MARKET BREAKDOWN
REGIONAL SPOTLIGHT: DETROIT
THE ART OF EMPLOYMENT: BRINGING JOBS TO DETROIT
D etroit, Michigan, has friends in high places. Spe- cifically, the city enjoys the dedicated patronage of Quicken Loans founder and CEO Dan Gilbert, whose decision to move his company to the metro area played a key role in revitalizing Detroit’s downtown and whose latest pro-Motor-City move has him sinking $2.1 billion into four development projects that he believes will create a total of 24,000 jobs to the local economy over the next five years. Those jobs consist of 15,000 construction jobs and another 9,000 permanent ones. The development project includes restoration of Detroit’s Book Tower, a 38-floor skyscraper that has been part of the Detroit skyline since 1926. The historic address has foundered through a series of defaulted mortgages, tragic accidents, and even untimely deaths of owners and managers since the late 1980s. Gilbert reportedly purchased the tower as part of a package for around $30 million. Gilbert’s project also includes erecting two new skyscrapers and building an addition to the former Compuware Building, which is part of One Campus Martius, which houses Quicken Loans and several other major tenants. Gilbert has called his ambitious project “optimistic” because 51 percent of the work done will employ Detroiters, even if those Detroiters must be trained in order to do the job. This move will create a highly skilled population of construction workers in an industry desperately seeking skilled labor. Gilbert’s project also takes advantage of the Michigan Thrive Initiative (MIthrive), which permits projects to keep state sales and state income taxes from on-site construction work and retain as much as half of the state income taxes generated from new jobs and residents in the new development. The combination of such initiatives and a willing leader in the area like Gilbert are likely to spur more such development in Detroit and elsewhere in Michigan. State senator Jack Brandenburg said of the MIthrive initiative, “Right now, the state is getting 100 percent of nothing [from abandoned developments like the Book Tower]. By passing this legislation, we will get 50 percent of something.” Other politicians and businesspeople have praised the initiative because it costs the state nothing
Detroit’s central local on the straits linking Great Lakes Huron and Erie made it perfectly suited for the fur trade in colonial times. It remains a commercial transport hub to this day.
PHENOMENALAPPRECIATION AND POTENTIAL “Detroit has seen phenomenal appre- ciation in recent years, absolutely, but we say you should never get too excited about the prospect of appreciation [be- cause it can cloud your judgment] about the long-term play,” said Jordan. Even today, the city’s jobs and housing mar- kets are volatile [see sidebar and images to the left], though generally extremely positive. He noted that thanks to the market’s extended decline from the 1950s to the early 2000s and then extremely rocky experience during the housing crash, his company routinely purchases dozens of properties a month that are relatively simply rehabbed and converted to cash-flowing rental properties. Jordan added that office space in the area is mostly rented, the city finally has an effective program in place to remove blighted properties from the market, and that Dan Gilbert, founder of Quick-
A LITTLE HISTORY: PERFECTLY SITUATED FOR A PERFECT STORM Detroit was founded more than three centuries ago by French explorers who found its central location on the straits linking Lake Huron and Lake Erie perfectly suited for one of the most lucrative industries of the day: the fur trade. What was less perfectly suited to French settlements, however, was a strong Iroquois Indian Nation presence that demanded consideration and often careful negotiations before French or British settlers or traders could settle, trade, or hunt the beaver that flourished in the area. The Iroquois’ strength and sheer numbers allowed them to claim and control land as far south as modern Kentucky, and eliminating their dom- inance in the area would play a major role in many British colonists’ eventual decision to support the American Revo- lution decades later.
en Loans and dedicated Detroit revival- ist, is still actively engaged in building up the local economy while also keeping affordability front and center. Gilbert recently announced he would begin construction on 700 affordable homes within the city limits to help keep local workers living local, some- thing that will become increasingly im- portant as the population continues to grow. According to a report published by the Urban Institute (UI) this past July, southeastern Michigan could gain 380,000 households in the next two de- cades. Much of that population is likely to be more inclined to rent instead of own since about a third (37 percent) are projected to be senior-headed house- holds, predicted UI researchers. “[These results] could reframe how we approach housing in the region,” the researchers noted, adding that they expect a “growing demand for rental housing in the region and across Michigan.”
up front and relies on private-sector investors to “make the investment, rebuild the site, and fill it with jobs and people.” Should Gilbert’s project appear to bear fruit in the next few years (the first phase is projected to be completed before 2020), more developers are likely to come on board with their own projects and associated job creation. • At present, Detroit area unemployment is hovering around 8.4 percent, which may seem high compared to the national rate of 4.4 percent. However just eight short years ago that number was closer to 30 percent (28.4) and it did not fall into single digits and stay there until April of this year. Charts provided courtesy of Strategy Properties.
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