A lack of new construction and an increase in employment will cause rents to rise and vacancies to fall in the Detroit office sector in 2012, according to the latest research from Marcus & Millichap Real Estate Investment Services.
The company predicts that by the end of 2012, vacancy rates in the Detroit office market will have fallen 120 basis points to 25.4 percent. That’s still a high vacancy rate, but the projected 2012 fall does represent a step in the right direction.
Marcus & Millichap said that office vacancy rates fell by just 30 basis points in 2011.
At the same time, office rents are projected to rise slightly in Detroit this year. Marcus & Millichap predicts an increase of 0.6 percent in asking rents to a market average of $18.86 a square foot.
Marcus predicts that effective rents will rise 1.1 percent to $14.11 a square foot in the Detroit office sector.
Part of the reason? There won’t be much new construction of office space in Detroit in 2012. Marcus & Millichap predicts that Detroit will see just 25,000 square feet of office space added to the market in 2012. That comes after a far busier 2011, when 100,000 square feet of office was added to the Detroit market in just the final quarter of that year.
At the same time, Marcus is predicting employment gains in Detroit in 2012. Detroit employers should create 25,000 jobs in 2012, the company says, representing an increase of 1.4 percent from 2011. Marcus says that of these jobs, about 17,000 will be positions using office space.
– Dan Rafter