The Wayne County Treasurer filed a motion requesting that the redemption period on property tax foreclosures be extended. Judge Timothy Kenny ordered that foreclosure protections for occupied homes and commercial properties be extended to March 31, 2022. The order will keep properties off the annual auction block. However property taxes must continue to be paid. The Treasurer asserts that the main objective is to keep people in their homes.
White-collar workers at Stellantis are likely to continue working remotely much of the time once they formally come back to the office. The company has devised a new work model that it calls the New Era of Agility. As part of a new pilot program in October, 450 employees will return to the Chrysler Technology Center at the headquarters complex in Auburn Hills. What’s learned in the pilot program will determine how the company proceeds with its remaining employees, but it envisions a split of 70% remote work to 30% on-site time.
The commercial real estate industry is historically homogeneous, populated largely by white men in the executive ranks, even in a city like Detroit, where the population is more than 80 percent Black. The Greenwood Commercial Real Estate Group adds some diversity to the homogeny. The firm is named for the Greenwood District of Tulsa, Oklahoma, commonly called Black Wall Street and at one time a thriving Black economic hub before it was destroyed in 1921 after the arrest of a young Black man for the purported “assault” of a 17-year-old white girl. James Pitts, head of the Atlanta office of Greenwood, believes that Greenwood CRE will help Black real estate professionals break into commercial real estate.
In an effort to unite two separate offices under the same roof, Plante Moran shuttered its owned 125,000-square-foot office at 27400 Northwestern Highway and is leasing 8 floors in the Southfield Town Center in addition to the four it currently occupies at that location. The accounting, tax advisory, real estate and wealth management firm will occupy the first through 12th floors of the 32-story 3000 Town Center tower. The move will relocate 550 Victor Center building employees to the Southfield Town Center.
Meijer is eyeing the site of an abandoned Kmart store in Orion Township. Located at 1025 S. Lapeer Rd. in the Lake Orion Plaza, the old Big K store would be demolished and replaced with a 90,000 square-foot Meijer store. The new Meijer store will not be a full-size supercenter, but it will carry more than just groceries. Although Meijer says it’s too early to release details like project start and completion dates, the owner of the shopping center believes that the company is aiming for a late 2022 opening.
Once valued at $101 million in 2014, the Dearborn mall is currently valued at $42.75 million. That’s a 57.7% decrease in value. The Florida-based Starwood Capital Partners purchased the property in 2014 as part of a $1.4 billion deal that included The Mall at Partridge Creek in Clinton Township and five other malls. Fairlane Town Center has been in receivership since May and faces liquidation.
All Michigan downtowns have been hit by the pandemic. With decreased foot traffic and former customers continuing to work from home, business is slow. But downtown Lansing has been hit especially hard as its businesses rely on the State of Michigan office hub. Struggling businesses have lost up to 90% of their sales while waiting for state employees to return to work. Unfortunately, even once the pandemic fades, far fewer state employees will return to work on a daily basis.
Dead malls are the ghost of retail pasts, but they’re being repurposed in creative ways. Amazon is using old mall space as new fulfillment centers. One dead mall has become the new headquarters for Fortnite creator Epic Games. To survive, malls are bringing in non-traditional tenants like bowling alleys, gyms, and grocery stores. Turnover and vacancy are high in mall real estate right now.
The vacancy rate for regional malls in the United States hit a record 11.4% in the first quarter of 2021 from 10.5% in the fourth quarter of 2020, according to Moody’s Analytics’ commercial real estate division. Shopping traffic to enclosed malls has been steadily decreasing for years due to Americans spending more online. In it’s latest quarterly report, Moody’s finds that other commercial real estate sectors are showing better progress, retail is still in crisis.
My 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.
