We continue to hear positive news from the Metropolitan Detroit commercial real estate community with news of absorption of both office and industrial space while vacancy rates start to fall. There has also been investment from both local and out of town buyers of both distressed and investment-grade properties. While we are hearing about the positive at one end of the spectrum, we are still seeing areas of distress in the market at the other. The economy is starting to wake up but it still has a hangover!
Chrysler Group LLC continues its expansion in Auburn Hills with the lease of 147,000 square feet of office space at 2301 Featherstone Road. This is their second expansion over the past year as they previously leased 210,000 square feet in 2011 at 1075 Entrance Drive in Auburn Hills. Many are speculating that Chrysler will announce another significant lease in the area in the next few months. Panasonic Automotive Systems Company of America announced a lease of 90,000 square feet at 3170 Corporate Drive in Farmington Hills from Lexington Property Trust; this is a consolidation of operations from several locations.
New York based Sovereign Partners LLC recently announced the acquisition of the Grace Lake Corporate Center; an 889,000 square foot Class A office complex which includes the 527,000 square foot headquarters for Visteon Corporation. The purchase price is reported to be $81 million or $91.11 per square foot. While this is the third asset that Sovereign acquired in Metropolitan Detroit, this demonstrates that Metropolitan Detroit does indeed have an appeal to out of town investors.
While we are hearing about the positive news, there still is an undercurrent of distress in the marketplace. The assets of Dearborn-based Dearborn Bancorp trading as Fidelity Bank has been acquired by Huntington Bank as the FDIC shuttered its operations. This occurrence is due in part to the defaulted commercial real estate loans on its books. We are starting to see less lender directed sales and foreclosures, they still exist in the market.
While the local markets continue to show signs of recovery, they are still feeling the pain from the party of the early to mid-2000′s. THE ECONOMY IS STARTING TO WAKE UP, BUT IT STILL HAS A HANGOVER!
Matthew B. Fenster, CCIM, MCR