by Dan Rafter
Stores are returning to downtown Detroit, and vacant retail suburban space in this market is falling, too.
Those are the pair of good news stories in Marcus & Millichap’s second quarter retail research report for Detroit.
According to the Marcus & Millichap report, the Detroit-area retail vacancy rate is expected to fall by 90 basis points this year, ending 2017 at 6.4 percent. If this happens, this will be the lowest the vacancy rate here has been in more than 10 years. It will also be more than 510 basis points lower than the retail cycle peak that the Detroit market hit in 2010.
At the same time, retail rents in the Detroit area are rising. Marcus & Millichap says that the average retail rent in the market will hit $13.15 a square foot this year. This is the highest this figure has been since 2009 and represents an increase of 4.9 percent from a year earlier.
However, there are still challenges in this market. Marcus & Millichap says that retail rents here remain 6 percent below their peak from 2008.
According to the report, the increase in foot traffic in downtown Detroit is bringing more retailers to this section of the city. Sports apparel firm Under Armour is one of the latest retailers to move into the city’s downtown, following such big-name retail companies as Nike and Shinola. Marcus & Millichap said that the completion this year of more than 1,600 Detroit apartments in the urban core should being even more shoppers to the area.
Vacancies are falling in the suburbs, too. But here, strip center owners are looking for retailers who are resistant to ecommerce. This includes such users as restaurants and hair salons, which are increasingly filling vacant suburban space. Some owners are turning to non-traditional users such as medical clinics, too, to draw more traffic to their retail centers.
In more good news, Marcus & Millichp says that the vacant big-box space in the Detroit suburbs is steadily filling up. Rural King, a farm- and home-supply store, recenty purchased a vacant former Wal-Mart sapce in Hartland Township. At Home, another retailer, has been filling large spaces in the Detroit market, too, including setting up shop in a former Kmart in Bloomfield Hills.