Detroit Multifamily Report – Summer 2020
While rental rates proved resilient during the first half of 2020, the metro might be looking at a prolonged recovery.
Detroit’s multifamily market faced its share of challenges in the first half of 2020, and the road is steep. Rent expansion remained positive at 0.2 percent on a trailing three-month basis through June. Lifestyle rates, typically more volatile during a downturn, were up 0.3 percent as a result of limited supply. Renter-by-Necessity figures increased by 0.1 percent. As nearly all of Detroit’s 4,895 units under construction fell into this category, we expect rent improvements to further soften as projects deliver.
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Michigan entered a state of emergency in early March following the state’s first confirmed cases of COVID-19, effectively bringing Detroit’s economy to a halt. Unemployment jumped from 5.4 percent in March to 26.4 percent in May. Leisure and hospitality was the hardest-hit area, but all sectors saw significant losses through May. The recovery will be slow: Although Michigan moved closer to reopening in June, concerns over a second wave of cases led the governor to hit the brakes on easing further restrictions.
Transaction volume reached $153 million in the first half of 2020. All of the metro’s transactions during this period involved Renter-by-Necessity properties—with value-add potential—in Detroit’s suburbs. However, uncertainty stemming from the pandemic gave investors pause: No major transactions closed after the start of April.