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.
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.