Rents keep going up in greater downtown Detroit
People continue to write bigger rent checks for the chance to live in or around downtown Detroit, with some mainstream rents at levels once reserved for penthouses and other ultra-luxurious spaces.
Driving the higher prices is a demand for apartments at all price ranges in downtown, Midtown and Corktown that still exceeds the supply of available units — despite a mini-boom of construction and building rehabs.
According to local experts, the going rent for newly built or newly restored Class A apartments is up to about $1.70 per square foot in Midtown and $2 per square foot in downtown. It was only five years ago that $1.25 was a common number.
But the hot rental market has inevitable side effects, with some university students and young professionals complaining they've been priced out of the market or pay too much for comfort.
Tenants in existing market-rate buildings in Midtown experienced rent hikes this year averaging about 5% and about 14% over the past three years, said Sue Mosey, president of the nonprofit Midtown Detroit Inc.
"We have priced out a lot of the undergraduates from the neighborhood because they typically need very cheap rent," Mosey said. "We think that's a missing market piece right now."
Landlords raised rents 3% to 10% this year in some market-rate apartment buildings as new, high-profile redevelopment projects also burst on the scene at price points that would have been unimaginable just three years ago. The momentum is carrying over to Detroit's once-stalled condo market, which experienced similar price increases this year and saw the conversion of some former rental units.
While some new and planned buildings in Midtown set aside 20% or more of their units for individuals or families with below-average incomes, not all demographics can afford the new rents.
New rent levels
Two redeveloped downtown buildings set new rent levels this year for the upper-end market.
The first to open in July was the Albert, 1214 Griswold in Capitol Park, which most recently was a home for low-income seniors. The original 1929 office building, designed by Albert Kahn, underwent an $8-million total renovation.
The Albert caused a stir in the market by introducing $2-per-square-foot rents throughout an entire downtown building that, until then, were typically seen only in showcase apartments, usually with rare and breathtaking views. Some renters are experiencing sticker shock.
"It's the price for the size of the units," said Albert tenant Kelly Lewis, 31, who pays $1,415 a month for a roughly 670-square-foot one-bedroom unit and a parking spot. It's a per-square-foot price she called "outrageous."
Despite those misgivings, Lewis said she moved in last summer because she was pressed for time and didn't see many other options available. She hopes to find less expensive housing next year. "I can't wait until my lease is up," she said.
There are happy Albert tenants, too. Former Dearborn resident Pat Bernardelli, 25, pays $1,645 a month for a two-bedroom unit on the top floor and a parking space. He said that he and his parents were taken in by the amenities and the building's expansive views of downtown.
"I was like, 'Wow, this is really nice,' and my parents were like, 'You'd be foolish if you didn't move in here,' " said Bernardelli, who until recently worked at Quicken Loans downtown and is now in the insurance industry. "I was making excellent money over at Quicken, so $1,600 was really just a throw in the bucket."
Asking rents for all of the Albert's 127 units — starting at $1,295 for smaller one-bedroom apartments — meet or exceed the $2-per-square-foot mark once considered the minimum required to develop market-rate Detroit projects without tax credits or government subsidies. (Some developers now insist the "magic number" is higher, perhaps $2.25 a square foot.)
Todd Sachse, vice president of Birmingham-based Broder & Sachse, developer of the Albert, said the rents reflect the high quality of the units and the building's hotel-like amenities, which include a 24-hour concierge, a fitness room, dog-washing station and an elaborate common area with billiards tables and fountains. More than two-thirds of the units are leased.
"It's been wildly successful," he said.
The low-income seniors who lived in the building before the renovation received a one-year notice of the coming redevelopment, Sachse said. His firm also paid their moving expenses.
"I would bet you that of the 100 people who moved out of here, 95 of them are happier today," Sachse said. "You can't even wrap your imagination around what this place once looked like — it was beyond a dump."
This summer, Midtown resident Graham Davis, 28, saw the rent increase to $1,300 from $1,175 a month for the two-bedroom, townhouse-style loft on Canfield that he shares with his girlfriend.
"We're happy here and that's why we renewed," Davis said.
He said they weren't surprised by the 10% increase and were willing to pay it, as they enjoy their neighborhood near Wayne State University and are eager for the new M-1 Rail, which Davis intends to ride to his work downtown once the streetcar opens in late 2016.
David Whitney restored
Rents in the newly restored David Whitney Building in Grand Circus Park will slightly surpass the $2-per-square-foot mark.
The 19-story David Whitney features 105 apartments and a 136-room hotel that opens next week. Tenants will start moving in after Jan. 1 and face average rents of $1,450 a month for one-bedroom units and about $2,500 a month for two-bedroom units.
James Van Dyke, a vice president at the Roxbury Group, lead redeveloper of the $92-million restoration, said half of the apartments are already reserved. The incoming tenants include young professionals, empty-nesters and even a few families with children.
The condo market in greater downtown is also regaining momentum that it lost in the recession, when half-sold buildings had to convert vacant units to rentals. Now many of those rentals are going back up for sale.
"The rents are going up to the point that many people now renting are converting over to ownership," said Austin Black II, founder and president of City Living Detroit brokerage. "At $2 a square foot that is $2,000 a month for a 1,000-square-foot unit, and you can get a decent condo with that kind of money."
Rentals become condos
The Park Shelton near the Detroit Institute of Arts is selling units that it once rented out. And last week, the FD Lofts project in Eastern Market sold the last available condo of its 34 units that previously were rentals.
FD Lofts' sale prices ranged from about $120,000 for studio units to $220,000 for the one bedrooms and $330,000 for its largest three-bedroom suite.
"I was surprised by the demand and the depth of the market," said Brian Giles, codeveloper of FD Lofts with Robert Heide. "We had people coming through the building almost on a daily basis who were interested in buying."
Where there was once an oversupply of condos, there are now concerns of an undersupply.
"We really do need more for-sale development," Black said.
Units in pipeline
Most of the projects in the planning stages call for rentals.
Mosey, the Midtown Inc. president, said about 300 housing units are under construction in Midtown alone, with other projects totaling nearly 1,700 units in various stages of planning.
One of the biggest Detroit projects in the pipeline is Orleans Landing, which calls for 278 apartments in 19 all-new buildings that will rise along the riverfront east of the Renaissance Center. (Opening target is mid-2016.)
Its developer, McCormack Baron Salazar of St. Louis, is also a partner with Midtown Inc. for a total renovation of the old Strathmore Hotel in Midtown on Alexandrine Street into 129 units. (40% or more will be set aside as affordable.)
Jack Hambene, the firm's senior vice president, said he doesn't yet know what the rents will be.
"What the market is at the time we actually hit the market is what we will charge," he said.
How Detroit rents compare
■New or newly renovated building in Midtown Detroit: $1.70 per square foot
■Newly renovated in downtown Detroit: $2 per square foot
■New or newly renovated in downtown Cleveland: $1.75 per square foot, $2 for high-end building
■Typical rent in downtown Cincinnati: $1.50 to $1.70 per square foot, $2 for new construction
■Newly renovated in downtown Toledo: about $1 per square foot
■Average rent in downtown Chicago: $2.66 per square foot, $2.80 and above for luxuryhttp://www.freep.com/story/news/local/michigan/detroit/2014/12/07/rents-keep-going-downtown-detroit/20019111/