Billionaire’s Real Estate Buying Spree Catches On in Detroit
Dan Gilbert, the billionaire founder of Quicken Loans, is on a buying spree of commercial buildings in downtown Detroit. His move has been dubbed the “Dan Gilbert effect,” and it’s spreading, according to The Wall Street Journal.
Five months ago, Detroit declared Chapter 9 bankruptcy. But despite that, the real estate market downtown has been seeing a resurgence.
Many in the industry are crediting Gilbert with leading the rebound. He’s purchased dozens of properties downtown and plans to move 3,800 of his employees into the city from suburban offices. He’s created 6,500 jobs downtown since 2010.
Now other investors are taking note of the downtown expansion and are betting on rising property values and rents. They are increasingly purchasing buildings and apartments to meet the rising demand of new workers heading downtown, which also is from the area’s rebounding automotive industry and expanding medical and technology industries.
For example, Schostak Brothers, a real estate firm, recently announced construction plans for a 16-story office building, valued at $111 million, for Meridian Health Plan, set to open 2017. It will be Detroit’s first new high-rise since 2006.
Also, Dongdu International is buying up properties downtown, including the former Detroit Free Press building, which it plans to convert into residential units. DDI is also under contract to purchase a 10-story apartment building for $2.77 million downtown.
The city’s downtown development authority recently greenlighted a $450 million sports and entertainment arena for the Detroit Red Wings. That plan also includes another $200 million in private investments for residential, retail, and office space across a 45-block area, The Wall Street Journal reports.
Still, Detroit’s office vacancy remains high compared to the national rate. Its office vacancy rate was at 26.5 percent at the end of the third quarter (but down from 33 percent in 2010). The national average is 15.2 percent.
“We’re seeing significant investment, but what we are lacking are big institutions,” says Fred Liesveld, executive vice president for commercial real-estate firm Newmark Grubb Knight Frank.