Future Cities

Emerging Industrial Markets: Detroit

September 19, 2023 5 Minute Read

Detroit has long been known as the nation’s leader in the automotive industry and for advancing new technologies in mobility and manufacturing. With a deep foundation of talent from several universities, Michigan has engineers, chemists and computer scientists to create these products and the skilled labor to build them. West Coast technology companies have been relocating to Michigan because of the welcoming business climate, quality of life and affordability. This combination of cutting-edge technology, skilled labor and economic incentives has resulted in billions of dollars invested in state-of-the-art facilities, which support a strong and thriving industrial market.

Lauren ScarpaceCBRE Executive Vice President

Demographics

Approximately 4.9 million people—22% aged 18 to 34—live within 50 miles of Detroit, and 37.5 million consumers live within 250 miles.

Figure 1: Detroit Population Analysis

Source: CBRE Location Intelligence.

Detroit’s warehouse labor force of 67,322 is expected to grow 6.7% by 2033, according to CBRE Labor Analytics. The average salary for a non-supervisory warehouse worker is $17.74 to $20.72 per hour, with an overall average of $18.98. Detroit’s unemployment rate was 3.9% as of July 2023, according to the U.S. Bureau of Labor Statistics, versus 3.7% a year earlier. Over the same time period, the state’s unemployment rate decreased from 4.1% to 3.6%. Overall, the region’s unemployment rate hovers close to the U.S. average of 3.8%.

Figure 2: Detroit Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.

Supply & Demand

Detroit has 540 million sq. ft. of existing industrial space. In terms of building size, the majority of facilities (182.4 million sq. ft.) fall into the 10,000-50,000 sq. ft. category. Another 114.9 million sq. ft. of buildings are over 500,000 sq. ft. Although the vacancy rate has increased slightly to 2.6% at the end of Q2 2023 (up from 2.3% at end of 2022, largely due to speculative construction deliveries), leasing activity has increased by 27% quarter-over-quarter and 11% year-over-year. Nearly one million sq. ft. in new and renewed leases transacted in Q2, including DTE Electric Company’s nearly 530,000 sq. ft. commitment in Redford.

Overall average asking rents in Detroit increased 5% from Q4 2022 to Q2 2023, to $7.54 NNN per sq. ft. Asking rents are highest in the Washtenaw, Northwest Suburbs and I-75 Corridor submarkets, all with rates above the market’s average. For big-box product (industrial warehouse buildings 200,000 sq. ft. or larger), CBRE’s H1 2023 Midwest Industrial Big Box report noted that Detroit had the second-highest taking rents (at $6.79 NNN per sq. ft.) out of 13 Midwest U.S. markets.

Detroit has benefited from many automotive industry-related companies moving to the area and the reshoring of certain manufacturing operations. Detroit had the second-highest manufacturing-based net absorption in 2022 at near 6 million sq. ft—just behind Chicago, according to CBRE’s report on the rise of onshore manufacturing.

Construction activity has held steady with 18 buildings (5.1 million sq. ft. total) underway and 36.7% preleased by the end of Q2 2023. For comparison, the market held 4.7 million sq. ft. of construction with 46.1% preleased at the end of Q2 2022. The largest project will stand at 655,000 sq. ft. for FANUC America, a leading supplier of automation and robotics for manufacturing. The property is located in Auburn Hills and due to deliver in April 2024. Strong activity should continue in the region and, as a result, industrial occupiers and investors can greatly benefit from Detroit’s active automotive sector, growing labor force and robust economic incentives offered by the state of Michigan.

Figure 4: Detroit, Historical Data

Source: CBRE Research, 2023.

Figure 5: Detroit, Size Range Comparison

Source: CBRE Research, 2023.