Interested in additional insights on the Detroit market? Download your free copy of the January 2024 BID Magazine for CRE insights and updates about Michigan.
Retail leasing in the Detroit area has been surprisingly resilient the past couple of years, but the effects of prolonged inflationary pressures appear to be affecting market participant behaviors as the area totals just under 3.5 million square feet for leasing so far for the year.
By contrast, retail leasing in the Detroit area reached almost 4 million square feet during both 2021 and 2022.
While 2023 started off well for retail leasing in the area, there was a pullback in activity toward the end of summer, similar to many other areas nationwide. Both the demand and supply sides are driving the recent decrease in leasing activity. Tightened availabilities have limited leasing from the supply side, while decreasing sales and elevated operating expenses are influencing softening demand.
Demand for retail space in the Detroit area continues to be focused on neighborhoods in Macomb, Livonia, and Novi that have well-performing retail properties. But now Southfield is moving up in the rankings, as tenants have started taking space at the Northland Mall redevelopment site immediately north of the Eight Mile and Greenfield Road intersection.
The Costco Business Center will occupy 160,000 square feet in Michigan’s first business center location. The Costco Business Centers are designed without pharmacies or bakeries; they focus on selling products in greater amounts, with roughly 70% of the items in business centers distinct from those found in regular Costco locations. To the immediate north of the Northland Mall redevelopment, 5th Avenue Furniture took 60,000 square feet at the Greenfield Plaza in the former Art Van Furniture & Outlet location.
Monitoring the amount of sublet space in the area may help give insight into tenants’ long-term plans and overall health. While there was a sizable increase to 93,000 square feet available for sublease in 2022, nearly double the amount available for sublease from the prior year, this year has seen subleasing space available shrink to only 25,000 square feet. From 2019 to 2022, the average space available for sublease was right around 50,000 square feet.
This article originally appeared on CoStar Insight. It has been republished here with permission.