Detroit April 2022 Key Take Aways
- TOM BARRETT, The State Bank – On the residential and commercial side of real estate, the 5-year to maturity is higher than the 10-year. Tom indicates that is not normally a positive reflection on the economy. We are in the throes of trying to figure out how to price things, and the margins we would like to get are probably not competitive. As a lender, he has been faced with the problem of what’s in their pipelines and how they’re going to price it.
- MICHAEL ZIECIK, NAI Farbman – Michael reports that first of all, industrial is still strong. There is still no supply and tons of demand for tenants. There is a reluctance to build because of time and cost. And he indicates that he believes that it is more timing rather than a cost because it would be pretty common to build an industrial building in 9 months. And right now, it is taking 1.5 years or longer now depending on which suppliers are used. Large office spaces are going to take time to sell off. The smaller buildings are moving. There are several sites in local communities that are being redesigned or torn down and rehabbed for storage facilities. One in Southfield and some in Ferndale. Industrial Park to mini storage.
- MATT FENSTER, Etkin Real Estate Solutions – On the healthcare side of things, we have been very busy. We manage and lease the Mission Medical Health Center. We are looking at putting an additional 15,000 feet on that campus. It’s 17,000 feet on 18 acres.
- STEVE SALLEN, Maddin Hauser – I agree with Mike that it is an interesting market. One transaction I didn’t make. It is a mutual client with David Dismondy and myself. Client was highly motivated to do the deal and even overpay. The terms by the seller were so absurd that the buyer finally pulled the plug and said no.
- DAN STYS, Professional Engineering Associates -We are starting to hear rumblings about work on the residential side, as far as permits being declined a little bit, I think due to cost and inflation. We are starting to see some of our car wash deals, we are seeing some crazy due diligence stuff. I heard yesterday that some of the big box guys are still building, but some of the investors are beginning to pull back on the occupancy. They were going to go active in 22 and are now being pushed out to 23. We don’t know exactly why, but we don’t think it is due to the building being ready. It’s a hyper-competitive environment right now..
- DAVID DISMONDY, District Capital – For most apartment acquisitions you can’t use permanent debt. You have to bridge it. Everyone in the apartment world knows that there is a shortage of multifamily properties, you can get lenders to agree to things. We can prove the rent bumps are on the horizon. Once you raise the rent, the deal works per month. This is nuts, and this is how it is going right now. Industrial is kind of the same, not as aggressive. You can still count on funds for guys paying $100 a foot for industrial now. Lenders are still really into industrial. Even with that, you can get a life company deal for about 4% for a fixed rate. Fours are still high.
- NICK MALOOF, Associated Environmental Services – Had not heard of this before, but apparently, there’s a new specific market geared toward the development of hotel room units, and all of the units are leased for short-term occupancy. They’re not on a daily rate, like a hotel, but they’re leased like a VRBO. They build only in urban markets so they have availability of restaurants, museums, sporting events, and other things in the area. It’s very interesting.
- PHIL SEAVER, ATA National Title Group – Amazing statistics in the residential market in the ages 25 to 35, over half are not married and some – 31% – are living with their parents. The average market time is 26 days now. Roughly 20% of the homes for sale have been on the market for 90 days or more. You will have a lot of instant offers and acceptances coming in. It is unbelievable. In comparison, in Sept. 2017, there were 17,000 houses on the market. In the spring of ’08, there were 65,000. Prices went up 19.7% annually last year.
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