MARKET SNAPSHOT: As Auto Industry Bounces Back, Detroit Sees Sharp Increase in Multifamily Rentals
By Philip Shea, Associate Editor
Detroit—Vacancy is set to decline in Detroit Rock City as the United Auto Workers recently struck a deal with the Big Three that will create 14,000 new jobs through 2014. The deal includes $13 million worth of investments in products and infrastructure and will increase the rate of pay for most assembly-line workers, this according to the Detroit Free Press.
In addition, Detroit-based General Motors is once again the world’s largest automaker. According to the Center for Automotive Research, there are over 1.45 million people working as a direct result of the $80 billion government bailout of the company in 2009. As such, the city is set to see its third straight year of positive job growth in 2012, and rents are expected to increase by 3 percent.
The automaking sector, however, will not be the only driver of increased multifamily residence in the recession-worn city. Various companies and corporations are now offering relocation incentives for professionals to return to the Midtown/West and Downtown submarkets. Marcus & Millichap expects an influx of white-collar workers to reduce vacancy for Class A apartments to 8 percent.
Urban Science, an automotive research firm, recently launched its “Live Detroit” program, which will give employees up to $2,400 allowance toward the first year of renting a Detroit apartment, according to the Detroit Free Press.
“As a business owner in the city for the last 34 years, I’m encouraged and excited about the current revitalization I see throughout Detroit,” said Jim Anderson, founder and CEO of Urban Science, in an interview with the city’s newspaper. “It’s critical for companies of all sizes to get behind the momentum and play an active role in generating growth, whether it’s business or residential.”
Tax incentives are also being offered by the local and state governments to revitalize Michigan’s most populous city. A 6 percent state business tax was recently thrown out the window by Gov. Rick Synder, a move that was widely applauded by the Michigan business community. The Tax Foundation, a Washington, D.C.-based think tank devoted to analyzing tax policies’ effect of business, recently revised its ranking of Michigan’s corporate tax climate from 49th in 2011 to 7th in 2012.
As a result of well-rounded economic improvement, asking rents are expected to rise 2.3 percent to $846 per month in 2012, this alongside a 3.2 percent increase in effective rents to $783 per month, according to Marcus & Millichap. Overall vacancy will drop 60 basis points to 5 percent, while construction will remain low as only 290 new apartment units are expected to come online throughout the year.
For more news from Detroit, click here.