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'Final Frontier:' Detroit Tests Urban Luxury-Living Trend -- Wall Street Journal

March 01, 2017, 6:09 PM by  Alan Stamm
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The Griswold apartments were added atop a Capitol Park garage. (WDIV video image)

As a laboratory for all sorts of experiments -- urban agriculture, tech startup incubators, Challenge Detroit fellowships, Knight Cities Challenge grants and more -- Detroit serves as a kind of urban proving ground, an ongoing case study.    

Now a leading newspaper calls the city "one of the last frontiers in the nation’s apartment-development boom."

Laura Kusisto of The Wall Street Journal, adds Wednesday:

It is shaping up as the toughest test yet of the back-to-downtown luxury-living movement that developers have been pushing in urban centers from Cleveland to Nashville, Tenn.

Across the U.S., such development has reached its limit. Rents are dropping in some major cities, and bank lenders are pulling back even in strong markets.

Detroit developers, a small group of mostly local businesspeople, are gambling they will defy those odds because so little has been built there for decades.


Orleans Landing, on the eastern edge of downtown near the river, has 278 apartments developed by a St. Louis firm.

The economics writer at the largest U.S. paper talks with David Di Rita, developer of The Griswold ("the first new high-rise apartment building in 25 years in the downtown of America’s poorest major city"), and with Detroit native Richard Baron, chairman of a St. Louis-based developer called McCormack Baron Salazar.

She also name-checks Dan Gilbert (naturally), Shake Shack and Warby Parker. 

It's a balanced look at dramatic changes and a wider-angle view of a place where "many of the city’s 139 square miles are blighted. On many blocks, boarded-up homes and grassy lots outnumber occupied residences."

Kusisto ticks off upbeat data from the Downtown Detroit Partnership and other sources:

  • Downtown has gained about 20,000 jobs since 2010.
  • Residential occupancy downtown exceeds 99 percent.
  • People moving downtown have a median income of roughly $55,000.
  • About 2,000 new apartments came on the market in 2016 or are expected in 2017 -- the same number built in Detroit over the previous 16 years.

Wednesday's article in the largest U.S. newspaper.

When she widens the focus for a citywide portrait, readers see why "a tale of two cities" is such an overused cliché:

  • Detroit's median family income is about $26,000, barely half the national median of about $52,000.
  • About 70,000 homes are empty.
  • The population, down almost a third since 2000, continues to slide.
  • Unemployment [9.8 percent in December] is about twice the U.S. average. 

In another reality check, the New York writer gives this context for the increase in luxury apartments downtown:

The Detroit projects face some unique challenges.

Bank lending, the lifeblood of the commercial real estate sector, is just starting to pick up in Detroit. To pay for their buildings, apartment developers have been combining public subsidies with capital from wealthy individuals, kicking in the rest themselves.

Also, some of the new properties have been appraised at well below their construction costs, meaning it could take developers years to recoup their investments.

 


Read more:  The Wall Street Journal


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