detroit skyline2.jpg

(File)

DETROIT, MI – The rate of empty space in Metro Detroit office buildings fell to 24.9 percent during the third quarter of this year, its lowest level since 2009, according to the latest data from Newmark Grubb Knight Frank (NGKF), a New York-based real estate advisory firm with an office in Southfield.

The dropping vacancy rate has been led by Detroit’s Central Business District, where more than 1.2 million square feet of positive absorption has occurred over the past three years. Companies such as Quicken Loans, Blue Cross Blue Shield, DTE Energy and Chrysler have all either relocated headquarters or added offices in downtown Detroit since 2010.

“Although vacancy matches 2009 levels, the office market today looks significantly different than it did pre-recession due to robust activity in the CBD over the past several quarters,” Fred Liesveld, executive vice president, managing director at NGKF, says in the report, released Thursday. “In 2007, the Detroit CBD had a vacancy rate of 33% while today it stands at 26.5%. And now we are starting to see demand pick up in the suburban office market, which is great news for southeastern Michigan and underscores the overall improvement in the region.”

The suburbs continue to have higher vacancy rates than Detroit’s core, but are improving. Southfield, which used to be the best sub-market in the metro area, had a vacancy rate of 29.7 percent in the third quarter, the report from NGKF says.

During the third quarter, Southfield’s vacancy rate fell 40 basis points to 29.7 percent, its lowest level since 2011. A little more than 58,000 square feet of Southfield’s office space was absorbed during the period.

“What is most encouraging for Detroit is that healthy activity now extends beyond the CBD,” Dan Canvasser, senior managing director, says in the report. “The suburban market experienced significant vacancy increases as a result of the recession as well as the migration of some companies to the CBD. However, those trends are reversing, particularly in Troy, Southfield and Livonia.”

In Troy, the vacancy rate dropped 40 basis points to 28.3 percent, as about 73,000 square feet of office space was absorbed.

Mr. Canvasser adds, "We continue to see solid market improvements in large-block lease activity in Troy and expect the vacancy rate to fall further in the coming quarter as Residential Home Health is expected to occupy 41,000 square feet on Corporate Drive."

For the city of Detroit, the rate of empty office space fell 60 basis points to 26.5 percent, while 70,000 square feet of commercial real estate was leased up.

For all of Metro Detroit, the average leasing rate was $18.52 per square foot in the third quarter, compared to $18.47 during the same period a year ago.

David Muller is the business reporter for MLive Media Group in Detroit. Email him at dmuller@mlive.com or follow him on Twitter or Facebook.