Detroit Office Investment Forecast
Improved Leasing Activity and Limited Speculative Development to Aid Vacancy in the Motor City
Second-half momentum paves way for a positive outlook. Uncertainty surrounding future office space needs during the health crisis resulted in a number of relocations and consolidations that lifted metrowide vacancy in 2021. However, net absorption returned to positive territory during the second half, supporting an optimistic outlook for fundamentals this year. Total employment in traditional office-using sectors surpassed the market's pre-pandemic peak, contributing to the rise in tenant demand. Notable companies like Rocket Mortgage already initiated their return to office, while other major firms like Ford Motor Co. and General Motors plan to recall workers in the early stages of 2022. Barring any setbacks from COVID-19 variants, more employers could follow suit as vaccination rates increase. Development activity remains robust, but it is improbable that deliveries will result in a rise in availability, as nearly 85 percent of space scheduled to deliver in 2022 has a tenant in place. Therefore, a moderate contraction in vacancy is expected this year. Nevertheless, the metro's recovery timeline will likely extend into 2023 as availability remains above the historical average.