The retail sector in Detroit ended 2022 on a positive note with its vacancy rate declining and absorption levels returning back to positive territory.
This is good news for Detroit’s retail sector. It will continue to benefit from the lessons learned during the COVID-19 pandemic, which included curbside pick up, in-store pick up, enhanced delivery, and online options.
According to the report, the vacancy rate in Detroit’s retail sector fell to 5% during the fourth quarter. This is a decrease in vacancy rate of 10 basis points compared to the previous quarter, and 10 basis point compared to the same period a year ago.
Colliers also reported that the total net absorption for the fourth quarter was 352,000 square feet. This brought Detroit’s annual absorption to 332,000 square feet.
Positive momentum was also seen in the asking rents. Colliers reported that the retail asking lease rate was $16.07 per square foot in the fourth quarter. This represents an 8.9% increase over the previous year.
Colliers noted that not all submarkets are equal. The Southfield market was a strong one. This submarket was responsible for 46% of total retail space that was absorbed during the quarter, according to Colliers. The fourth quarter ended with positive 161,112 square footage of net absorption in Southfield.
From 278 closed leased, Detroit’s retail market saw 992,856 sq. feet of leasing activity in the fourth quarter. The Macomb submarket saw the highest level of leasing activity with 55 deals totaling 155,017 square foot.
Lapeer County and St. Clair County had the lowest vacancy rates. Both ended the year with a low vacancy of 3.1%. Rents in North Oakland and Try were the highest at $22.67 and $22.56 per square foot, respectively.
Although there weren’t a lot of retail sales in the Detroit area during the fourth quarter, there was enough to generate $152million in sales volume at an average $141.79 per square foot. The largest retail sale was a 111.805-square-foot, freestanding building that Home Depot occupied at 5951 Mercury Drive in Dearborn. The property was sold by Kin Properties to LaneStar Properties for $13 million.
Other notable retail sales include Tel-Huron Plaza, Pontiac, which was sold for $7,000,000; a Shelby Township CVS Pharmacy, which sold at $5.3 million; and a Novi Walgreens that sold at $4.8 million.
The average cap rate for retail sales was 6.7% in the fourth quarter, a decrease of 7.1% in the beginning 2022.