Posted By: Jeff Shaw
By: Bob Kraemer

Detroit is in a state of transition. It’s a process that has been simmering for some time, but really began in earnest about five years ago. This article discusses some of the property types, developments and neighborhoods that continue to reshape downtown Detroit and offers some insight into what the city might look like in five to 10 years.

Fueled by a strengthening economy, there is an air of excitement in the Motor City, and the development climate is increasingly vibrant. The nexus of development and redevelopment activity is occurring in the same places — Downtown, Midtown, New Center — that were at the core of the city’s renaissance a century ago. In some respects, today’s Detroit is reinventing itself in the same way.

Residential leads the way

The foundation of Detroit’s development resurgence is residential growth. People are continuing to move to Detroit to work and to live — a trend that has accelerated dramatically in the last few years with downtown apartment buildings reporting upwards of 98 percent occupancy.
It’s a phenomenon that shows no real sign of slowing down. It’s also an important and natural first phase. With residential comes the corresponding demand for dining, retail and entertainment.

The residential sector has been especially active in the adaptive reuse marketplace, where market-rate residences have sprung up in many of the city’s most important and recognizable buildings.

Noteworthy additions to the downtown residential portfolio include the 34-story Broderick Tower, which opened in 2012 and includes 127 rental units, and the David Whitney Building across the street, where a $92 million renovation was completed in late 2014 that transformed the historic structure into a 136-room hotel below 108 apartments.

On Woodward Avenue, The Lofts of Merchants Row, known for some time as the premier loft apartment rental community in downtown, has been so successful that it is in the process of expanding into the adjacent Valpey building, which has been vacant for several years.

Just down the street on Woodward Avenue is the site of the former J.L. Hudson’s flagship department store, which was demolished in the late 1990s.
While billionaire businessman Dan Gilbert and Bedrock Real Estate Services have not yet shared final plans for the site, located at 1206 Woodward Ave., it is clear that there will be a significant residential component to the development.
It was also recently announced that a New York-based developer is bringing 28 new units to Midtown with the conversion of a vacant building at 678 Selden St. to the H.R. Finn Apartments.

For the most part, however, the hottest residential activity has occurred in Capitol Park, a long-overlooked triangular plot of land between Campus Martius and Grand Circus that actually served as the original site of the state capitol.
My team at Kraemer Design Group recently worked with Broder & Sachse Real Estate Services on the conversion of the former Griswold Building, originally constructed in 1929 and designed by famed architect Albert Kahn, into 125 luxury apartments called The Albert. Rental rates draw an impressive $2 per square foot.

Lansing-based developer Richard Karp is turning the former United Way building, located at 1212 Griswold St. in Capitol Park, into office space for the Archdiocese of Detroit as well as 56 loft-style apartments and first-floor retail.

The 11-story 1145 Griswold Building in this area is being transformed into 63 market-rate apartments, dubbed Capitol Park Lofts, with an additional 18,000 square feet of commercial space and occupancy slated for early 2016. Just across the street at 1215 Griswold St., Bedrock is developing a space that will feature an additional 25 units.

Lastly, the historic Farwell Building, located at 1249 Griswold St., is also slated for residential redevelopment, with retail on the ground floor and multifamily housing in the balance of the building.

New Construction Ramps Up

While the redevelopment activity continues, the past six months in particular have turned our heads to the blossoming new construction downtown.

Prime examples include the 4,000-square-foot site at 28 W. Grand River Ave., a new mixed-use project currently under development by Bedrock, with construction set to begin this fall, as well as a new residential project located atop a parking garage near the Westin Book-Cadillac Hotel Detroit.

Other ground-up development projects include the recently opened Garden Lofts at Woodward Place, featuring condos overlooking Tiger Stadium, and The Scott @ Brush Park, a development undertaken by Woodward and Erskine LLC that will add approximately 200 apartments in a new five-story building in the historic Midtown neighborhood.

There is also abundant activity along the East Riverfront, most notably Orleans Landing, which is a plan for five city blocks that will create 300 units of housing, both townhomes and apartment-style units.

Retail Rebound

Detroit’s retail renaissance is driven, at least in part, by retailers looking for the cachet of a Detroit address, and the earned “street cred” that comes with being in downtown.

The new John Varvatos store on Woodward Avenue is a prime example of the kind of hip retail presence that has helped re-energize the Detroit retail landscape. Varvatos is a big-name designer with a longtime Detroit connection, but the Woodward Avenue corridor is proving to be highly desirable to a range of retailers.

As the city’s main thoroughfare, and the site of the future M-1 Rail, Woodward Avenue is truly the center of the retail marketplace and will continue to attract big names. But don’t expect to see a Gap store or an American Eagle, or any other retailer that you’re more likely to see on Chicago’s Magnificent Mile.

Downtown will more likely be the new home for those retailers recognizing and valuing the Detroit brand — the slightly out-of-the-mainstream national brands, and the edgier, trendier, more entrepreneurial brands and retailers, both regionally and nationally.

That actually fits well with the motivations of downtown landlords and property owners who clearly want a national presence, but are also shooting for something different and distinctive.

If you’ve been thinking about making an investment in retail on Woodward Avenue, the time to act is now. A considerable number of buildings fronting Woodward Avenue have been renovated but remain unoccupied for now.
Other hotbeds of retail activity in Detroit are Capitol Park and the New Center area.

With independent local retailers like Detroit Bikes expanding and opening in Capitol Park, it’s a prime area to watch, as it is going to continue to develop enough retail to satisfy all the new residents.

New Center, the proposed terminus for the M-1 rail project, is going to see a huge surge in activity from the recently announced purchase of two blocks of retail buildings at the intersection of Grand Boulevard and Woodward Avenue.

Bold Predictions

Five to 10 years from now, Detroit will look very different than it does today. Downtown will be firing on all cylinders. The new Detroit arena and entertainment district will be completed, and with apartment rentals continuing to drive rates comparable to other major cities and creating longer wait lists than ever, I suspect the downtown population will be booming.

The development and redevelopment activity of today will have paid significant dividends. The Capitol Park area will have been essentially completely remade, with all of the major buildings renovated — including the David Scott building. The Book Tower is probably the last large-scale adaptive reuse project in the city, and that rehabilitation will almost certainly be completed within the next five to 10 years.

Development isn’t going to stop anytime soon. It will keep expanding beyond downtown proper through the radial arteries of the city, starting at the Detroit River along Jefferson Avenue, to the east on Gratiot Avenue, north along Woodward Avenue, and west on both Michigan and Grand River avenues.
The wildcard is the high-profile arena and entertainment district project. It will certainly become a significant piece in the downtown development landscape, and has great potential to be a uniquely transformative development in Detroit’s urban landscape.

Downtown development activity will also continue to migrate west toward Corktown — located just west of downtown Detroit and the city’s oldest existing neighborhood — where there is still available and underdeveloped land.
The area west of the MGM Grand Detroit casino and luxurious Fort Shelby Tower Apartments is a very interesting prospect.

Playfully known as “Corktown Shores,” this area has the potential to connect to the West RiverWalk and ultimately to Southwest Detroit. To the east, moving toward Lafayette Park, already established residential neighborhoods will likely continue to grow.

The riverfront provides another area of opportunity. There are lots of projects bubbling up now, and the area will undergo a profound transformation within the next decade.

New construction will be in full swing, starting with midscale projects of three to five stories tall — the most economical to build. Examples include Woodward Garden Apartments and The Auburn, both of which are mixed-use developments in Midtown that contain residential and retail.

But as we begin to see land values increase, we will likely start to see more projects going vertical to the tune of 10 or more stories. Higher density will be the order of the day.

In addition to the increased density of traditional retail storefronts, my prediction is that we will also see more service-oriented businesses such as professional dry cleaners, doctors, personal accountants, dentists and fitness clubs move into the city, especially downtown, and along the five radial arteries of the city.
Those service retailers will represent an important step in the evolution of Detroit from a re-emerging investment opportunity to a truly revitalized community.

— By Bob Kraemer, Co-founder, Principal, Kraemer Design Group. This article first appeared in the August 2015 issue of Heartland Real Estate Business magazine.

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