Michigan's real estate market 'somewhat jittery,' experts say

Detroit is still a bargain

By Gary Gosselin

Dolan Media Newswires

If you're looking for office space in Michigan, it is still a buyer's market. But if you're looking for sales transactions, things are a bit slow for now.

Sommers Schwartz PC moved late December from the Southfield Town Center to One Towne Square, also in Southfield. Despite the complete upheaval of the office in December, the move was more than worth it, said Joseph Bourgon, the firm's managing partner.

"That space was designed 25 years ago when lawyers were practicing differently, and we would have had to gut our old space to refit or redo," he said. "Occupancy levels are down and rents are down, and this gave us a good opportunity to modernize and locate all on one floor. It's looking like occupancy rates are starting to go up, but it is still a good time to get new property."

Detroit is still a true bargain, said Kelly Burris of Ann Arbor, managing partner at the newly opened Detroit office of IP firm Brinks Hofer Gilson & Lione.

They just opened at 300 River Place Drive--in the same building as the new U.S. Patent & Trademark Office satellite branch--and Burris said she couldn't be happier.

"We really needed to be close to the patent office; the business model is to best serve our clients by being on site, and we have conference rooms and open offices where visiting attorneys from our other offices can come in, and we have a specific business model here in Detroit," she said.

The price was right, too, she said, especially comparing costs to the suburbs, and the amenities for the cost-- the Detroit River is just outside their front door--are outstanding for any location.

"I would absolutely tell other people who want to come down here to come, but I want to grab as much business as I can," she said, only half-joking. "I'm hearing that other law firms are looking in this building, I would not be surprised if other IP firms moved into building or the next building over. I've experienced nothing but a warm and welcome down here and I'm really happy here. It is a great place and the rent is [cheap]."

It's a tough time for landlords, and these are still tough business conditions, Bourgon said, noting what's tough for landlords is better for tenants, saying you can't stay put forever.

"In our case [the move] was worth it. It is difficult. In law firm life in December, trying to figure compensation, plus holidays and then throw in a move," he said. "The long nights and stress of the move are distant memories. It never pays to make decisions on what's better on the short run, and for us, this decision was clear."

Birmingham real estate attorney John Gaber said he's seeing that a lot of clients are getting much better deals than they had with older leases.

"Because of that, the activity level is pretty brisk on the leasing side," Gaber said. "Since you still have a substantial amount of inventory, you will continue to see a lot of that."

Miller, Johnson, Snell & Cummiskey PLC moved from its historic downtown Kalamazoo office to a new office, also downtown, at the Radisson Plaza Hotel & Suites building.

"Our lease happened to be up, and clearly, anybody looking for commercial office space has found the market favorable, so we found no shortage of space in Kalamazoo," said Chief Operating Officer Betsy Raymond. "And we had 10 available properties that met our needs and were in the central business district--and, yes, we were able to improve the economics of our lease."

The Radisson offered an upgrade in technology with WiFi throughout the building, and videoconferencing abilities and wiring for all the technology. And it is a 24-hour facility, so there is security and maintenance, for instance, always at the ready, she said.

Real estate attorneys are steady, Gaber said, but are not expecting any big upticks in the market any time soon.

"What it will take is that the general [economic] recovery will have to continue and general development will have to improve to see much activity," he said. "People are shuffling around and not building or buying much; we're seeing fast food and seeing individual companies build for themselves, but beyond that, not much."

He said the credit markets still aren't where they were five or six years ago, and while there are more credit sources out there now, lending is still limited in a somewhat jittery market.

"As the economy in Michigan continues to recover, it's going to create a demand for space, but I don't see any spark that's going to create instant demand," Gaber said. "Over the past few years, the job of real estate professional has gotten more challenging; it requires more creativity. I think it's going to be a long, gradual increase in real estate; a lot of the indicators are positive, but it's going to continue to be a slow recovery process."

Published: Thu, Jan 17, 2013