Colliers International | detroit

The Knowledge Report

INDUSTRIAL | First quarter | 2010

Detroit Industrial Market Reports Negative

Results for the First Quarter 2010
Metro Detroit’s industrial/flex market began 2010’s first quarter with negative net absorption.
Overall vacancy rates managed to remain close to the same from quarter to quarter in 2009.
Market Indicators
The first quarter of 2010 continued that trend and experienced negative results. Vacancy rates
slightly rose as well as a $0.08 decrease in rental rates. A continued drop in activity is expected
2009 2010 throughout the year in all submarkets for both flex and warehouse type industrial product.
Q1 Q1
Property owners must continue to focus on retaining their existing tenants by enticing them
Vacancy with lease concessions and rate reductions. Land sales and new construction are expected to
remain at a standstill until the overall absorption improves.
net absorption
continued on page 2

construction

rental rate

under construction by submarket This pie chart is showing

the current quarter’s under
New Supply, Absorption & construction by submarket
Vacancy Rates
Washtenaw County 10,127

West Area 0

Million Square Feet Vacancy Rate %

100% East Area 0
1.0 15.0
I-275 Corridor 0

0.5 Detroit 0
14.5

0.0 14.0

-0.5 13.5

-1.0 13.0

-1.5 12.5
1Q06 1Q07 1Q08 1Q09 1Q10

New Supply Absorption Vacancy Rate

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 The Knowledge Report | First Quarter | 2010 | Detroit | Industrial

INVENTORY submarket. Most of the rental rates range

I-96

Total industrial inventory amounted to from $7.00 to $9.00 per square foot; with the
WEST EAST
463,944,034 square feet in 9,419 buildings average settling at $8.23 per square foot in the
overall market.
I-96

in the first quarter 2010. The flex sector

I-275

consisted of 39,409,031 square feet and the Asking warehouse/distribution rates are
DETROIT
I-275
I-7
5
Warehouse/Distribution sector consisted of averaging $4.09 per square foot. Effective
WASHTENAW I-94

Total industrial inventory in the
Detroit market area amounted to
463,944,034 square feet in 9,419
buildings at the end of the first
quarter 2010.
First quarter reports a negative net
absorption compromised of 959,150
square feet, with the highest
absorption this quarter found in
the Detroit area submarket.
424,535,003 square feet.
RENTAL RATES
This quarter the average overall asking rental
rate slightly decreased $0.08 and currently
stands at $4.44 per square foot.
R&D and Flex rates are double that of
warehouse/distribution in almost all
submarkets and continue to fluctuate
significantly among the geographic market
sectors. Rates range as high as $11.68 per
square foot in the Southfield market to as low
as $5.61 per square foot in the Southern I-275
rental rates are usually up to 20% less than
asking rates, due to concessions and face rate
reductions used as incentives for tenants to
commit to a lease.
VACANCY
Warehouse/Distribution vacancy rates
increase from 2009’s fourth quarter to
14.1%. Some submarkets, such as Royal
Oak, Southfield and Farmington Hills, have
stabilized vacancy below 10%. Higher vacancy
rates are holding in the Detroit submarket
reaching 19.7%.
continued on page 4

Sale & Lease Activity

­S ale A ctivity

Property Address submarkets Sale Date Sale Price Size Sq Ft Sale Price Sq FT
41100 Plymouth Rd Plymouth Township 2/1/10 N/A 866,000 N/A
47050 Five Mile Rd Northville 3/18/10 $3,999,000 131,709 $30.36
2955 Haggerty Rd S Canton 1/15/10 $5,400,000 126,000 $42.86
531-631 Ajax Dr Madison Heights 3/16/10 $1,750,000 116,786 $14.98
434 McCormick Dr Lapeer 3/28/10 $1,000,000 92,625 $10.80
4121 N Atlantic Blvd Auburn Hills 3/15/10 $4,900,000 82,185 $59.62

47585 Galleon Dr Plymouth 3/5/10 $2,500,000 66,900 $37.37

lease A ctivity

Building Name Submarket Tenant Size Sq Ft

41873 Ecorse Rd Airport Exel Logistics 347,380
28400 Plymouth Rd Livonia Mastronardi Produce 347,000
29700 Commerce Blvd Macomb Adavance Intigrated Tooling Solutions 115,539
6333 Lynch Rd Detroit Goodwill’s Green Works 94,192
46201 Five Mile Rd Livonia N/A 64,631
1919 Concept Dr Macomb N/A 44,818

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 The Knowledge Report | First Quarter | 2010 | Detroit | Industrial

Existing Properties Direct Vacancy Sublease Vacancy Total Vacancy Net Absorption - Sq Ft New Supply - Sq Ft U/C & Prop. - Sq Ft Avg Rent

Total
Class Bldgs Inventory Sq Ft Rate Sq Ft Rate Sq Ft Rate Current YTD Current YTD Under Proposed Rate
Sq Ft Period Period Constr

D E T RO I T
Detroit
W/D 962 82,020,295 15,505,205 18.9% 662,000 0.8% 16,167,205 19.7% 315,488 315,488 - - - - $2.99
Flex 36 2,028,822 397,650 19.6% - 0.0% 397,650 19.6% 4,900 4,900 - - - - $6.60
Total 998 84,049,117 15,902,855 18.9% - 0.0% 16,564,855 19.7% 320,388 320,388 - - - - $3.08
Downriver
W/D 385 41,553,334 5,437,175 13.1% 93,051 0.2% 5,530,226 13.3% - - - - - 10,000 $3.91
Flex 10 1,116,409 69,430 6.2% - 0.0% 69,430 6.2% 4,525 4,525 - - - - $7.00
Total 395 42,669,743 5,506,605 12.9% 93,051 0.2% 5,599,656 13.1% 4,525 4,525 - - - 10,000 $3.99
Dearborn
W/D 231 12,720,925 1,350,830 10.6% - 0.0% 1,350,830 10.6% (77,851) (77,851) - - - - $3.40
Flex 54 3,075,464 1,699,127 55.2% 10,000 0.3% 1,709,127 55.6% (178,043) (178,043) - - - - $8.03
Total 285 15,796,389 3,049,957 19.3% 10,000 0.1% 3,059,957 19.4% (255,894) (255,894) - - - - $4.30

I-275 CORRIDOR
Airport
W/D 658 36,430,880 6,279,252 17.2% 186,110 0.5% 6,465,362 17.7% (154,895) (154,895) - - - 1,409,845 $4.04
Flex 20 1,326,646 106,235 8.0% - 0.0% 106,235 8.0% (2,300) - - - - $8.41 -
Total 678 37,757,526 6,385,487 16.9% 186,110 0.5% 6,571,597 17.4% (157,195) (154,895) - - - 1,409,845 $4.19
Southern I-275
W/D 328 15,686,754 1,644,493 10.5% 1,074,888 6.9% 2,719,381 17.3% 12,367 12,367 - - - 645,602 $3.57
Flex 25 1,416,995 560,015 39.5% - 0.0% 560,015 39.5% (6,689) (6,689) - - - - $5.61
Total 353 17,103,749 2,204,508 12.9% 1,074,888 6.3% 3,279,396 19.2% 5,678 5,678 - - - 645,602 $3.74
Livonia
W/D 721 34,735,141 4,598,847 13.2% 317,912 0.9% 4,916,759 14.2% (189,464) (189,464) - - - 1,540,289 $4.55
Flex 73 3,821,290 596,963 15.6% - 0.0% 596,963 15.6% 37,391 37,391 - - - 80,000 $7.82
Total 794 38,556,431 5,195,810 13.5% 317,912 0.8% 5,513,722 14.3% (152,073) (152,073) - - - 1,620,289 $4.87

EAST
I-75 Corridor
W/D 668 39,458,090 3,783,020 9.6% 25,896 0.1% 3,808,916 9.7% (336,760) (336,760) - - - 1,376,149 $4.96
Flex 105 4,912,410 743,877 15.1% 93,610 1.9% 837,487 17.0% (78,492) (78,492) - - - 114,036 $7.43
Total 773 44,370,500 4,526,897 10.2% 119,506 0.3% 4,646,403 10.5% (415,252) (415,252) - - - 1,490,185 $5.23
Macomb
W/D 1,647 55,257,738 5,863,849 10.6% 145,439 0.3% 6,009,288 10.9% (67,599) (67,599) - - - 2,460,433 $3.71
Flex 44 1,290,055 280,398 21.7% 10,000 0.8% 290,398 22.5% 20,234 20,234 - - - - $5.64
Total 1,691 56,547,793 6,144,247 10.9% 155,439 0.3% 6,299,686 11.1% (47,365) (47,365) - - - 2,460,433 $3.75
Royal Oak
W/D 373 10,729,680 827,106 7.7% - 0.0% 827,106 7.7% (96,592) (96,592) - - - 962,568 $3.55
Flex 24 853,107 80,631 9.5% 11,857 1.4% 92,488 10.8% 3,119 3,119 - - - $7.11
Total 397 11,582,787 907,737 7.8% 11,857 0.1% 919,594 7.9% (93,473) (93,473) - - - 962,568 $3.81
Troy
W/D 865 25,782,280 3,517,423 13.6% 30,778 0.1% 3,548,201 13.8% 159,654 159,654 - - - 60,000 $4.56
Flex 113 3,885,896 766,718 19.7% 19,871 0.5% 786,589 20.2% 7,108 7,108 - - - 170,000 $6.58
Total 978 29,668,176 4,284,141 14.4% 50,649 0.2% 4,334,790 14.6% 166,762 166,762 - - - 230,000 $4.82

WEST
Central I-96
W/D 680 29,020,672 3,499,186 12.1% 22,000 0.1% 3,521,186 12.1% (131,746) (131,746) - - - - $5.33
Flex 127 4,240,864 976,875 23.0% 130,418 3.1% 1,107,293 26.1% (111,805) (111,805) 39,523 39,523 - - $9.77
Total 807 33,261,536 4,476,061 13.5% 152,418 0.5% 4,628,479 13.9% (243,551) (243,551) 39,523 39,523 - - $5.90
FarmINGTOn Hills
W/D 246 9,141,118 815,940 8.9% 22,550 0.2% 838,490 9.2% (9,920) (9,920) - - - - $5.23
Flex 83 3,172,538 477,409 15.0% 60,754 1.9% 538,163 17.0% (11,667) (11,667) - - - - $8.46
Total 329 12,313,656 1,293,349 10.5% 83,304 0.7% 1,376,653 11.2% (21,587) (21,587) - - - - $6.06
Howell/Brighton
W/D 224 8,983,606 1,152,913 12.8% 42,356 0.5% 1,195,269 13.3% (111,038) (111,038) - - - - $5.32
Flex 12 273,751 93,972 34.3% - 0.0% 93,972 34.3% 5,277 5,277 - - - - $7.76
Total 236 9,257,357 1,246,885 13.5% 42,356 0.5% 1,289,241 13.9% (105,761) (105,761) - - - - $5.39
Southfield
W/D 115 3,806,930 173,050 4.5% 30,200 0.8% 203,250 5.3% 12,050 12,050 - - - - $4.46
Flex 41 1,821,575 534,651 29.4% - 0.0% 534,651 29.4% 15,890 15,890 - - - - $11.68
Total 156 5,628,505 707,701 12.6% 30,200 0.5% 737,901 13.1% 27,940 27,940 - - - - $6.80

WA S H T E N AW C O U N T Y
W/D 416 19,207,560 2,682,999 14.0% 58,809 0.3% 2,741,808 14.3% 29,733 29,733 - - 10,127 100,000 $5.29
Flex 133 6,173,209 926,659 15.0% 21,762 0.4% 948,421 15.4% (22,025) (22,025) - - - 272,849 $10.13
Total 549 25,380,769 3,609,658 14.2% 80,571 0.3% 3,690,229 14.5% 7,708 7,708 - - 10,127 372,849 $6.47

TOTA L S
W/D 8,519 424,535,003 57,131,288 13.5% 2,711,989 0.6% 59,843,277 14.1% (646,573) (646,573) - - 10,127 8,564,886 $4.09
Flex 900 39,409,031 8,310,610 21.1% 358,272 0.9% 8,668,882 22.0% (312,577) (310,277) 39,523 39,523 - 636,885 $8.23
Total 9,419 463,944,034 65,441,898 14.1% 2,408,261 0.5% 68,512,159 14.8% (959,150) (956,850) 39,523 39,523 10,127 9,201,771 $4.44

Q U A RT E R LY C O M PA R I S O N A N D T O TA L S
Q1-10 9,419 463,944,034 65,441,898 14.1% 2,408,261 0.5% 68,512,159 14.8% (959,150) (959,150) 39,523 39,523 10,127 9,201,771 $4.44
Q4-09 9,395 461,158,849 63,100,091 13.7% 2,353,794 0.5% 66,115,885 14.3% - (5,433,274) 45,000 289,514 25,996 9,887,898 $4.52
Q3-09 9,362 457,072,564 61,040,019 13.4% 2,212,501 0.5% 63,914,520 14.0% - 0 18,650 244,514 46,600 10,903,302 $4.64
Q2-09 9,335 456,220,593 60,532,645 13.3% 2,101,200 0.5% 63,274,845 13.9% - (1,871,891) 90,864 225,864 65,250 11,610,439 $4.77
Q1-09 9,325 452,663,524 56,761,669 12.5% 1,742,247 0.4% 59,144,916 13.1% - (776,074) 135,000 135,000 112,118 15,306,447 $4.86
Q4-08 9,284 449,173,375 54,124,559 12.0% 1,789,026 0.4% 56,554,585 12.6% - 1,292,628 133,878 252,594 190,020 16,787,880 $4.98

W/D = Warehouse/Distribution FX = Flex

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The Knowledge Report | First Quarter
Flex/R&D vacancy rates in the first quarter
decreased compared to 2009’s fourth quarter
and stand at 22%.
CONSTRUCTION
The first quarter saw a total of 39,523 square
feet added to the industrial market at the end
of the first quarter 2010.
Approximately 10,127 square feet is currently
under construction; concentrated primarily
in the Washtenaw submarket.
ABSORPTION/LEASING ACTIVITY
The Detroit market reported a negative
absorption of 959,150 square feet at the end
of 2010’s first quarter. The highest absorption
reported, found in the Detroit submarket,
was a positive 315,488 square feet.
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| 2010 | Detroit | Industrial
SALES ACTIVITY Colliers International
294 offices in 61 countries
Total year to date, sales activity of industrial/ on 6 continents
flex product decreased compared to the USA 94
Canada 22
same time last year. The 2009 industrial
Latin America 17
market finalized around 120 industrial sales Asia Pacific 64
with a total volume of over $188 million, Europe, Middle East 97
and Africa
considerably less than 2008 close of over
$1.6 billion in revenue
$470 million. The price per square foot this $48.1 billion in transaction value
year has averaged around $23.00, which is 1.1 billion square feet of property
about $22.00 per square foot less than the under management
4,660 active agents/brokers
average reported this time last year. 12,749 professionals
On a local level, sales are averaging
approximately $35-$55 per square foot. Contact information
Capitalization rates are averaging around
9.8%. Nationally, sale prices range from $60-
DETROIT
$85 per square foot, with capitalization rates
Cameron McCausland
ranging from 6.9% to 8.9%.
Director of Brokerage Services
2 Corporate Drive, Ste. 300
Southfield, MI 48076 USA
Tel: 248-540-1000
Fax: 248-540-1038
Ann Arbor
617 Detroit Street, Ste. 100
Ann Arbor, MI 48104 USA
Tel: 734-994-3100
Fax: 734-222-9045
Source material and statistical information,
unless otherwise noted, is provide by The
CoStar Group, Real Capital Analytics, REIS,
Bureau of Labor Statistics, and Colliers-Detroit
Research Department.Statistics reflect inventory
on buildings of 10,000 SF or greater. Asking
Rental Rates are quoted on a grossbasis; per
square foot annually. Information contained
herein was obtained from sources is deemed
reliable. No representation is made as to the
accuracy thereof. CTT Partners is an
independent member of Colliers International.
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