My home town is in the suburbs of Detroit, Michigan. The commercial real estate market here has seen the worst of the economy and credit crisis. The recession in Michigan actually began in 2001 due to the issues related to the automotive industry. I’ve heard it estimated that we lost 900,000 jobs during that 10 year period, in a state that has 10,000,000 in population. It was a painful time for all, filled with uncertainty.
When the national recession hit in 2008, Michigan was already “wounded” and it seemed like there would be little chance of real recovery in the state. Commercial banks agreed with this notion and those that had not already stopped lending, did. Conventional commercial financing was out. Non Michigan based lenders left the market and even Michigan banks hit the brakes on lending. Trying to get even a government guaranteed loan, such as an SBA loan, closed here was very difficult.
Now the story is changing. The automotive industry has stabilized, real estate values have begun to rise and banks have begun to lend again. There is competition amongst banks in the market. There are even non Michigan banks that are coming to the state looking for deals and looking for other banks to buy.
Crains recently published an interesting article regarding out of state investors, such as REIT’s, that are purchasing major commercial investment properties here. Values remain much lower in Michigan than most other parts of the country. For example, Cap Rates are still in the 9%’s versus 6-7% in the rest of the county. Many view this as a solid opportunity to acquire CRE while values remain low.