This Issue -- Thursday, August 3, 2006 |
Commercial Real Estate Deal - Michigan's Changing Economy |
by Andy and David Farbman |
|
Having a major tech company make a significant investment in southeastern Michigan is indeed a big story. In fact, Google's announcement received a fair amount of national media attention. The decision will, it is hoped, create additional spinoff development and create additional jobs beyond the 1,000 created directly by Google. Automotive R&D is another growth sector in Michigan, with new global and North American auto R&D facilities cropping up in metro Detroit. Another example is Behr North America expanding its four-year old North American HQ by 75 percent. The changing economy will create both opportunities and challenges for businesses, citizens and policymakers. What will this mean for commercial real estate in the Detroit region?
As manufacturing declines, the industrial real estate market will probably
see slower growth rates. But on the other hand, growth in office demand
could lessen the blow of a shrinking industrial base. As companies
like Google come
to town, they will stimulate
demand for office space and other supporting services and amenities. |
Are you positioned to take advantage of the changes that are already underway? All the best, Andy and David Farbman |
Automotive - Michigan Buys Into Ethanol Fuel |
As the Big Three up their sales and marketing of flex-fuel vehicles in the U.S., demand for E-85 fuels, made up of 85 percent ethyl alcohol and 15 percent gasoline, is surging. Using corn and other crops to make E-85 ethanol to fuel cars has become a possible solution for reducing the nation's oil consumption and reducing carbon emissions. Michigan stands to cash in on this both at the pump and on the farm, because we are a major corn producing state. Gas stations across the state are hurrying to add ethanol to their menu of regular and premium gasolines. Click here for a list of E-85 fueling stations. Currently, Michigan is home to one ethanol production plant in Caro, Michigan Ethanol, that turns 16 million bushels of corn into ethanol fuel. The state's second ethanol plant may open in Wayne County by 2008. Could some of Michigan's hottest real estate in the future be in the state's rural areas? |
Office Market - Direct Ownership Trend Raises Rates |
Growth in direct ownership of commercial real estate is driving up rents on the coasts, but the trend is going to stay on the coasts for the time being. Inland markets, including Detroit, are expected to see slower rates of growth. "The price per square foot in some areas like New York and Boston are becoming too high for many tenants," said David Farbman of NAI Farbman. "Meanwhile in other markets, and particularly in Midwestern cities like Detroit, St. Louis and Cleveland, higher vacancy rates mean better value for businesses looking for space." |
Government - State Looking at Changes to Biz Taxes |
The state of Michigan is currently reviewing its value-added Single Business Tax (SBT). The SBT is often criticized for being overly punitive to businesses. While some have called for the abolition of the SBT, others argue that the SBT should not be eliminated unless provisions are made to replace the $2 billion in state revenue the SBT generates each year. "State leaders are not blind to the changing global economic landscape," said Andy Gutman of NAI Farbman. "They realize that Michigan is in competition with other business locations around the world. In order to compete, taxes and incentives need to be tweaked from time to time to take account for the realities of the marketplace. This is just a reflection of the changing realities of the marketplace." |
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Michigan is changing. Manufacturing employment levels are falling, but
the state is showing signs of growing its economy in new and different
ways. The announcement that