Job Growth, Increased Apartment Demand Expected to Revitalize Detroit
- Feb 13, 2014
Detroit may be bankrupt but its thriving real estate market could be a veritable lifebelt leading to the city’s recovery from the gloomy years of economic decline. Slowly but steadily, Motor City is heading to a long-overdue financial momentum as investors flock to grab bargain-priced office or retail properties and turn them into apartment buildings.
According to research data from Marcus & Millichap, job growth in Downtown Detroit and the designation of the city as one of the seven Google tech hubs in North America will attract new tech firms and boost employment opportunities for young professionals, increasing apartment demand in the re-emerging neighborhoods located near the city’s financial core. As Detroit will see robust job growth, residents are expected to return to the city and its suburbs. The market report predicts that approximately 29,000 new jobs will be created in Metro Detroit in 2014. This means a 1.6 percent growth in total employment, a slightly increase from 2013 when payrolls advanced 1.5 percent.
Oakland and Macomb counties have seen significant population increases since 2010 and are projected to gain another 25,000 households over the next five years, which will generate renter demand. Desirable suburbs such as Ann Arbor or Rochester Hills, where competition for properties is likely to go even stronger, will see increased prices and an influx of investors looking for lesser quality real estate assets in well-located areas.
With almost 500 new rental units due for completion in 2014, construction activity will slightly slow down from the 2013 buzz, when 600 new units came online. Construction of new market-rate apartments will likely be fueled by tightened vacancy rates and soaring rents, especially in submarkets such as Royal Oak or Farmington Hills.
Metro-wide, vacancy is expected to reach the lowest year-end rate in 13 years, falling 30 basis points to 4.1 percent. As a result, effective rents will see a 1.2 percent climb and reach $827 per month as compared to 2013, when rents increased by a modest 0.6 percent.
Charts courtesy of Marcus & Millichap