Detroit: A Tale of Two Cities
Detroit is a fascinating example of stark contrasts. After spending the better part of a week there with 4,000 other real estate professionals at the Urban Land Institute Spring Meeting, I am inspired, impressed and eager to see what the future holds for the Motor City.
Detroit’s Rise and Fall
As the home of the automobile industry, Detroit thrived for the first half of the 20th century, and by the 1940's was the fourth largest U.S city. Home to over 2 million people in its heyday, Detroit boasted iconic commercial buildings and mansions and widespread home ownership. But as the fortunes of U.S. car manufacturers waned, so went the fortunes of Detroit. Decades of public and private disinvestment resulted in a population that dwindled to fewer than 700,000 inhabitants, deserted neighborhoods and the largest municipal bankruptcy in American history.
An Urban Renaissance
Fast forward to 2010, when Dan Gilbert decided to relocate his Quicken Loan empire from the Detroit suburbs to downtown. In conjunction with this relocation, Gilbert's companies have invested billions to revitalize and redevelop the city, triggering what can easily be characterized as the most exciting urban renaissance in modern history. Rotting buildings throughout the downtown core have been redeveloped into well-occupied office, retail and residential properties. Population loss has been transformed into population growth, and land prices are said to have doubled over the past 18 months alone. There is a food scene, a music scene, a new 19,000 seat arena, new retailers and a real sense of optimism and opportunity.
On the other hand, and not surprisingly, much remains to be done. The 'neighborhoods' which occupy the majority of Detroit's 139 square miles remain blighted, deserted and challenged. The verdict is not yet in on the extent to which the renaissance of the past 8 years can be sustained and expanded. I came away from the conference enthusiastically optimistic about the future of Detroit, but only time will tell.
In order to minimize the risk of what the future holds in cities everywhere, both landlords and tenants need to consider now how to split the resulting costs and benefits. That way neither party gets stuck with the whole bill but none of the benefits.