Market Information

Gain insight to the current and future Detroit area office, industrial and retail marketplace through L. Mason Capitani's Market Information reports.

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DETROIT AREA INDUSTRIAL MARKET

The Detroit Industrial Market ended 2010 with a vacancy rate of 14.4%, which was up from 14.2% at the end of the third quarter. Total industrial inventory in the Detroit market area amounted to over approximately 580 million square feet of space in nearly 17,000 buildings. The general consensus is that the Detroit industrial market is stabilizing. Although major improvements in the market will not come to fruition overnight, the market is heading in the right direction.

As the market improves and more transactions are completed, a natural competitivenss between property owners will surely occur. Therefore, it is anticipated that lease rates and property values will continue to decline. Once we reach a level where the majority of sale transactions are traditional "arms length" transactions rather than bank-owned or distressed sales, values will begin to stabilize. When this occurs and we realize a positive net absorption, properties will surely begin to appreciate again, also resulting in a steady increase in lease rates.

Industrial building sales activity decreased from the last quarter. This was the case in terms of volume of transactions, as well as average dollar value per transaction. Cap rates on investment opportunities held constant for the most part, with a slight increase to 9.7% by year’s end.

FUTURE OUTLOOK

The strength of the Metropolitan Detroit Industrial Market is predicated upon the strength of the automotive industry. As suppliers continue to employ cost-cutting measures, and as foreign suppliers expand locally, the industrial sector will surely improve in 2011. Furthermore, local companies continue to diversify their business portfolios through defense, aerospace and various commercial industries. Although we will not witness an immediate turnaround, a healthier industrial market is on the horizon.

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