1. Office real estate implications
Sources: JLL Research, Bureau of Labor Statistics
Job growth/loss by sector (12-month change)
Detroit
Total vacancy has continued to decline since hitting a record high of 29.2
percent in the first quarter of 2011. With an improving economy and increasing
space needs by office tenants, total vacancy is expected to continue its
downward trend through 2015. That said, over 14.5 million square feet of
office product remains vacant, ensuring tenant-favorable conditions across
most submarkets for several years. Rents are expected to increase modestly
over the next year, with the concentration of gains taking place among Class A
properties.
The economic challenges in Detroit have created significant barriers to
speculative office construction. Developers have steered clear of this market
for at least a decade and fundamentals are unlikely to justify any speculative
construction over the forecast, albeit build-to-suit activity will continue to take
place. As such, demand growth will continue to translate almost entirely into
vacancy improvements, as experienced over the last two years.
Total jobs vs. unemployment rate
Detroit
(25.0)
(15.0)
(5.0)
5.0
15.0
25.0
2011
2012
2013
2014
2015
Professional & Business Services Information Government Financial Activities
Office employment trends (12-month change)
Detroit
Office employment update
Metro Detroit . May 2015
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2000 2002 2004 2006 2008 2010 2012 2014
Peak: 2,217,186 jobs
unemployment rate
total jobs
3.0%
-2,000
100
200
1,100
2,400
2,600
5,300
8,700
8,900
10,900
-7,000 -2,000 3,000 8,000 13,000
Government
Other Services
Information
Leisure & Hospitality
Financial Activities
Educational & Health Services
Trade, Transportation & Utilities
Mining, Logging & Construction
Professional & Business Services
Manufacturing
Number of Jobs
6.0%Detroit unemployment
2.0%Detroit 12-month job growth
5.5%U.S. unemployment
2.3%U.S. 12-month job growth
• According to the most recent estimates from the BLS, total non-farm
employment in Detroit stood at ~1.9 million payrolls, representing an
annualized increase of 38,200 jobs or 2.0 percent. Meanwhile,
unemployment decreased 3.4 percentage points year-over-year to 6.0
percent.
• Office-using employment sectors have experienced substantial
employment expansion over the last year, recording an annualized net
gain of 9,500 jobs across the metro. Employment gains were led by the
professional and business services sector, which added 8,900 jobs year-
over-year.
• Total U.S. nonfarm employment increased by 126,000 jobs in March, the
lowest level since March 2013 and well below economist forecasts of
244,000 jobs. Downward revisions were also made to the January and
February figures, totaling 69,000 jobs.
• U.S. unemployment was unchanged at 5.5 percent and wage growth
remained sluggish as average hourly earnings increased only 2.1 percent
year-over-year, far below the Fed’s goal of 3.5 percent or better.