Suburbs Matter Too in Commercial Real Estate

At a time when downtowns and urban cores in cities across the Midwest and the nation are making a comeback, and redevelopment continues to reenergize and revitalize high-profile civic centers, it’s easy to lose sight of the fact that cities do not exist in a vacuum. The suburbs play an important role in shaping the commercial and professional landscape of major metro centers.

                                                                                                                     Photo Credit:   RE Journals

                                                                                                                    Photo Credit: RE Journals

To understand the significant economic impact of the suburbs in and on major metro areas, consider how developers and construction professionals play an important role in helping to boost regional economies. Both build and upgrade the kind of modern and tech-friendly suburban buildings that meet the needs of today’s businesses. This gives us some important insights into how and why so many companies are making the decision to invest in suburban facilities and communities.

Dollars and sense

What are some of the ways in which the suburbs can have an economic impact on major metro areas? In a word: jobs. Cities and urban centers get a lot of media attention as business destinations, but, for a variety of reasons—including space and building-type requirements, and access and appeal to employees—suburban locations simply make more sense for many businesses.

Proximity to employees (and potential employees) and convenience and ease of access is perhaps the most important factor. For example, of Metro Detroit’s roughly 4.3 million residents, less than 700,000 live within the actual municipality of Detroit. The result is that nearly 84 percent of people living in the second-largest city in the Midwest don’t technically live in the city proper.

While a certain percentage of suburban residents commute downtown, people generally like to live close to where they work—and less travel time and convenient parking is an appealing proposition. Quality-of-life issues, especially access to outdoor recreation and entertainment, cannot be discounted as another appealing factor for employees and their families.

Another reason suburban locations are appealing to many businesses is simple logistics. The availability and affordability of a wider range of building types and sizes, especially for R&D, light manufacturing and other sectors that generally require more elbow room, is a defining factor for many employers. The size and scope of those facilities makes them a potential economic game-changer. The GM Tech Center in Warren, Michigan, not only provides thousands of jobs, but also boosts all the nearby businesses that service and support it.

A large part of the fuel that drives the suburban economic engine is still made up of simple shopping and retail transactions. While there has been some attrition to online and mobile sales, and more than a few subpar shopping centers have closed their doors, brick-and-mortar retail is far from dead. Many quality regional malls are thriving, such as Westfield Old Orchard in Skokie, Illinois, and the Somerset Collection, a super-regional luxury mall in Troy, Michigan. Larger regional malls are also drawing from a larger radius than they did in the past.

If you build it

To appreciate what makes now such a promising and important time for suburban development—and for the commercial developers and construction professionals whose work is transforming suburban commercial landscapes—we need to understand development patterns over the last few decades. In greater Detroit, for example, very few new suburban commercial buildings were constructed after the 1970s and 1980s. Similar development patterns can be seen in other Midwestern markets. Consequently, most of those structures don’t have the tech infrastructure they need for today’s businesses. The recession of the late 2000s only exacerbated the lack of contemporary commercial supply.

The result is pent-up demand—and significant opportunity—for new suburban development, particularly in light industrial and R&D. Redevelopment activity is also spiking. Businesses are packing more and more people into buildings than those structures were originally designed for, and there is a growing need to add bathrooms and upgrade tech infrastructure and mechanical systems in existing suburban facilities.

While we aren’t seeing much market-rate suburban residential development, senior living and assisted living is booming in the suburbs. Together, those three categories—office rehab, light industrial/R&D and senior housing/assisted living—are among the most active suburban market construction and development sectors right now.

The familiar notion that “as goes the urban core, so goes the entire market” is certainly true, but it’s important to recognize that the connection goes both ways. Cities and suburbs are interdependent: equal participants in a synergistic system that can provide mutual economic benefit. Here in Detroit, suburban communities in Macomb and Oakland counties certainly rely on and benefit from downtown Detroit’s success, but that connection is an increasingly prosperous two-way street.

 

Article Resource: RE Journals