The former boutique space for Birmingham designer Linda Dresner is already in talks of  being filled with a new tenant after being vacant for just a few weeks.

The former boutique space for Birmingham designer Linda Dresner is already in talks of being filled with a new tenant after being vacant for just a few weeks.

Photo by Tiffany Esshaki


Real estate continues growth during pandemic

Chamber’s annual forecast predicts a good market in 2021

By: Tiffany Esshaki | Birmingham - Bloomfield Eagle | Published March 22, 2021

 Multifamily housing will be in high demand in the coming years, real estate experts say, particularly in areas surrounding downtowns.

Multifamily housing will be in high demand in the coming years, real estate experts say, particularly in areas surrounding downtowns.

Photo by Tiffany Esshaki

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BIRMINGHAM/BLOOMFIELD — If you think the real estate market in Michigan took a hit in 2020 because of the COVID-19 pandemic shutdowns, you’re right.

If you think the market had a banner year in 2020 with higher numbers of sales, pending sales and sale prices, you’re right, too.

The Birmingham-Bloomfield Chamber of Commerce virtually hosted its annual Real Estate Forecast event March 17, and the takeaway from speakers was largely positive for the year ahead.

Ellen Mahoney, a commercial mortgage broker and the owner of Re/Max Commercial Connection; and Brad Wolf, a managing broker and the president of Hall & Hunter Realtors, shared their takes on how commercial and residential real estate fared last year and what they think that means for 2021.


Watching the office … space
Mahoney kicked things off by explaining how the pandemic has changed the way developers think, but it hasn’t tainted their enthusiasm to build. After all, financial markets are strong: The economic issues caused by the pandemic were about unpredictability, not failings in the banking industry.

“In order to survive, businesses have needed to change their delivery methods,” she said, referring to social distancing precautions like curbside pickup and home delivery. “(Advertising) has largely moved to social media and e-commerce to sell products, and offices are moving to … telecommuting.”

New retailers and restaurants are building with drive-thru and pickup areas. Office developers are adopting more of a hybrid approach to spaces, with the presumption that most employees will only be headed into the office a few days a week, if at all.

That said, there is a relatively high inventory of office space in metro Detroit and a lower demand, which means reduced prices.

“Since the pandemic, subleases (for office space) are up over 51%. That’s a sign tenants aren’t comfortable with their current lease and they’re looking for exit strategies.”

But occupancy for those spaces in the Birmingham/Bloomfield area is still between 80% and 90%. Mahoney said that doesn’t mean there are bodies in those offices, but the landlords are collecting their rent.


Prime time for industrial facilities
While office spaces might be on the decline, warehouses are climbing in demand. Legalized recreational marijuana has created a need for growing and processing facilities, and larger corporations like Amazon and Fiat Chrysler Automobiles have announced plans to scoop up industrial buildings in the area.

So, what are Mahoney’s expectations for 2021? More of the same: future development will look a little more shutdown friendly with the ability to apply social distancing measures if needed, and office spaces are going to become more fluid and fewer in number for the same reason. Distress sales of some office properties may be in the cards.

Two areas of interest though, Mahoney explained, are developments in multifamily housing and reimagining of shopping malls.

Multifamily and affordable housing — not to be confused with low-income or subsidized housing — is in high demand to accommodate growing numbers of younger families and empty nesters. There are several such developments going up in the Detroit area, including at the old Hudson department store site — an endeavor Mahoney pegged to be the most substantial development in the area in generations. But suburbs should plan their own projects to meet those projected needs, despite challenges like high construction costs, a shortage of labor and slow-moving municipalities reviewing zoning ordinances and site plans.

Some apartments or senior housing might also be considered at malls, since the concept of shopping malls is going to be a hot topic in the next few years. With major retailers, known as anchor retailers, closing up shop in malls across the country, smaller stores are at risk with reduced traffic.

Lots of developers are pitching the idea to replace those anchor stores with mixed-use development, reinventing and renewing malls to be more useful destinations.

“Redeveloping malls and turning anchor spaces into hotels, senior housing, multifamily, medical and office,” Mahoney explained. “The goal would be to help sustain smaller tenants and also fill demand for sufficient housing.”


Going out with a bang
Mahoney wrapped her presentation by saying she thinks the word for 2021 is “optimism.” Wolf agreed, saying projections for the residential housing market are looking pretty bright.

Especially when compared with this time last year.

“We were looking at 2020 to be a flagship year, with interest rates low, demand high and low inventory. In January, it was shaping up to be one of the strongest years I can remember,” he said. “Typically, the second quarter is our busiest quarter. But we were dramatically down, just because we were restricted from doing showings.”

Home sales took a dive with the beginning of pandemic shutdowns, as buyers weren’t too keen on purchasing sight unseen. Wolf said agents made due and moved as many services online they could, including virtual showings.

On May 7, the state gave the OK to resume in-person home showings. Since then, Wolf said, the industry hasn’t looked back. The latter half of the year more than made up for the damage caused by the first.

In 2020, total sales in Oakland County went up 25% over 2019, the median sale price was up 14% and the average for days on the market was down 24%.

“That’s unheard of. We’ve never seen those numbers,” Wolf said.


Sticker shock
The peak of home sale prices in 2020 came in the fourth quarter, and prices have sort of plateaued at those great heights through the first quarter of 2021. But Wolf said he suspects things will begin to “trail off a little bit” as we progress through the year.

“I shouldn’t say a little bit — looking into the future, that’s where I think we’ll see the biggest change. Median home prices will begin to stabilize into the next year,” he said.

But that doesn’t mean there will be an immediate shift away from the seller’s market we’re currently in. Inventory last year was down 16%. There is still more demand than supply, which gives sellers the advantage likely through the end of this year, though appreciation will certainly begin to slow before then. By 2022, the pendulum should begin to swing the other way.

“Stabilization is not a bad thing, though. With this inventory so low, I do worry some of these prices have artificially grown at a rate that may not be sustainable,” Wolf said. “The biggest driver will be to correct the inventory problem. Sellers are feeling more comfortable having people in their home, so more will likely list their home. We’re already seeing that.”


Buyers want better, not bigger
Looking ahead, what does he think will lead the market? Buyers are seeking a more urban experience, he said, looking to buy in downtown areas with a smaller square footage but more options for walkability.

“People are more drawn to downtown areas where yard size is less important to buyers as it was 10-15 years ago,” he said. “Amenities and homes that are renovated are important to buyers. Homes that don’t need a lot of attention, because people have less time. They’re spending less time fixing up their home and more time at work, unfortunately.”


Real estate snapshot
In February, 927 homes sold in Oakland County, and the average sale price was $357,764, according to the Greater Metropolitan Association of Realtors.

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