With roughly 4,000 units under construction across the metro area, Detroit’s developers appear to be anticipating the city’s successful economic rebound, recently bolstered by Ford’s acquisition of the iconic Michigan Central Station this summer. The city’s downtown area is particularly dynamic, with multiple ground-up and adaptive reuse projects underway.
From the inside, things are even clearer. The market has room to grow and companies that understand the new consumer will grow with it. Local developer Jonathan Holtzman, chairman & CEO of City Club Apartments, reveals his view of Detroit’s transformation.
How would you characterize Detroit’s current landscape for multifamily development?
Holtzman: Detroit continues to produce fewer new apartments than the market demands. There are challenges to bringing communities to market quickly—construction costs, construction lending, zoning and site plan approval, the speed of getting things approved and a labor shortage. That said, the demand continues to be extremely strong.
In which Detroit submarkets do you see the most optimism in terms of growth over the next few years, and what plays into this?
Holtzman: We are only operating in suburban urban and urban markets where we can focus on our Walkability Index. Whether you are suburban, suburban urban or urban, if you do not have a location in which you have almost a perfect walkability score, you are not going to achieve the rental or occupancy rates that you need. This is a very clear trend everywhere in the U.S. The properties that have the highest walkability scores are achieving the highest rents and occupancy.
What sets Detroit’s multifamily market apart from the other markets City Club Apartments has a presence in?
Holtzman: Construction of new apartments in Detroit is a relatively new phenomenon. Other Midwest cities like Minneapolis and Chicago have been actively building for the last eight years and are ahead of us. Everything that is being built in Detroit right now represents a huge difference from what has existed in the past. Detroit has not seen the new thinking—resort amenities, time-saving services, technology, green and wellness, luxury finishes. This is a huge opportunity for us.
How has recent news, including Ford’s announcement of plans to invest $740 million in Corktown, impacted the market?
Holtzman: The Ford announcement is a continuation of a trend we have been seeing in Detroit over the last three to five years. Suburban jobs are moving to the city. Those jobs are creating opportunity in housing, restaurants, entertainment and other services. Developers that understand Detroit’s new urban customer and deliver a product that meets the needs of that customer from an amenity, service and walkability standpoint will do very well.
How has recent rent growth deceleration in the metro impacted your business strategy?
Holtzman: Communities in the right location with the right amenities and services and the right operator have not experienced a deceleration in rents. Those communities will continue to benefit from the investments that their owners and operators have made to meet the needs and wants of their customers.
Image courtesy of City Club Apartments