Detroit’s technology prowess comes from its well-known ‘Motor City’ moniker, with technology’s role and investment in the automobile industry remaining prominent as ever. According to JLL’s U.S. Technology Outlook, a low cost of living and real estate, alongside a highly skilled workforce (29.4 percent hold a bachelor’s degree or higher) will keep tenants and investors interested in the market’s opportunities.
“The talent of Detroit’s workforce is incredible, particularly in engineering. Companies who have looked outside of Detroit typically come back because of the dominant automotive nature of this town – investors have taken notice of this staying power,” says Managing Director Dave MacDonald. “Regarding driverless technology, it’s not a question of whether it’ll come from Detroit or Silicon Valley – the innovation will come from Detroit AND Silicon Valley.”
Additionally, Quicken Loans’ impact on the market cannot be overlooked while tech startups are finding a home in Detroit as well. JLL research shows the market’s average office rent per-square-foot (p.s.f.) is $18.32, making it the lowest-cost market in the country and presents the following case study: occupying 5,000 square feet in Detroit is an approximate 63 percent premium compared to coastal high-cost markets.
Consider the case of The M@dison Block, Detroit’s technology corridor. The city block hosts several buildings which serve as tech startup incubators: rent is affordable and there is opportunity to expand. The hub, which includes backing from Dan Gilbert’s umbrella firm Bedrock Ventures, is home to more than 25 tech startups.
There is limited Class A space in the CBD and significant new development has yet to be seen due primarily to the fact that rental rates do not yet support now construction. However, the sector that is seeing new development is multifamily. MacDonald points to residential occupancy rates in the high-90 percent range as a younger, tech-focused workforce looks to live in the urban core.
“While Detroit’s housing stock has seen tremendous growth, older office product is being revitalized and put to use,” says MacDonald. “There is some deferred maintenance and asset pricing has started to rise, but investors are finding real value in Detroit by acquiring at a premium and catering to tech tenants by playing off a building’s charm and unique features.”