The Great Recession hit Michigan harder than many other states, resulting in massive employee layoffs and the closure of several major auto manufacturing plants.
However, the state’s biggest city, Detroit, also known as Motor City, appears to be poised for a remarkable comeback. For one thing, Chinese real estate investors are focusing on the city’s bargain-priced residential properties. According to the Global Times (“Chinese real estate investors eye Detroit,” March 27, 2013), John Holsapple, director of Sterling Pacific’s investment consultancy, said, “The city is seeing a resurgence … so it seems to have great potential. And the cost of entering the local market is very low compared with other cities like New York and Chicago.”
Quicken loans founder Dan Gilbert recently poured millions into transforming downtown Detroit after relocating several of his businesses there. He hopes to lure 15,000 young professionals and potential employees to the city by 2015.
Meanwhile, Detroit is receiving national and international attention following Forbes magazine referring to it, in March, as the scene of “America’s Most Surprising Real Estate Boom” in its list of 15 U.S. cities with emerging downtowns.
The magazine also named fellow Michigan city Grand Rapids on the list, citing its development of the Van Andel Arena, Grand Rapids Art Museum, $220 million convention center, upgrades to the Michigan State University College of Human Medicine facilities and the $30 million Downtown Market, among other improvements.
Colliers International recently released a report indicating “sunnier economic days are in store for Michigan” in 2013, according to the Grand Rapids Business Journal (“West Michigan economic forecast shows ‘continuing growth,’” Jan. 28, 2013).
The report revealed the state’s “real estate recovery is still ongoing, with capital becoming increasingly available, while quality inventory is becoming a concern. … Michigan’s housing recovery will stimulate sub office, retail and warehouse demand. … Several Michigan cities are showing up on national lists of improving home markets, including Grand Rapids, Holland and Kalamazoo.”
West Michigan as a whole is drawing renewed interest, in no small part owing to its attractive margins. According to an article in MiBiz.com (“West Michigan real estate markets nipping at national trends year-to-year,” Jan. 20, 2013), “some (West Michigan) real estate firms are seeing more Chicagoland buyers dipping their toes in the market, though they are not alone as outside interests pop up more regularly, sources said.
“‘There is certainly a renewed interest in West Michigan from outside investors, not just Chicago per se, but across the board,’ said Derek Hunderman, an industrial broker with Colliers. ‘There’s been a handful of notable transactions lately and the money is flowing in from sources across the nation.’
“‘There has been increased inquiry from buyers around the country, including New York and St. Louis,’ said Dan Yeomans, president of Amicus Management, a Grand Rapids-based turnaround firm. ‘But again, most buyers come from within the market on assets under $10 million for commercial real estate. It takes a credit-rated lease like a Walgreens, a public company, or a law firm to generate interest from national investment buyers.’
“While Hunderman is encouraged by the interests from outside the West Michigan market, it’s still local buyers that are driving sales activity. Overall, most transactions seem to be West Michigan buyers who have cash and who have created a use for the property, he said
“Still, Yeomans noted that interest from investors from different markets, including Chicago and Canada, were on the rise. ‘I suspect we will see more activity from both areas,’ he said.”
In other Michigan real estate news, residential construction is expected to comparatively boom in 2013. The Grand Rapids Business Journal reported in February (Residential construction expects brightest year in ‘nearly a decade,’”) that “the residential construction market rebound should grow by more than one-third this year, according to the region’s home builders association. ‘I think we will have a lot more sales opportunities,’ said Tony Zahn, founder and president of Zahn Builders. ‘We are already seeing that right now. The consumer is definitely back. I’m expecting growth in 2013.’”
The Home Builders Association of Michigan projects 2013 single family home construction will increase by 39 percent over the previous year. According to the article, “with record low new home production for the past several years, pent-up demand is finally beginning to burst through in the marketplace,” said Robert Filka, CEO of HBA Michigan. “When combined with positive tax and regulatory changes that will encourage more investment, our outlook is more optimistic than it’s been in nearly a decade.”
Michigan general contractors attribute the resurgence in construction to several factors, including low housing inventory, increased hiring and low interest rates.
According to the article, “Bob Sorenson, vice president of marketing and sales for Eastbrook Homes, noted that the two key industry drivers needed for a rebound — jobs and population growth — continue to occur. ‘Last week, Perrigo announced significant potential new jobs in the Holland area,’ Sorenson said. ‘Also, in Allegan we’ve seen a modicum increase in job growth of one percent or one-and-a-half percent. There’s confidence being gained.
“‘You combine that on top of that we have not produced homes over the last four or five years at the level that would even replenish inventory — that is why there is significant confidence from our perspective,’ he said.
The revival of the auto industry, along with employment in general, is also fueling construction in Michigan. In fact, Michigan has added back about 120,000 jobs in two years, with 50,000 more jobs gains expected over the next two years.
Those returning to work in factories and other venues are more confident they will continue to have an income with which to pay for homes, said Sorenson, adding that the law of supply and demand will prompt would-be buyers to take the plunge into homeownership.
Michigan’s recovery from the Great Recession is also apparent in the increase of its gross domestic product from $351 billion during the recession to $385 billion.