May 3, 2023
SOUTHFIELD, Mich. (WXYZ) — When you take a look at the commercial real estate market in metro Detroit, you will find many stressors. The office market vacancy rate it is now at 20.7%. That is an eight-year high.
And this doesn’t just impact the owners of those buildings, but surrounding buildings such as Fuddrucker’s in Southfield.
Just over seven years ago when Randy Bahoora bought the Fuddruckers in Southfield he had a business hypothesis.
“Fuddruckers is known for… we make our own bread,” said Bahoora.
“We have our never frozen beef, Angus beef.”
Lunchtime would be busy as workers from the nearby Southfield Town Center came to eat.
And for a time – it was.
Then came COVID-19.
“Lunch crowd has been total disaster for the last two to three years now,” Bahoora said.
Randy says workers who stop in mention they are working often from home — shrinking his market size.
7 Action News reached out to the leasing office and did not hear back, but as you can see on the Southfield Town Center website there are vacancies listed for rent.
“We’re still not sure yet how back to the office is going to work,” said Sandy Baruah, CEO of the Detroit Regional Chamber.
He says as leases expire in coming years, we will understand the impact of the pandemic on commercial real estate in metro Detroit.
The chamber shared research that shows when leases expire, large office users are taking advantage of remote capabilities by moving to smaller spaces. The Southfield, Troy and Farmington Hills office submarkets have been hit the hardest.
The three submarkets alone added over 1 million square feet of available space to the market during the first quarter of 2023.
Still, Baruah says there are areas of optimism.
“My level of confidence in commercial real estate is high. When you think about industrial – where manufacturing or logistics – the demand is very high,” said Baruah.
“Downtown Class A real estate there is still a demand,” Baruah said.
“Now, the class B and C buildings, I think those are going to be challenges,” said Baruah.
This could mean trouble for certain communities, when and if values decrease, impacting tax assessments.
At Fuddruckers, Randy Bahoora is working to over come those challenges within his business by offering specials to attract a dinner crowd and families.
“Hopefully, whoever is watching this can come support us, because we can use all the help we can get,” Bahoora said.