The state of the city’s multifamily real estate market is a reflection of larger trends and a sign of what might be in store for the city in the years ahead.
To give you a heads up on the market – an update on the city’s economy, the Broder & Sachse Real Estate has compiled a market study twice a year to assess the rental and occupancy rates of all multifamily properties downtown.
In the research the continued strength of Detroit’s multifamily marker is very clear. It has an average occupancy rate of 95.6% all over downtown last winter 2018. The occupancy rate shown in the report has indicated the demand is quite high, plus the findings in the Downtown Detroit Partnership’s 3rd Greater Downtown Residential Market Study, which was released last 2017. The research estimated an addition 10,000 units needed for the next 5 years. The need for 10,000 additional units would mean supply or perhaps relatively lack thereof (this is still part of the equation).
Now, the number of residential units in Detroit has significantly increased based on a percentage basis. In other terms, the volume of quality residential product is still limited. There are still fewer than 8000 professional managed market-rate apartments in the downtown area.
With the influx of new residential properties online, there are more than 1850 units that are under construction and about 700 additional units still being proposed. To bring new projects in the market would take 18-24 months. With that, a demand is expected to go beyond the supply for a foreseeable future. This is quite different from what is happening compared to what is happening in the larger coastal markets, even in Chicago where it is known about oversaturation or overbuilding are being heard.
Landscape is Evolving
Over the past decade, the multifamily landscape of Detroit has changed dramatically. There has been a lot of changes during that time – the city has emerged from bankruptcy and started adding jobs again. Business leaders with forward-thinking have moved their operations to the downtown core from the suburbs or out of state. It shows that the sustained economic prosperity and a civic renaissance has made Detroit a popular destination for business owners and also for new residents.
Here is what the RE Business Online said about the impact on great recession:
“The impact of the Great Recession left Detroit with an unemployment rate of 28 percent in mid-2009, according to the U.S. Bureau of Labor Statistics. Eight years later in 2017, the city reached an unemployment rate of 7.1 percent — the lowest in 17 years.”
For investors, it is important to know that there is a great demand for quality residential options including a complete amenity-rich experience, but with the population growth, it displays a multigenerational demographic profile, which appeals to people of all ages and backgrounds.
Diversity of Neighborhoods
The multifamily market in Detroit is very diverse when it comes to neighborhoods.
The driving force behind Detroit’s ongoing urban renaissance is the rising residential population downtown plus a continued strong tenant demand. So, 3-5 years from now, there is an assumption of several thousand new residential units in the market amidst a continuous surge of corresponding commercial, dining, and entertainment growth.