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Commercial Department: Spotlight: Michigan: March 2019

 

Spotlight: Michigan

The Great Lakes State continues its recovery efforts.

Michigan’s geography is unique. It is the only one of the lower 48 states to be split into two large land masses, with the sparsely populated upper peninsula and the urban-based lower peninsula connected since 1957 by the 5-mile-long Mackinac Bridge. The state’s nickname, the Great Lakes State, is the result of Michigan bordering four of the five Great Lakes — Erie, Huron, Michigan and Superior.

Several Native American tribes originally inhabited the area, and a wave of European immigration — known as the “Michigan Fever” — arrived in the 1830s. Michigan achieved statehood in 1837, shortly after a tenfold population increase from 1820 to 1834.

Michigan’s economy has been on a rollercoaster ride for the past two decades. In the early 2000s, the bursting “dot-com” bubble and the faltering auto industry triggered massive job losses. The Great Recession deepened the state’s troubles as some 850,000 jobs disappeared, many of them related to manufacturing.

The state’s post-recession recovery has been strong, however. As of March 2018, Michigan led the nation in the number of engineers per capita, was third in durable-goods manufacturing and was seventh in total manufacturing output. Still, the Great Lakes State has work to do as 2017 rankings from U.S. News & World Report placed Michigan among the bottom of half of states for health care, education, infrastructure and quality of life.

A report this past November from the University of Michigan said the state experienced nine straight years of uninterrupted job growth from third- quarter 2009 to third-quarter 2018. The same report predicted Michigan would add about 75,000 jobs in 2019 and 2020, although that equated to a lower employment-growth rate than the state recorded from 2011 to 2016. International migration is expected to comprise 55 percent of the state’s population growth through 2025.

According to the U.S. Department of Labor, the six-county Detroit metro area recorded an average weekly wage of $1,107 as of second-quarter 2018, higher than the national average of $1,055. The metro area added 12,800 jobs from November 2017 to November 2018, and the mining, logging and construction sector led the way with 4,600 jobs added, or 6.1 percent growth, during that period.

Among the nation’s 100 largest rental markets, Detroit had the sharpest decline from 2008 to 2018 in the size of an average apartment, RENTCafe and Yardi Matrix reported. The average apartment in the Motor City is now 791 square feet, a 27 percent reduction over the past decade, placing Detroit 12th among U.S. cities for smallest average apartment size.


c_2019-03_Spotlight_chart-1Detroit-Ann Arbor office market

A third-quarter 2018 report from Colliers International said Detroit’s central business district and suburban office markets posted year-over-year asking-rent and net-absorption increases. The metro area had 55 office transactions totaling nearly 2 million square feet of space during the past third quarter, and the office-vacancy rate for the area declined from 9.8 percent to 9.1 percent between the first and third quarters of 2018.

Colliers also reported that Michigan’s largest bank, Chemical Bank, will start construction on a new headquarters in downtown Detroit by mid-2019. Ford Motor Co., Little Caesar Enterprises Inc., and LinkedIn are among the companies driving construction and leasing trends in the first half of 2019. Detroit is attractive to tenants because Class A office space, which averages $22.77 per square foot, is much less expensive than in markets like Chicago or New York City.

Focus: Auto manufacturing

Detroit’s largest automakers — Ford, General Motors and Fiat Chrysler — reduced their profit forecasts for 2018, the University of Michigan reported this past November. Ford reported that federal tariffs on aluminum and steel would cost the company as much as $1 billion. The “Big Three,” however, are expected to see their share of U.S. light-truck sales to rise from 65 percent in 2017 to 75 percent in 2020.

Despite its struggles over the past decade, Michigan’s auto industry is still a world leader. It is home to 96 of the top 100 North American auto suppliers, and it leads the U.S. in the number of autonomous-vehicle testing projects, according to the Detroit Regional Chamber. The auto industry is responsible for 14 percent of the state’s tax revenue and 20 percent of its workforce, the Alliance of Automobile Manufacturers reported.

c_2019-03_Spotlight_chart-2Unemployment

Michigan’s unemployment rate rose slightly to 4 percent this past December, but that figure was only slightly above the national rate of 3.9 percent. Unemployment rates in each of the Detroit metro area’s six counties fell year over year as of this past November, according to the U.S. Department of Labor.

A report released this past July by the Michigan Department of Technology, Management and Budget (DTMB) listed several job sectors that should see double-digit percentage growth through 2026. These include high-wage positions such as mechanical engineers, software developers and computer-systems analysts.

A separate report from DTMB noted that Michigan’s share of foreign-born residents is 6.4 percent, which is about half the national average, and about 25 percent of this population faces employment challenges due to language barriers. Foreign-born residents in the Great Lakes State, however, are more educated than the statewide average, DTMB said.


3 Cities to Watch

Detroit

The Motor City’s population declined by 5.7 percent from 2010 to 2017, according to the U.S. Census Bureau, but the metro-area population has grown in recent years to 4.3 million residents. An income gap continues to plague Detroit as about 35 percent of the population lived below the federal poverty line in 2016 and the city ranked fifth on a 2018 list of the nation’s most-impoverished areas. Quicken Loans founder Dan Gilbert, however, has been lauded for a $5.6 billion investment in Detroit that has created 17,000 jobs across more than 100 businesses.

c_2019-03_Spotlight_cityGrand Rapids

Located about 150 miles west of Detroit, this city of nearly 200,000 residents grew by 5.7 percent from 2010 to 2017, according to census figures. It boasts an unemployment rate of 3.5 percent and a cost of living that is 5 percent below the national average. The median household income is about $63,000 and the median home price is $193,000. Grand Rapids’ largest employers include Spectrum Health, regional supermarket chain Meijer Inc., and furniture manufacturer Steelcase.

Lansing

The state capital and home to 117,000 people, Lansing added 4,700 jobs from October 2017 to October 2018, labor statistics show. Michigan State University is a major economic driver as it employs more than 11,000 people. Other major employers include General Motors, Sparrow Health System and apparel-manufacturer Peckham Inc. The Lansing area has three medical schools, two law schools and hosts the headquarters for four national insurance companies.

Sources: Alliance of Automobile Manufacturers; Brittanica.com; Business Insider; Detroit Free Press; Detroit Regional Chamber; Forbes; Lansing Economic Area Partnership; Michigan Department of Technology, Management and Budget; RENTCafe; Riverbank Finance; The Grand Rapids Press; U.S. Department of Labor; University of Michigan; U.S. Census Bureau; U.S. News & World Report; Yardi Matrix

What the locals say

“There are many players, development companies, that are active in Detroit now, especially in the greater downtown area, and they’re starting to look for opportunities out in the neighborhoods as well. The bread and butter has really been rental housing. However, now we have a lot more for-sale housing coming back into the area in terms of some single-family housing, but primarily townhomes, lofts and condos. … There are mortgages available and appraisals have been certainly allowing a lot of these [types of] lenders to come back into the market, because the [property] values have really risen here over the last five years or so.”

c_2019-03_Spotlight_local



Susan Mosey

Executive director, Midtown Detroit Inc.


 

Neil Pierson is editor in chief of Scotsman Guide Media. Reach him at neilp@scotsmanguide.com or (800) 297-6061.

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