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Industrial Space, Talent Attraction Impacting Detroit’s Sustainable Growth

As Detroit continues as a hotbed for the automotive and manufacturing industry, and foreign investors, creative solutions to the region’s limited industrial development space and the ability to attract and retain new talent will impact long-term prosperity. That was a key message economic development, building and real estate experts laid out during the Detroit Regional Chamber’s Investor Briefing: Industrial Projects in Today’s Property Market.

According to Paul Hoge, vice president and principal of Signature Associates, Detroit’s current average industrial vacancy rate hovers just over 6 percent, compared to an 18 percent vacancy rate in 2010. Correspondingly, rental rates and construction have also gone up.

“It’s a classic supply and demand scenario. Right now we’ve got a lot of demand and limited inventory,” he said.

Douglas Fura, senior vice president of Farbman Group, a Southfield-based industrial real estate brokerage firm, said in some markets the vacancy rate is near zero when you remove the functionally obsolete facilities that are too expensive to rehabilitate into the modern age.

What’s Driving Demand?

According to Hoge, unlike comparable metro regions, Detroit did not face an overbuilding problem heading into the Great Recession. Additionally, as the economy began to recover, many OEMs and Tier 1 suppliers demolished 20 million square feet of under-functioning industrial space.

“We are pretty well positioned if things slow down again. The bigger issue is how do we expand on an efficient basis?” Fura said.

Ronald Moran, vice president of Dearborn-based Ghafari Associates, said from a construction perspective, he has noticed more clients looking to merge their manufacturing and engineering teams into one facility.

“While it used to be all the engineers and office workers in one building separated from the manufacturing facility, these days there is a big demand to bring those people closer to production so they can collaborate more easily to solve problems,” he said.

That requires building a new central facility or renovating existing assets.

The Talent Question

In addition to growing demand for industrial space, the ability to attract and retain talent is critical. Both manufacturers and government leaders have a role to play in that as well, according to Romano Curti, director of business development for Barton Malow Co.

Curti said Michigan faces tremendous competition from other states offering deep incentives to lure national and international investment. Average wages and “cool places” with the flexibility of open, collaborative environments that appeal to the next generation workforce are also deciding factors in a decision to locate.

Ultimately, however, the winner will be the region that can provide these assets — whether it be talent, office/manufacturing space or incentives — in an efficient timeframe.

“Speed to market is key,” Moran said.

Justin Robinson, vice president of business attraction for the Chamber, said the Investor Briefing is the first step in better educating economic developers and regional partners on the state of the regional industrial market.

“Having a clearer picture of the real estate market and constraints helps us all better inform investors so that they can make faster and better decisions,” Robinson said.

The next Investor Briefing on attracting and retaining talent will take place on Feb. 14. Learn more and register here.

For more information on Forward Detroit, contact Marnita Hamilton at mhamilton@detroitchamber.com, or 313.596.0310. To view a full list of investors and past Investor Exclusive content, visit our Investor Resources page.