United States -  Detroit

Overview:

Detroit is known as the world's traditional automotive center, as the city was the home of the invention of the automobile and its mass production, headed by Henry Ford. Detroit also has a long history of producing groundbreaking and influential musical talent. These two historical legacies are celebrated by the city's two familiar nicknames: Motor City and Motown. Detroit and the surrounding region constitute a manufacturing powerhouse, most notably as home to the Big Three automobile companies: General Motors, Ford Motor Company, and Chrysler’s American headquarters. While the financial viability of the Big Three was severely strained during the Great Recession, the subsequent government support and restructuring has provided solid footing for the companies' recoveries. It is evident that measures taken by the federal government have aided the recovery of the automotive industry over the past few years, with the Big Three each posting increases in profits from 2012 through 2015. Additionally, the region has become competitive in emerging technologies such as biotechnology, nanotechnology, information technology, and hydrogen-fuel-cell development.

The greater Detroit economy suffered major setbacks due to the near collapse of the U.S. automotive industry last decade. The restructuring and rebuilding of the auto industry in the years that followed, along with continued challenges in the residential real estate market and a national recession, left the Detroit market one of the nation’s hardest-hit areas. However, several factors are contributing to an improved economic outlook for the region, including the resurgence of the Big Three automakers and the continued diversification of the local employment landscape. In addition, moderating unemployment levels and improving vacancy rates for commercial office space are indicators of the positive changes occurring in the market. Value gains for hotels were accordingly robust during the 2010 through 2015 period. The proposed Detroit River International Crossing, the $279-million renovation and expansion of The Cobo Center, the $137-million M-1 rail circulator, and the 35-acre, $650-million entertainment district anchored by a new multipurpose arena for the Detroit Red Wings should be catalysts for continued job growth, economic vitality, and urban renewal throughout Detroit.

In April 2016, two of Detroit most prominent billionaires, Tom Gores and Dan Gilbert, announced their intentions to bring a Major League Soccer (MLS) team to the city of Detroit. With a new stadium in the early planning phases, and city and league approval in the works, Gilbert and Gores are aiming to have a team in Detroit by 2020. Furthermore, Bedrock Real Estate Development Detroit, owned by Dan Gilbert of Quicken Loans, has been purchasing buildings in Downtown Detroit at a record pace. Starting around 2010, Bedrock Real Estate Development Detroit now owns or controls more than 80 buildings in Downtown Detroit, with plans to redevelop most all of them. The latest plans for development include constructing a high-rise apartment and condo building on the site of the old J.L Hudson department store on Woodward Avenue.

The Detroit metro area and CBD lodging markets have experienced significant and record growth in recent years. The CBD’s demand growth has outpaced the additions to supply, resulting in occupancy levels similar to those experienced in the late 1990s and early 2000s. Average rate peaked for the market in 2015. The renovations of existing hotels and the anticipated entrance of several additional, smaller boutique properties should support continued rate growth with minimal impact on hotel occupancy levels. The redevelopment efforts in Downtown Detroit continue to attract more demand to the CBD, and the market’s office vacancy rate has declined. Limited sales volume occurred in Detroit in 2014 and 2015, with most sales occurring in the surrounding suburbs and representing limited-service lodging facilities. No transactions of noteworthy importance took place in Downtown Detroit. We expect these factors to support continued, strong value gains in 2016, before tapering off somewhat through 2018.

* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent big picture data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Valuation Trends and Predictions:

Detroit United States
Previous Year +1% (30 of 71) +1% (49 of 71)
Growth in 2017 +2% (18 of 71) +2% (36 of 71)
Growth in next 3 years +7% (53 of 71) +10% (36 of 71)

Change In Value For Market:

Detroit RevPAR % Change

For more information, please contact:

Stacey Nadolny, MAI
snadolny@hvs.com
  • +1 419 367-3879 (w)
Brandon Leversee
bleversee@hvs.com
  • +1 269 303-5551 (w)
Meghan Bean
mbean@hvs.com
  • +1 734 649-7221 (w)