This article originally appeared on CoStar Insight. It has been republished here with permission.
Construction of office properties in the Detroit area remains at a moderate pace, even as the future of office properties is still very much in the air amid prolonged uncertainty surrounding office use and the trajectory of interest rates.
The 1.5 million square feet underway represents only about 0.8% of the Detroit area’s total inventory and the lowest level underway at any time throughout the past three years.
Developers have been much more selective in commencing office starts, which have declined to about 215,000 square feet being initiated this year to date. For context, the average construction starts per year over the past five years has been around 949,000 square feet per year. While this is good for market fundamentals now, recent declines in office construction could result in the market lacking higher-quality, amenitized office space in the future.
The two main projects in progress are Hudson’s Site by Bedrock Management Services in the central business district and Ford Motor Land Development’s work at the former Michigan Central Station in the Corktown neighborhood.
The Hudson’s five-star office site has an expected completion date of June 2024, after starting the work in August 2017. The pandemic may have slowed things down, but structural work on the tower is expected to be finished this year. This 558,000-square-foot property includes 400,000 square feet of office space with smaller allocations for retail, apartments, luxury hotel rooms, meeting space, an indoor gallery and an outdoor plaza.
Meanwhile, developer Ford continues to work on re-imagining the former Michigan Central Station into the anchor for Ford’s Mobility Innovation District. The iconic rail station is being converted into 471,970 square feet of four-star office space aimed at drawing more tech workers to the city. While the Detroit area has one of the highest concentrations of engineering talent in the United States, STEM-related occupations account for only about 7.4% of the area’s total workforce. When this project is completed in January, the 30-acre campus is expected to include about 14 acres of public park space.
Over the past 12 months, Detroit lost about 530 office jobs, marking a 0.1% decline. But this doesn’t tell the full story. Since the pandemic hit, traditional office-using sectors have posted significant gains. However, job gains in these sectors, such as professional, finance and information technology, haven’t yet translated into increased office usage as the stickiness of remote working remains in force.
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