Tuesday, February 14, 2012

Michigan Commercial Real Estate Update!

The economy in Michigan has stabilized and the fall in housing prices has either slowed significantly or even stabilized, depending on the location  This bodes well for commercial real estate, especially multi-family properties. Rents are rising and vacancies are falling. The result is CAP rates are falling slowly for good properties in good locations. Interest rates are very attractive and lenders are coming back in the market.

Michigan's economy will not pick up until unemployment drops and production rises.  This is not going to happen soon. Per the chart to the left, the number of people employed in Michigan has dropped by almost 14% from the beginning of the rescission to January of this year.to slightly over 3.8 million.

Unemployment is significantly down while
productivity is back to pre- recessionary days, as shown by the chart to the right. These two charts show the effects of computerization and the increase in productivity per employee.

This bodes well for rhe existing companies in Michigan, however it demonstrates the need for our work force to improve their skills and for the need to attract more employers to the state.

Retail stores and apartments need people to fill their buildings. Outside factors to watch are the Euro crisis and whether we will address our long term debt problem.

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