Signature Associates

Metro Detroit sees boom in industrial development

Posted By: Detroit News on August 17, 2023.  For more information, please click here to read the source article.

One recent afternoon, workers at LM Manufacturing in southwest Detroit stood at their stations on the production line, each doing their part to assemble seating for the Ford Bronco and Ford Ranger.

After launching production last month, three shifts of nearly 700 workers at the plant on Fort Street assemble between 1,000 and 1,200 seats daily, which are then delivered to Ford Motor Co.’s Michigan Truck Assembly Plant in Wayne.

The plant’s location, the ability to expand, and access to a ready labor force were among the top reasons for the company’s site selection, said Sylvester Hester, president and CEO of LM Manufacturing. The company leases the building from Bedrock, part of a 37-acre campus the firm purchased in 2020.

“After an exhaustive search, we decided that, hey, this is where we want to be,” he said. “This is our new home.”

The facility is one example of the manufacturing plants coming online recently in Metro Detroit during a period of strong demand for industrial space.

Real estate experts say there’s high demand for such sites even as lease rates increase for an eighth straight quarter.

“We’re seeing demand in Wayne, Oakland and Macomb,” said Eugene Agnone, senior vice president of CBRE, a commercial real estate services and investment company. “It’s still very robust. And there’s a lot of spec development in each of those markets as well.”

Agnone said several factors are driving demand, including the auto industry’s transition to electric vehicles.

“Obviously automotive electrification,” he said. “We’re seeing a lot of e-commerce demand and a lot of onshoring of manufacturing.”

‘A lot of leasing’

During the second quarter of this year, developers in the Detroit market completed eight industrial buildings totaling 1.2 million square feet, according to CBRE’s Q2 industrial market report.

Construction is underway on 18 properties in Metro Detroit for a total of 5.4 million square feet, according to the report. Among those buildings are the Romulus Trade Center in Romulus, the Eastland Commerce Center in Harper Woods and robotics company FANUC America in Auburn Hills.

In Detroit, four industrial projects are underway totaling 1.3 million square feet that are expected to be completed later this year or in early 2024, according to CBRE.

And more industrial projects are in the pipeline. Companies looking to move into Detroit include Ypsilanti-based vacuum insulated glass developer LuxWall Inc., which recently said it is considering leasing a facility Bedrock would construct in southwest Detroit to produce its energy-efficient windows. And Magna International has plans for a 280,000-square-foot manufacturing facility in Auburn Hills.

Some of the developments in the planning phase just a few years ago are now in operation. Late last month, online retail giant Amazon opened its 3.8 million-square-foot fulfillment center on the site of the former Michigan State Fairgrounds. And last year, automotive supplier Dakkota Integrated Systems opened a 375,000-square-foot manufacturing facility on the former Kettering High School site.

In Auburn Hills, Farmington Hills-based Friedman Real Estate recently facilitated a deal for DTE Energy to lease space to store equipment at a 528,340-square-foot building at Pinnacle Logistics Park in Redford.

“We’re doing a lot of leasing on the industrial side,” said Jared Friedman, executive managing director of Friedman Real Estate. “And then we’re also doing a lot of build-to-suit as well. And the reason we’re doing build-to-suit is because there’s a lack of industrial buildings because the market is so tight.”

Friedman Real Estate, in partnership with Southfield’s General Development Co., is building the seating plant for Magna International in Auburn Hills, which will supply seats for electric vehicles to be produced at the nearby GM Orion Assembly Plant. The Magna facility is replacing a former animal shelter and pet adoption center on Brown Road.

“So we’re seeing a lot of demand, not only on existing product but building custom buildings in the industrial space because there’s a lack of available product and still a lot of strong demand from the automotive sectors,” he said.

Projects that are done speculatively tend to be pre-leased before they’re complete, Agnone said.

That appears to be the case for NorthPoint Development, which has ramped up its development in Metro Detroit in the past few years with several projects, including those in Shelby Township, Romulus and Detroit. The Kansas-based firm also opened an office in downtown Detroit as it grows its presence in the area. Its portfolio is largely industrial.

NorthPoint Development has 3 million square feet of construction under development in Metro Detroit and has delivered 1.35 million square feet this year in Michigan, said Marc Werner, a regional vice president of NorthPoint Development.

Although the company is mum about prospective tenants prior to building completion, Werner said leasing activity is strong. Every completed project is 100% leased, he said, and of the 3 million square feet under construction, about half is already leased.

“It’s really supply chain distribution warehousing and e-commerce and automotive …” he said. “The industrial fundamentals are really strong. There’s a lack of Class A industrial warehouses in the market, and there’s a large labor population.”

Werner said the company has had a lot of success with brownfield redevelopment, such as the Cadillac Stamping Plant and the former headquarters site for American Motors Corporation in Detroit as well as the former GM Warren Transmission Plant in Warren.

“Those are three examples of automotive manufacturing buildings that were absolutely vacant for years that we’ve been able to get redeveloped,” he said.

Among the projects NorthPoint Development has underway is the Eastland Commerce Center in Harper Woods on the site of the former Eastland Shopping Center. That project, which consists of three buildings, is expected to be complete by the end of the year, Werner said.  (Joe Hamway and Greg Hudas of Signature Associates are proud to be a part of leasing this exceptional new development!) 

The company also has construction underway on the former headquarters site for American Motors Corporation on Detroit’s west side. Work is expected to be completed during the first quarter of 2024.

The EV shift’s impact

The city of Detroit has seen growth driven by original equipment manufacturers, accelerated by the push for electric vehicles, said Kenyetta Hairston-Bridges, executive vice president of economic development and investment services for the Detroit Economic Growth Corp.

“I think Detroit is positively positioned to be able to capitalize on those opportunities going forward because we do have the land,” she said. “We do have land that is still available that we could site these projects. We have a favorable climate in terms of the regulatory climate for manufacturing and industrial projects. And the workforce. When many of the industrial projects come to us, they say we really like the Detroit market because south of Eight Mile, you have a concentrated workforce, available workforce here in the city of Detroit. As well as your expertise around your engineering talents and things like that.”

Hairston-Bridges said the city has more than 1,000 acres it has targeted for future industrial development; however, she declined to name most of those locations. She noted two locations in the city ripe for future projects: 9.3 acres near Interstate 94 and Mt. Elliott and 12 acres yet to be developed at the former Kettering High School site.

The focus is not on logistics or distribution, Hairston-Bridges said, but rather on support of the automotive industry.

“We’re really talking about those industries, those new industries, that are being accelerated as a result of your electric vehicles,” she said.

In 2020, Bedrock, known for its office and residential holdings in Detroit’s central business district, entered the industrial market with the purchase of the 37-acre former Sakthi Industrial Campus. Now known as the Fort Street Industrial Campus, it houses Bedrock tenant LM Manufacturing in 260,000 square feet of space and Diversified Synergies LCC in 200,000 square feet of space.

“The Detroit region is still extremely attractive to a variety of industrial and manufacturing users,” said Kofi Bonner, chief executive officer at Bedrock, in an email to The Detroit News. “The needs of these users have evolved to match the automation and logistical demands of the OEMs. Retaining and attracting these businesses is key to continued diversification of the Detroit economy and Bedrock expects to continue its efforts to provide real options right here in the city limits.”

Bedrock says it has had exploratory conversations with LuxWall Inc. and has received interest from companies in the manufacturing, transportation and warehousing sectors.

CBRE’s Agnone doesn’t see the interest waning.

“There’s a lot of demand from developers seeking out large parcels of land to develop,” he said. “That can be time-consuming as to whether or not it’s for environmental wetlands, entitlements or be it rezoning. So there are a lot of large national developers that are not yet here, but are here looking to try to title properties that they can then develop.”