What do you call a community with a new baseball stadium, new casino entertainment venues and a major new corporate headquartersready to bring several thousand high-tech jobs downtown? You call it a city poised for success, albeit in the very long term.
There's no guaranteed payback yet, but Detroit may be on its way to becoming an attractive target for national developers with an eye for unique situations.
Dubious distinction It's been fashionable for critics to "pile-on" when it comes to listing Detroit's failings over the years. No other large city in the nation has suffered the kind of population loss, economic blows and development gridlock Detroit experienced during the past quarter century. In fact, no other major city in the United States has lost 1 million people like Detroit has over the past 30 years.
Indeed, the prospect for city development has disappointed some national investor groups in the past decades. The major capital markets have always neglected the Midwest. Even when Japanese and other offshore investment dollars flowed into the U.S. real estate market during the past 15 years, Midwestern urban centers rarely felt the brush of investor attention. Were these cities eager for national investment?
Detroit was no exception in this respect. A signature office tower built by developer John Madden Co. in Englewood, Colo., failed to perform for its initial investors, despite the fact the development "fit" a national profile for success and profitability.
Formulas that may work in Boston, New York and Los Angeles don't necessarily function in other economies, and appealing pricing per square foot is far from the only factor to be considered.
Encouraging signs The key in Detroit has been to recognize the unique aspects of the urban market, and to partner with local players whose working knowledge can recognize hidden opportunities. Investors here also must base decisions on current soundness, fundamental improvements and long-range paybacks. Those who can manage properties, not just build or acquire them, are the ones with the discipline to reap Detroit's potential gains.
One example is San Diego-based Capstone Advisors, which partnered with Michigan's The Farbman Group to acquire the Penobscot and First National Buildings, both built in the 1920s and prone to all the limitations of that vintage.
Capstone has concentrated on intensifying communications upgrades, physical plant improvements and services to make the buildings appealing players in the market. The company also has launched an image improvement campaign, cleaning the exterior of both buildings and dramatically lighting the Penobscot to return it to the status of a Detroit icon. Together, the buildings provide the company with more than 2 million sq. ft. of rentable space, and makes Capstone one of Detroit's largest private landlords.
Properly funded and supported, the investment could give Capstone an enormous downtown advantage when Detroit's economy improves. And the city has continued to push for that improvement, "walking the talk" with developments such as the new Comerica Park baseball stadium, the future football stadium and the opening of two of three temporary casinos on downtown's western edge.
The April groundbreaking for Compuware's Campus Martius headquarters development - on the site of the former Hudson's building - was yet another sign that the city is making the right preliminary moves to show its commitment to long-term revitalization.
It's not enough Such developments serve to bring the spotlight to the city. But investors are watching more eagerly for the second vital step to rebuilding: residentialto concentrate and sustain a population supporting the high-occupancy offices of a vibrant downtown.
Ultimately, the success of commercial and retail development in Detroit will require the "nuts and bolts" of America to be put in place - and those include safe, secure residential developments where homeowners can expect appreciating property value, safety in living, ease of travel for commuting and good schools.
That's going to be a slower process than the promotional pieces of sports and leisure attractions downtown - but Detroit's leaders have made a good bet, so far, that by concentrating attention on the stadiums, casinos and the Campus Martius development, they can show national investors the beginning of a success story.
That story is being furthered by the willingness of private players to step up to the plate with their own dollars - specifically Compuware and General Motors Corp. with its Renaissance Center investment.
Detroit, like everywhere else, competes for investment dollars. Ultimately, it will have to prove it can generate a return. While that future is still uncertain in the Motor City, Detroit has taken some first steps toward a promising future. The potential certainly exists there for great things to happen.