Farmington Hills, Michigan (May 29, 2014) – Friedman Integrated Real Estate Solutions, one of the nation’s leading providers of commercial real estate services, is monitoring Metro Detroit’s industrial market as forecasters predict that demand for all types of industrial space is expected to spike in 2014.
Real Capital Analytics reported that U.S. sales of industrial properties increased 16% year-over-year in 2013, totaling $47.0 billion: a far cry from the 2009 low of $10.7 billion. The continuing economic recovery, an increase in commercial real estate lending, and a growing interest in industrial properties driven by e-commerce are all contributing factors to heightened demand.
Here in Metro Detroit, the industrial sales market recovery is even more apparent. According to CoStar Group, Metro Detroit’s industrial market ended the first quarter of 2014 with a vacancy rate of 9.0%, marking the lowest rate the area has seen since the third quarter of 2006. The average overall rental rates also increased over the previous quarter and currently stand at $4.46 per square foot. National Real Estate Investor reported that, “Detroit recently recorded one of the strongest declines in industrial property availability in the country.”
Larry Schultz, Senior Associate in the Brokerage Services Division, specializes in the leasing and sales of industrial properties within the I-75 corridor in Oakland and Macomb counties. Schultz has experienced the growth in demand firsthand and attributes the upturn to the resurgence of the automotive industry. “This is a dynamic market. We are seeing bidding wars, buyers paying full asking price, and fewer seller concessions due to the high demand,” said Schultz.
All of this is good news for the once-stagnant industrial market. However, buyers must be willing to act quickly or run the risk of missing out on opportunities. And, they need to be prepared for competition. Schultz recommends that purchasers contact their lenders before heading out to look at properties because there is a limited inventory of quality space that is being gobbled up at a fast pace. “Purchasers need to be ready to buy. Having paperwork ready to go from the lender can mean the difference between getting a property or losing out,” Schultz added. In addition, purchasers must be willing to close on properties quickly.
Earlier this month, Schultz brokered a deal on an 11,941 square foot industrial building in Pontiac. He represented the purchaser who toured the turnkey property and made an offer, close to asking price, the very next day. The listing broker informed Schultz that there was another interested buyer with a competing offer and suggested that if Schultz’s client wanted the property, he should make a final offer and include documentation on the ability to close quickly. “My client ultimately got the building, but he gave the owner their asking price, paid for the survey, and presented a letter from the president of his bank that they would close within 45 days,” Schultz explained. The property closed on day 43.
Schultz says this is just one of many recent deals he can recall that illustrates the competitive nature of the industrial market for purchasers as well as for those looking to lease. With growing demand and shrinking inventory translating into quick occupancy gains, the industrial sales market is certainly back on track.
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