Detroit CRE pros know the truth: Good things are happening in this key Midwest city

The M-1 line will bring streetcar service to downtown Detroit.

The M-1 line will bring streetcar service to downtown Detroit.

by Dan Rafter

Detroit is an unusual market today. Andrew Farbman, chief executive officer of Southfield, Mich.-based Farbman Group, says it’s one of the few markets in the country in which competing developers actually root each other on.

The reason for this? Everyone working in the Detroit commercial real estate market wants to see new development in the core of this city. It’s the only way for the city to continue its recent rebound.

“This is one of the only markets I know of where you actually cheerlead your neighbor’s projects,” Farbman said. “The addition of supply in downtown Detroit only increases demand. That’s the nature of the beast in the city of Detroit. Everyone is more open and collaborative of what the downtown should be.”

Farbman and other CRE pros working in Detroit say that downtown Detroit has steadily gained momentum since July of 2013. That, of course, was when the city filed for bankruptcy protection, becoming the largest municipality in the United States to file for Chapter 9 bankruptcy.

That bankruptcy filing generated plenty of negative headlines. But the move was a necessary one, say commercial real estate leaders in the Detroit market. It gave the city a chance to start over.

Today, people are moving into downtown Detroit again. Entrepreneurs like Quicken Loan’s Dan Gilbert are investing in the city. And construction has started on a new arena for the NHL’s Detroit Red Wings and connecting entertainment center that will fill about 45 blocks of the Midtown section of Detroit’s Central Business District. This $650 million project has commercial real estate pros here even more excited about the future of downtown Detroit.

“What brings people to downtown Detroit today? There is a lot of traction there,” said David Friedman, chief executive officer and president of Farmington Hills, Mich.-based Friedman Integrated Real Estate Solutions. “The riverfront. The sporting venues. The bars. The entertainment. The riverwalk. There are a lot of great assets in downtown Detroit. It’s always been a great city. It kind of took a leave of absence. But it’s dynamic again today. The city of Detroit has a lot of great things to offer.”

The pieces fell into place

Friedman says that the pieces are falling into place for Detroit. The bankruptcy happened and gave the city a fresh start. Then entrepreneurs like Gilbert sank their dollars into the downtown, hoping to turn Detroit into an urban environment favoring start-ups, tech firms and Millennials looking for city living.

Now plans are moving ahead for the M-1 Rail Line — or, if you prefer, the Woodward Avenue Streetcar — a 3.3-mile-long streetcar line that will run along Woodward Avenue in Detroit. Construction on this line officially began in the summer of 2014. The line will include a stop at the new Detroit Redwings arena in Midtown.

The Penske Tech Center is also under construction now in the New Center area of Detroit. This is a $6.9 million, 19,000-square-foot facility that will serve as the headquarters for the M-1 Rail. The facility, located between Bethune and Custer streets north and east of Grand Boulevard, will also be responsible for all the maintenance on the line’s streetcars.

“What is amazing to me is how all the pieces came together at one time,” Friedman said. “The bankruptcy. Our new mayor (Mike Duggan), who has done a great job so far. The light rail. The arena. It is simply amazing that all of this fell into place at one time.”

The key, of course, is for residents to move into downtown Detroit. With a steady influx of new residents, it makes sense for retailers to open shops in the Central Business District and for companies to fill office buildings.

And since the bankruptcy, people have been moving into downtown Detroit.

“The first generation of people who moved back into the downtown were urban explorers,” Farbman said. “They wanted the excitement of living in the city. The critical mass downtown is 35,000 to 40,000 people. That crowd has led to safety in numbers. And there are now amenities downtown that weren’t there before. The business leaders are stepping up and creating amenities that are really attractive.”

As an example of the increased amenities downtown, Farbman points to plans for the new gastropub Central Kitchen + Bar. The new bar, headed by entrepreneur Dennis Archer Jr. and his partners, will fill a 3,028-square-foot space at the First National Building in downtown Detroit.

Farbman said that new businesses such as the gastropub would probably have avoided downtown Detroit if it wasn’t for the bankruptcy filing.

Farbman said that the resurgence of downtown Detroit truly picked up steam during the last 12 months. He refers to the bankruptcy as a cleansing that has helped the city wipe away old liabilities.

“It created an end to the bottom,” Farbman said. “It made it so that this city government and the city itself can start to grow again.”

Both Farbman and Friedman predict that the next several years will be exciting ones for Detroit as more businesses invest in the city’s Central Business District and its surrounding neighborhoods. The suburbs surrounding Detroit have long been stable. Now with the downtown core on the upswing, the future looks bright for this key Midwest metropolis.

“There is so much capital coming into the city, both nationally and internationally,” Farbman said. “Every corner is getting attention. There was a time when you would put a sign on a building and wait a long time for the phone to ring. Today, our clients are calling us with suggestions for what they want to get involved in. It’s a big change, and it’s an exciting time.”

“Multi-family is doing great in the CBD,” Friedman said. “Office is doing great. All the different commercial sectors in the CBD are doing great. There is a three- to five-mile stretch where there is just so much activity going on now. We are seeing so many buildings in that stretch that are in the middle of being rehabbed. And the new arena will only spur future development here.”

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