The 211-million-square-foot Detroit warehouse/ distribution space market is still surging according to Reis data, with 466,000 square feet of net absorption in the second quarter and 852,000 in July bringing the 2012 total to that month to plus 1.3 million. The vacancy rate fell 20 basis points in the second quarter, and was down 30 from a year earlier at 14.9%. The July rate was 14.5%. Reis had predicted net absorption at less than 1 million square feet each year from 2012 to 2014, but that was before the July surge. In any case new supply is not an issue, as Reis reports no space under construction.
Warehouse/distribution rents are beaten down, but starting to revive. The asking average increased 0.5% in the second quarter, but remains down 0.3% from a year earlier at $3.74 psf. But a 0.9% increase in the effective average, to just $3.36 psf, brought this measure to plus 0.3% year-over-year. The effective average added another penny in July. Gains of 1.3% asking and 2.1% effective are forecast for all of 2012, with similar increases expected in subsequent years.
The 37.8 million-square-foot Flex/R&D market is also moving forward. The vacancy rate fell 10 basis points in the second quarter, to 19.7%, on 26,000 square feet of positive net absorption and another 10 basis points in July. The average asking rent for this type of space rose 0.3% during the quarter to $6.42 psf, with the average effective rent up 0.4% to $5.66 psf. Although Reis records a decrease of 0.2% by both rent measures in July, gains of 0.5% asking and 1.2% effective are forecast for all of 2012 as the vacancy rate continues to edge down.
“The overall vacancy rate of the Metro Detroit industrial market closed the quarter at 14.5%, a significant decrease of 3.2 percentage points compared to one year ago,” according to Cushman & Wakefield. This source reports a direct asking rent of $4.53 psf.