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10.29.2019

Detroit Retail Real Estate Challenges to Know

Retail real estate in Metro Detroit has been an increasingly hot topic for everyone from small businesses to global brands. As such, there are several challenges that need to be taken into consideration if you’re interested in the market.

As one of Detroit’s top retail real estate brokers for nearly half a century, Farbman Group has seen firsthand how the landscape has changed and evolved, and serves as an expert navigator for prospective brands looking to enter the market.

If you’re thinking about buying retail real estate in Detroit, here are just a couple challenges to know before making the plunge. 

Shopping Malls

In the Detroit area and around the United States, shopping malls are losing—starting with once-venerable big-box retailers such as  Sears, Lord + Taylor and more. When a flagship store at a mall closes, it’s common for in-line stores to follow suit when their Leases are up for renewal or if a clause in their lease allows them to do so, creating a chaos-inducing domino effect. While the statistics say online only makes up a small portion of retail sales, it is a rapidly growing percentage.

Commercial real estate firms like Farbman Group help mall owners reposition to adapt to this rapidly changing retail landscape. At the Fairlane Mall in Dearborn, for example, instead of replacing vacant retail shops with more retail brands, space was leased by Ford and readapted for office use. This helped the mall fill much-needed big-box space, while the automaker enjoyed lower rents than a traditional office building.

Retail is being disrupted all over the board. The brands who survive have figured out an experiential angle, complete with unique décor and touches, that bring people in. This is seen often, especially in Detroit, with retailers like Under Armour taking up residence in historic buildings and altering their interior for modern use. This experiential component is becoming increasingly more prevalent, with places like TopGolf, hotels, and multifamily back filling large retail vacancies.

Shopping malls, especially strip malls, are also seeing a sharp rise in medical tenants. Examples include doctors, dentists, physical therapy clinics and other medical specialists. Service-oriented retailers are also great back filling options, including phone stores, insurance companies and credit unions, as they are always in demand and are viewed by developers as “internet-resistant.”

Retailers or shopping center owners should work with a tenant or landlord representative to ensure they understand their long-term plan, can navigate conversations with lenders, and either select a great site or fill vacant space with the right tenants.

Detroit Retail Investment

Real estate investment opportunities in Detroit continue to grow and provide a variety of fresh concepts as well as National brands

Some neighborhoods in Detroit are growing faster than others, due to increases in investment and the construction of high-end residential communities. In Corktown, for example, the purchase of Michigan Central Station by Ford in 2018 has prompted residential, retail and office development in the surrounding area.

Being able to successfully spot up-and-coming Detroit neighborhoods can make a huge difference in the price of a property. It can also determine the level of success a retailer will have in the area—something Farbman Group has successfully helped dozens of brands navigate.

However, the Detroit retail real estate market had historically demanded owners use most of their own money to finance investment. In a Vacant to Vibrant report, over three quarters of Detroit property owners had personally financed nearly all redevelopment efforts, however, that has changed dramatically in the last few years as Lender’s clammer to be part of the revitalization of the City and to find fresh options in an up and coming market.

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Work with a real estate expert who can help you navigate these challenges and more. If you have questions about purchasing or selling retail real estate in Detroit, contact Farbman Group and get in touch with a professional on our development team.