Detroit April 2023 Key Take Aways
• Steve Sallen – Maddin Hauser – Interest rates are going up and everyone is worried, but the deal flow is still good. Only sfeen one call on a loan maturity so far.
• Nick Maloof – Associated Environmental Services – Has seen transactional volume go up a little for small use and industrial. The bill to amend Act 381 or Brownfield TIF to allow using tax rent financing for affordable and workforce housing and development is back and in committee through Senate Bill 129. If that gets through, which they think it will and the governor will sign it, that means you can use tax increment financing to develop residential and redevelop residential properties like single-family and subdivision types and multifamily.
• Dan Stys – Professional Engineering Associates – Has seen a 15 to 20% increase in volume from a dollar standpoint. More multifamily and a ton of industrial going on. It’s pretty brisk for PEA.
• Mike Ziecik – Farbman Group / NAI Farbman – Industrial is not slowing down. Stress in manufacturing from an operating income standpoint. One company went under, and they are getting ready to market for a crane company. More buyers than tenants, 3 leases out of 4 buildings, and it’s not on the market yet.
• Brad Rosenberg – Mid America Group – Retail is still good. Consumer confidence is good. The retail industry has just resisted a longer stand. There are new people coming into the market still and has got 2 large developments on A+ properties right now. 54 acres on one. Another tenant is taking the piece adjacent. The deal activity is strong. The car wash craze is slowing down now. Gas stations are coming in too. Raising Canes – coming in now too. Portillos is on Hall Road here and are looking to open more – hot dogs and cheesesteaks. Shake Shack is looking to do more. There is so much money on the sidelines.
• Matt Fenster – Etkin Real Estate Solutions – On office, you have to be very careful whom you allow in an office building, I think you might be seeing the carnage with the loans. You want to make sure that the landlord can handle those tenants. There is no money for office buildings now. On the healthcare side, acquisition volume has slowed because of cap rates and what sellers are expecting. Stock prices are depressed so they are not raising money. Doctors have loans that are coming due. We just took over 3 medical buildings. When the market comes back, we can sell them.
• Martin Lavelle – Federal Reserve Bank of Chicago – Detroit Branch – A month ago, I would have overemphasized the upside risks to the outlook, consumer spending has been stronger than expected. Consumer spending has been stronger to start off 2023, spending patterns have changed but there’s definitely a bifurcation between higher-income and lower-income groups as far as where the money is going. But given that real wage growth has rebounded, it’s now positive as influence inflation has eased to some extent, and wage pressures persist. Construction real estate – home builders are still tentative. Multifamily is slowing here, but strong in parts of the country. For large construction, if you are tied to the infrastructure bill, your pipeline is pretty healthy. Long lead times, but it’s working. They want to lock in purchases before interest rates go higher. People want to get deals done before the market gets worse.
• Michael Harris – CoStar Group – We can look at CoStar data, and Loopstar data tells us what has happened. Competitive differences, and maybe rewrite your listing, and maybe there is a feature to your property that isn’t listed that some people are looking for. If you don’t have something in your listing like it’s near a Starbucks, people would be missing your listing, and maybe you have that in a file or a picture. There are things you can do to change things and make sure that people can find it easier online.
• Scott Elliott – Signature Associates – Office sector, I keep running into small companies that want to buy somewhere. Under 20,000. They might like to occupy 3 or 4,000 and get a few tenants. Hudson’s site: making great progress. Office-wise, they are building 400,000 sq. feet of office space, they actually have 3 good-sized deals looking at it now. They can start to get tenants in by next spring. The rents are $45 per sq. foot per triple net.
• Shannon Selby – Detroit Regional Partnership – VP real estate, we are the 11 County Economic Development Organization that goes out and recruits companies internationally and nationally. My role is industrial real estate specific to land to get the sites prepped and ready. Dan Stys and Nick Maloof are symbols that work with us. But what we’re seeing in this market is that there were some hiccups when we were getting users down the road to finally find out what was represented wasn’t actually there. I issued an RFP in March to 32 organizations. We are now in the final stages and that’s how we scale and accelerate the program. We are a strong, dynamic, and young team. Detroit market has not had an organization like that before. I do vacant land, 10 acres and up, we have several mega sites in our group.
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