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Weekly Brief – April 5
/in Weekly Brief /by Dave NykanenMy focus this week is on the impact of COVID-19 on the future of office space. Although I have previously discussed the impact of the global pandemic on retail (bad) and industrial uses (good), I have not devoted much time to the impact on the future of the office sector.
At this point, there is not a lot of hard data on the impact of the acceleration of remote work caused by COVID-19 on office users. This is mainly due to the fact that most office leases have not yet expired post-pandemic. So the choices made by tenants about the contraction of office space have not become evident in the market.
We are, however, starting to see some anecdotal evidence that office space needs will contract in the near term.
Ford will likely be reducing the number of employees working on-site. This decision will necessarily reduce the office space needs of Ford. This could have a significant impact on the Dearborn marketplace, especially. (This may have a double impact on Fairlane mall, as the mall is being reused as office space by Ford after the closure of anchor retail tenants).
DTE Energy recently announced it would be selling its office building in downtown Ann Arbor. The 400 employees at the site are either going to work remotely or be relocated to existing DTE office space in Detroit.
This week Crain’s also provided more anecdotal stories. Some smaller office users are reducing office space. New entrepreneurs are reducing office space. A large law firm is maintaining its office usage in Detroit. However, that decision may be due to the space being completed, and the lease having been signed pre-pandemic.
Also anecdotally, I have spoken to office users who have renegotiated existing leases to reduce square footage. Apparently, some landlords have decided that getting 100% rent on 50% of space from a tenant is better than receiving 0% rent on 100% of space, notwithstanding existing lease terms.
As this year progresses, I expect we will receive more hard data about the contraction of office space. Each month, more office leases will expire and be renegotiated for a renewal. I expect tenants will be signing leases for less space, and the vacancy rates will start to tick upward.
DTE Energy Pulls Out of Downtown Ann Arbor
/1 Comment/in SE Michigan /by Tracy WillisDTE Energy is seeking a buyer for its office building on 414 S. Main Street in downtown Ann Arbor. DTE is accepting offers for the property but has yet to set an asking price. In April 2020, the utility company pulled 400 workers out of the Ashley Mews office. Those employees began to work from home amidst the pandemic. DTE has over 5,000 employees who are working from home. The 400 employees from the Ashley Mews office will either continue to work from home or relocate to the Detroit headquarters. The utility company is protecting the arrangements they have with other tenants in the building, so the remaining occupancy in the building will remain unfazed.
Shipping Container Homes Coming to Ypsilanti Township
/in SE Michigan /by Tracy WillisDarius Smith, a local developer and founder of ASJ Homes and the “What’s Up Detroit” show, has plans for at least two luxury homes built out of shipping containers, in Ypsilanti Township. He plans to have one of the homes built by this summer, which will start at $250,000. Incorporating the shipping containers, which he gets from California, keeps building costs down. The unit he’s building this year will use 6 containers to create a 1,600 square foot 3-bedroom, 2-bath home. Smith has also designed a container micro-hotel, along with a cryptocurrency utility token.