18 Jan ICONIC Detroit Market Update
ICONIC Detroit Market Update
Happy New Year from all of us at ICONIC Real Estate in Downtown Detroit.
I was recently asked to give a market update on Downtown for one of our clients and felt it was also a great opportunity to share with the ICONIC readership.
As you may or may not know, my personal pedigree within Detroit retail real estate is long standing, especially within the food and beverage business. I have been responsible for the leasing of everything from the top of the Renaissance Center to both Parc and Lumen restaurants in our city’s parks, to the Hudson Café a long time ago and more recent additions the Willis Show Bar and The Royce.
One of the key factors in Detroit retail real estate has traditionally laid in the condition of space. Prior to Mr. Gilbert’s proliferation, the conditions of spaces were extremely varied. Those who could or would took on the “White boxing” component, and typically were able to tilt the Lease scales in their favor. Now, “White boxing” along with tenant allowances in the neighborhood of first year’s rent on a 10 year term, seem to be the new normal, provided Tenant, Landlord and concepts are in agreement.
We can also a credit Mr. Gilbert with raising the bar with respect to achievable asking rents, starting in the low $20’s per square foot upwards to nearly $45 for certain very desirable spaces along Woodward Avenue, the market rate continues to accelerate as space becomes more sparse and food and beverage sales volumes continue to surge.
Smaller space footprints within the Downtown Necklace District remain a hot commodity. The older age of the building stock tends to leave the spaces over 100’ in depth, yielding large spaces with small frontages. This limits the frontage and exposure for the retailer or forces them to accept spaces substantially larger than needed, yet not necessarily easily merchandised. This compromise to retain proper street presence has been problematic for all except the likes of Nike and Under Armor. One side, Tenant or Landlord, has been forced to compromise to make deals work. This combined with what can be a challenging leasing process within the Bedrock portfolio, has increased the demand for space outside of his purview. Similarly we field an abundance of calls for National Restaurant users looking to be downtown, but they must not fit the overall merchandising strategy of Bedrock, as we do not see this use within his overall portfolio. This is not to insinuate that Bedrock cannot put together deals, more so that it’s not as simple as wanting a space, but that a Tenant must also demonstrate a market differentiation characteristic that brings both parties together on deal terms. ICONIC recently worked with Bedrock and Capital Spring to finalize a lease for Buddy’s Pizza, which will come to the Madison Building in late 2019. Similarly the District properties carry extensive extra charges (in the neighborhood of $25 PSF in addition to Rent) seem to have given less prominent Landlord’s an upper hand with respect to retail leasing.
Unique architectural features of the buildings downtown still tend to draw interesting Tenants, particularly within the Food and Beverage sector. The opening of Fort Street Gallery and Besa this past fall are clear examples of historic architecture taking on new life in the Food and Beverage sector. We are also seeing phenomenal performance out this sector seemingly at least partially as a result of distinct architecture and pent up demand, the industry however is still struggling with respect to staffing issues, hiring and retaining top talent continues to be challenging beyond the confines of the 7.2.
As the neighborhood around Bagley and Adams changes with the developments of Philip Houze and Detroit City Club there will be a constant stream of new residents and a much needed cleanliness to an otherwise heavy construction area. The completion of the Book Tower and Free press Buildings will also add fuel to the Washington Boulevard neighborhood and I would expect this area to have rents reflective of those in Capital Park in the not very distant future.
I plan to breakdown the Midtown and Brush Park market later in February so please be sure to Subscribe and get in touch with an ICONIC agent today to get the best representation in the city!
Thank you for reading, I look forward to hearing your thoughts on the topic, so please comment, email or call!
Kees Janeway – Managing Partner, ICONIC Real Estate