. There is a lot of capital on the sidelines, and people are engaging, but not happy.
• Dave Dismondy is seeing a lot of lenders and a ton of money. They are all leaning heavily into the real estate market probably because of the low-interest rates. There are new bridge lenders, and they are doing some retail, but are very cautious. The process is slow for everyone because they are all so busy, and not enough bodies to do all the work. Multi-family will quote you 65%. Rents are consistently raising annually.
• Mike Ziecik says industrial is hot, but there is not much inventory. He has noticed a pickup in office and he handles only smaller offices, like 10,00 to 15,000 square feet. He is also seeing a huge influx of new small businesses; hundreds of small business tenants like nail salons, beauty salons, manufacturing and work out facilities, to name a few.
• Matt Fenster agrees that the office sector is getting busier. He suggests that many have discovered that long-term remote work is not as productive as office work. New surgery centers, McLaren Hospital system, and Henry Ford in Royal Oak represent new developments in the healthcare sector. Beaumont Center on Orchard Lake Road is on the market now.
• Nick Maloof reports that the transactional and healthcare businesses have been very busy. He put out a warning to anyone looking to do Brownfield work in Detroit because lately, it has become somewhat “political”. Brownfield projects in Detroit were easier before COVID. Now they are more difficult. He recommends navigating them and having things ready in case something goes sideways now.
• Paul Hatcher is focused on the ever-increasing material costs in the construction business. Steel in particular has hurt his business progress and 2 big projects have had to be put on the shelf because of it. He mentions that concrete, lumber, HVAC, electrical supplies, and 16 gauge studs are all very difficult to acquire and expensive too. Steel deliveries are out 6 to 9 months; glue for FRP boards cannot be found, and roofing is about a year out with backlogs. Paul indicates that they are trying to communicate with owners, order supplies early, and focus on renovations and reuse of existing properties now that new out-of-the-ground projects are so difficult to reach.
• Rick Matoon is working on an early adopter program and testing out the systems at their offices to make sure everything is working. After being dormant for so many months, they want to make sure it all still works as anticipated. They have scheduled a new hybrid system to be installed in January of 2022.
• Martin Lavelle with the Federal Reserve Bank provided a presentation – “The Latest on the Economy… (before it changes…)
o Overall economy
 The U.S. economic forecast continues to improve with expectations of growth substantially above trend through the end of 2022.
 While Michigan economic growth picked up at the start of 2021, significant downside risks remain that could slow Michigan’s economy relative to the U.S.
o Leading economic indicators: a more visible difference between the U.S. and Michigan economies
 Consumer confidence slower to rebound in Michigan
 Considerably low vehicle inventory levels are impacting new light vehicle sales
 Growth in the goods-based economy remains robust
 Housing market activity remains healthy though a lack of inventory and rising prices are slowing growth
o Employment
 The rise in June U.S. payroll employment exceeded expectation
 Unemployment rates in the U.S. and Michigan are lower overall
 U.S. labor force levels continued to move higher
 But Michigan’s labor force participation rate has fallen noticeably at the start of 2021