2018 Ann Arbor Downtown Market Scan Ann Arbor Downtown ...€¦ · Multi-Family Multi-family real...

2018 Ann Arbor Downtown Market Scan

4WARD PLANNING INC. 1

Ann Arbor Downtown

Market Scan

POPULATION & HOUSEHOLDS 5

RETAIL & RESTAURANT 14

MULTI-FAMILY 9

EMPLOYMENT & OFFICE 18

OVERVIEW 2

CONSTRUCTION COSTS 22

July 2018



Socio-Economic Snapshot & Trends•Downtown

Ann Arbor

•City and MSA

•Comparable Downtowns

Near-Term Real Estate Needs•Multi-Family

•Retail

•Office

• A current snapshot of socio-economic trends

• Near-term real estate needs (multi-family housing,

retail, and office) over the next five years

• Benchmarks that can be updated periodically and

tracked over time

• Relative performance metrics that enable comparison

of Downtown Ann Arbor with the City of Ann Arbor,

the Ann Arbor Metropolitan Statistical Area (MSA),

and other downtowns located in mid-size cities

(between 80,000 and 200,000 residents) with a

major university or college presence

• A dashboard for presenting available public and

proprietary data in a graphic-friendly manner,

permitting ease of interpretation and distribution

More detail on the methodology and boundaries used in

this market scan are presented on the following pages.

OVERVIEW Purpose & Overview

The following 2018 Ann Arbor Downtown Market Scan provides the following:



OVERVIEW Geographies

Downtown

Chapel Hill,

NC

Downtown

Boulder, CO

Downtown

Berkeley,

CA

4ward Planning examined

historical and expected socio-

economic and real estate trends

(for 2010, 2018, and 2023) to

comparatively analyze Ann Arbor

(DDA) District (hereafter

“Downtown Ann Arbor”), the City

of Ann Arbor, and the Ann Arbor

Metropolitan Statistical Area

(MSA) (contiguous with

Washtenaw County).

For some metrics, Downtown Ann

Arbor’s four districts were

analyzed (Kerrytown, Main

Street, State Street, and South

University). Where available,

metrics were also compared to

similarly sized downtown areas,

located in towns with a college

presence (Berkeley, CA; Boulder,

CO; and Chapel Hill, NC), in order

to identify Downtown Ann Arbor’s

relative performance.

Downtown

Ann Arbor

City of

Ann Arbor

Ann Arbor

MSA

LOCAL MARKET AREAS COMPARABLE DOWNTOWNS



OVERVIEW MethodologyPopulation & Households

Population and household trends are derived from data provided by Esri’s Community Analyst (provides current year estimates and projections based on Census data). Current year population and household estimates for Downtown Ann Arbor are provided by the Ann Arbor Downtown Development Authority (DDA) and are based on new construction occupancy rates.

Retail & Restaurant

Retail real estate inventory and trends are derived from data provided by Esri’s Community Analyst, Swisher Commercial, and LoopNet. New near-term retail and restaurant demand was based on population data provided by the U.S. Census and Ann Arbor DDA, 2014-2024 employment projections provided by the Michigan Department of Technology, Management and Budget, retail sales per household provided by Esri, retail sales per-square-foot derived from BizStats, and retail capture based on known industry standards.

Multi-Family Multi-family real estate inventory and trends are derived from City of Ann Arbor building permit data, Esri’sCommunity Analyst, HUD, the Bouma Group, and Zillow. Near-term housing needs (next five years) were estimated based on existing multi-family real estate inventory, household income trends, and demand drivers for the top 10 Tapestry Segments within the MSA.

Employment & Office

Employment earnings data is collected from the Bureau of Labor Statistics (BLS) and Census’s OnTheMap. Office real estate inventory and trends are derived from data provided by Swisher Commercial, Esri’sCommunity Analyst, and LoopNet. New near-term office space demand was based on 2014-2024 annual employment projections provided by the Michigan Department of Technology, Management and Budget for the Southeast Michigan Prosperity Region, average office workers per industry provided by the National Association of Realtors (NCRER), and an assumption of 150 square feet of office space per office worker.

Construction Construction cost data is based on 2018 square-foot estimates by building type provided by RSMeans Online for the City of Ann Arbor. Estimates assume standard union labor and contractor and architectural fees. Historic and expected construction data is provided by Dodge Lead Center for the Ann Arbor MSA. Historic building permit data is provided by the City of Ann Arbor for the City.



POPULATION & HOUSEHOLDS Key Findings

Strong population growth

According to building permit data provided by the City of Ann Arbor, an estimated 1,660 new housing units have been built in

Downtown Ann Arbor since 2010, adding approximately 3,600 new residents. From 2010 to 2018, Downtown Ann Arbor grew by

11.1 percent per year, compared to approximately one percent within both the City of Ann Arbor and the MSA, over the same period.

Downtown Ann Arbor also grew at a rate much faster than other downtowns located in mid-size cities with a major university or college

presence like Berkeley, Boulder, and Chapel Hill – where the downtown population grew between approximately one to four percent per

year, over the same eight-year period.

Growth in non-family households and age cohorts continue to influence housing demandConsistent with national and regional trends, non-family households (a group of unrelated persons or a single person living alone) in

Downtown Ann Arbor are projected to continue growing at a faster rate than family households (includes married couples and other

families, with or without children). With a median age of just over 24 years, the population living currently in Downtown Ann Arbor is

relatively young. Nevertheless, the age groups forecasted to undergo the greatest growth in the region over the coming years include

mostly retirees (75+), older empty nesters (65 to 74) and, to a less extent, early-stage families (35 to 44) - age cohorts that will

influence short-term housing demand, particularly for smaller units.

Projected strong household income growth

In 2018, 67 percent of Downtown households earned less than $35,000 per year, a share more than twice than that observed within

the City of Ann Arbor and the MSA (33 and 28 percent, respectively), but less than that observed within Downtown in 2016 (73

percent). Although the relatively low median household income in Downtown Ann Arbor (and Downtowns Berkeley and Chapel Hill) is

likely due to the large student population with incomes supplemented by parents or student loans, over the next five years, the median

household income is expected to increase at a rate faster in Downtown Ann Arbor (4.5 percent per year) than that within both the City

and MSA (3.0 and 3.4 percent, respectively). Projected median household income growth in Downtown is likely due to the development

of market-rate housing targeted to higher-income markets (e.g., early-stage families and empty nesters).



960

4,560

3,600

1,220

2,120

2000-2010

10yr Trend

(2.7%)

2000-2018

18yr Trend

(5.1%)

2010-2018

8yr Trend

(8.2%)

2018-2023

5yr Forecast

(3%)

2018-2023

5yr Forecast

(5%)

Trend Forecast

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Po

pu

lati

on

Downtown Ann Arbor

Downtown Berkeley

Downtown Boulder

Downtown Chapel Hill

POPULATION Growth

From 2010 to 2018, Downtown Ann Arbor’s

population grew by 3,600 residents.

If the population within Downtown grows by

between three and five percent per year

through 2023 (a moderate to strong

growth estimate based on local and

regional demand drivers), Downtown Ann

Arbor could gain between 1,220 and 2,120

new residents over the next five years.

Source: Esri, Ann Arbor DDA, 2018

Population Trends and Projections Downtown Ann Arbor Annual

Population Growth Trends & Forecasts

Total Population Change (2010-2018)

Population Annual 2010 2018 Change % Growth

Ann Arbor MSA 344,790 370,070 25,280 0.9%Ann Arbor City 113,960 123,300 9,340 1.0%Downtown Ann Arbor 4,070 7,670 3,600 11.1%Downtown Berkeley 4,860 5,840 980 2.5%Downtown Boulder 540 590 50 1.2%Downtown Chapel Hill 2,090 2,770 680 4.1%



0.0% 1.0% 2.0% 3.0% 4.0%

Downtown Ann Arbor

Ann Arbor City

Ann Arbor MSA

Non-Family HHs Family HHs

POPULATION Age & Household Size

Median HH SizeAge (2018) Size (2018)

Ann Arbor MSA 34.4 2.4 Ann Arbor City 28.2 2.2 Downtown Ann Arbor 24.2 1.9

Downtown Berkeley 24.6 2.0 Downtown Boulder 32.7 1.5 Downtown Chapel Hill 22.4 3.3

Household Change by Type (2018 - 2023)

Population Change by Age Cohort (2018 - 2023)

Source: Esri, 2018

2.6%

1.5% 1.5%

2.3%

3.5%

0.7%

2.0%

4.9%

6.2%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0 to 4 5 to 14 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+

Pre-School-Age

Children

Grade School-Age

Children

High School and

College-Age

Young Workforce

and Grads

Early-Stage

Families

Late-Stage

Families

Young Empty

Nesters

Older Empty

Nesters

Mostly Retired

Pe

rce

nt

An

nu

alize

d C

ha

nge

Downtown Ann Arbor Ann Arbor City Ann Arbor MSA



POPULATION Household Income

Source: Esri, 2018

In 2018, 67 percent

of Downtown households

earned less than $35,000

per year, a share more than

twice than that within the

City and MSA, but less than

that within Downtown in

2016 (73 percent).

Households by Income

Category (2018)

Median Household Income by Age of Householder (2018)

Median HH IncomeAnnualized % Change

2018 2023 (2018-2023)

Ann Arbor MSA $66,340 $77,460 3.4%Ann Arbor City $57,050 $65,620 3.0%Downtown Ann Arbor $19,590 $24,010 4.5%

Downtown Berkeley $20,490 $22,450 1.9%Downtown Boulder $49,640 $63,350 5.5%Downtown Chapel Hill $15,760 $17,520 2.2%

$0

$10

$20

$30

$40

$50

$60

$70

$80

High School and

College-Age

Young

Workforce and

Grads

Early-Stage

Families

Late-Stage

Families

Young Empty

Nesters

Older Empty

Nesters

Mostly Retired

(<25 year) (25-34 years) (35-44 years) (45-55 years) (55-64 years) (65-74 years) (75+ years)

Me

dia

n H

H I

nco

me

(0

00

’s)

Downtown Ann Arbor Downtown Berkeley Downtown Boulder Downtown Chapel Hill

67%

33% 28%

68%

35%

78%

0%

20%

40%

60%

80%

100%

Downtown

Ann Arbor

Ann Arbor

City

Ann Arbor

MSA

Downtown

Berkeley

Downtown

Boulder

Downtown

Chapel Hill

Pe

rce

nt

of

Ho

use

ho

lds

<$35K

<$35 to $74.9K

<$75 to $99.9K

<$100 to $14.9K

>$149.9K



MULTI-FAMILY Key Findings

Increasing rents and condo sale prices

According to rent data provided by Zillow and Pad Mapper, and condo sale price data provided by the Bouma Group, over the past four

years, average asking apartment rents in Downtown Ann Arbor have increased by 29 percent (from $1,540 to $1,985), while average

asking condo sale prices have increased by five percent (from $335 to $353 per square foot), over the same period. While much of the

development in Downtown Ann Arbor is partially driven by the demand for high-end luxury condos, much of the available apartment

and condo inventory in Downtown Ann Arbor is likely unaffordable to lower-income households. For example, an affordable rent for

households earning less than $40,000 per year would be less than $1,000 per month, assuming rent is less than 30 percent of the

household’s monthly income.

$1,930 for a one-bedroomAccording to data provided by Esri, approximately 84 percent of occupied units within Downtown Ann Arbor are renter-occupied --

higher than Downtown Boulder (57 percent) but lower than Downtown Berkeley (96 percent). According to rental data provided by

Zillow, the average asking rent for a one-bedroom apartment in Downtown Ann Arbor is approximately $1,930. A one-person, low-

income household earning between 50 percent and 80 percent of Ann Arbor MSA’s 2014 Area Median Income (AMI) would need to

spend no more than $814 and $1,259 per month in order to not be considered cost-burned by HUD – a rent lower than the average

rent for a one-bedroom apartment in Downtown Ann Arbor. Lower-income households not receiving subsidies (e.g., parental income or

section eight vouchers) are likely priced out of the current Downtown housing market.

Demand for between 2,830 and 3,060 new apartment units by 2023

Due to projected household growth and pent-up demand from commuting workers desiring housing in Downtown Ann Arbor, by 2023,

there will be estimated demand for between 2,830 and 3,060 new housing units in Downtown Ann Arbor. Based on input from Esri top

Tapestry Segments with propensity for multi-family housing, approximately 65 percent of new near-term multi-family housing demand

will likely be for rental units and 70 percent of this demand will be from households earning more than $75,000 per year. While socio-

economic factors like household income and housing preferences typically drive housing demand, additional factors like building and

land costs, and zoning requirements also influence the type and price of housing that developers construct.



11%

3%

24%

33%

84%

40%

57%

59%

4%

6%

19%

9%

Downtown Ann

Arbor

Downtown

Berkeley

Downtown

Boulder

Downtown

Chapel Hill

Owned Rented Vacant

-

100

200

300

400

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

-

1,000

2,000

3,000

4,000

Ne

w U

nit

s

Tota

l H

ou

sin

g

New Housing Built

Total Housing

MULTI-FAMILY Development Trends

DevelopmentDowntown Development Under Approved

(2010-2018) Built Constr. Not Built Total Percent

Apartments 1,466 181 70 1,717 83%

Condos 196 120 23 339 16%

Single Family 1 - - 1 0%

Total 1,663 301 93 2,057 100%

(Affordable Units) 27 - - 27 1%

Employed and Living in

Downtown (2015)

Downtown Ann Arbor

Residential DevelopmentBetween 2010 and 2018,

1,663 new units were built in

Downtown Ann Arbor.

Source: Building Permit data, DDA; OnTheMap; Esri, 2018

Housing Tenure (2018)

1.2%

1.4%

0.4%

0.6%

Downtown

Ann Arbor

Downtown

Berkeley

Downtown

Boulder

Downtown

Chapel Hill



Based on average asking rents and condo sales prices,

much of the available apartment and condo inventory in

Downtown Ann Arbor is unaffordable to lower-income

households. Assuming an affordable rent is less than 30

percent of a householder’s monthly income, average asking

rents in Downtown Ann Arbor ($1,986) are not affordable to

households earning less than $40,000 per year (an

affordable rent would be less than $1,000 per month).

MULTI-FAMILY Rents & Sale Prices

Condo Market Trends: Downtown Ann Arbor

Sources: Esri, HUD, Bouma Group, Zillow, Pad Mapper

Ann Arbor MSA Affordable Rents(30% of household income)

50% of AMI 80% of AMI

1-Person HH $814 $1,259

2-Person HH $930 $1,439

3-Person HH $1,046 $1,619

4-Person HH $1,161 $1,798

Average Asking Rent Trends: City of Ann ArborDowntown Apt. Asking Rents

2014 2018 % ChangeStudio $1,090 $1,460 34%1 Bdr. $1,520 $1,930 27%2 Bdr. $1,900 $2,650 39%3 Bdr. $2,380 $2,300 -3%Average $1,540 $1,985 29%

Downtown Condo Prices (per Sqft))

2014 2018 % ChangeState Street $315 $366 16%Main Street $323 $366 9%Kerrytown $354 $327 -8%South University NA NA NAAverage $335 $353 5%

$1,239

$1,491

$400

$900

$1,400

$1,900

2011 2012 2013 2014 2015 2016 2017 2018

Ave

rage

Ask

ing R

en

t

1 Beds

2 Beds

$0

$200

$400

$600

$0

$200,000

$400,000

$600,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Pri

ce

/S

F

Ave

rage

Sa

le P

rice Avg Sale Price Price/SF



The chart below compares the share of

households across geographies by the top

10 Tapestry Segments with the greatest

propensity to live in multi-family housing

(typically found in downtowns), along with

notable socio-economic characteristics.

Given their strong presence within

Downtown (and within comparable college

towns), successful housing development in

Downtown Ann Arbor should consider the

needs and preferences of these top socio-

economic groups.

Source: Esri; 4ward Planning Inc., 2018

Dorms to Diplomas

Emerald City

Metro Renters College Towns

Young and Restless

Enterprising Professionals

Bright Young Professionals

Golden Years

Retirement Communities

Social Security Set

MULTI-FAMILY Top Tapestry Segments

Top Tapestry Segments, 2018

84.4% 81.3%

100.0%

5.0%4.6%

56.3%

5.5%18.7%

35.7%

Downtown

Ann Arbor

Downtown

Berkeley

Downtown

Boulder

Downtown

Chapel Hill



860 2,000

596 1,391

<$75k (30%) >$75k (70%)

Moderate Pop Growth (3%)

Strong Pop Growth (4%)

Downtown Ann Arbor Apartment Demand

By 2023Pop. Growth

Rate Scenarios3% 4%

Pent-Up Worker Demand 850 850 Household Demand 4,730 4,960

Total Housing Unit Demand 5,580 5,810Naturally Occurring Vacant Units 127 127

Net Marketable Housing Units 2,880 2,880Net Housing Unit Demand 2,830 3,060

280

710 1,270

570

199 497

894

397

Studio. (10%) 1 Bdr. (25%) 2 Bdr. (45%) 3 Bdr. (20%)

Assuming the population in Downtown Ann Arbor grows

between three and four percent per year (and

employment by 0.7 percent), by 2023, there will be net

demand for between, from 2,830 and 3,060 new

multi-family housing units both new household growth

and pent-up worker demand. Although demand will vary

by household income, bedroom type, and tenure, much

of the short-term housing demand will come from

households with incomes below $75,000 per year.

MULTI-FAMILY Supply & Demand

Net Apartment Unit Demand by…

Household Income Category

Bedroom Type Housing Tenure

2023 New Apartment Demand by Tenure

Source: 4ward Planning Inc.

695

1,291

990

1,840

For Sale (35%) Rental (65%)



RETAIL & RESTAURANT Key Findings

$32 to $36 per square foot

According to July 2018 data provided by LoopNet, there is approximately 47,790 square feet of vacant retail space in Downtown Ann

Arbor, with average asking rents for vacant retail space approximately $36 per square foot per year. Average rents varied by district,

from $32 per square foot within the State Street District to $45 per square foot in the South University Street District. Average asking

rents for retail space within other comparable downtown areas were lower within Downtown Chapel Hill ($30 per square foot) and

higher within Downtown Berkeley ($39 per square foot).

Increasing retail demand from new Downtown households

In 2018, the average Downtown Ann Arbor household spends $679 per month on selected retail trade goods and services, less than

half of the average monthly household spending within the MSA ($1,400 per month) but $97 more per month than what Downtown

households spent in 2016. Given lower-than-average retail spending from existing Downtown Ann Arbor residents, existing retail stores

and restaurants in Downtown Ann Arbor are likely capturing retail sales from the larger City or MSA households. As a greater supply

and variety of housing is developed in Downtown Ann Arbor, and more middle- and upper-income households move into the area,

average Downtown household spending on retail goods and restaurants will likely increase, supporting additional retail establishments

- especially limited- and full-service restaurants.

Potential to capture retail demand from larger trade areas

According to 2018 data provided by Esri, Downtown Ann Arbor’s retail trade and food and beverage establishments drew nearly $241

million in sales from shoppers residing outside the immediate Downtown trade area – a trend also experienced in other comparable

downtowns (a retail sales surplus of $78 million in Downtown Chapel Hill to $235 million in Downtown Boulder). Although the existing

supply of retail stores in Downtown Ann Arbor meets local retail demand from current Downtown residents, there is a leakage of retail

demand not met within the larger City and MSA that could potentially be captured by existing or new Downtown businesses.

Furthermore, strong household, employee, and retail sales growth projected to continue within Downtown through 2023, will have the

potential to support new retail stores.



18.8% 14.2% 19.4%10.9%

12.2%9.9%

11.2%

10.1%

13.3%13.6%

8.0% 23.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Downtown

Ann Arbor

Downtown

Berkeley

Downtown

Boulder

Downtown

Chapel Hill

Pe

rce

nt

of

All B

usin

esse

s

Educational Services Real Estate, Rental & Leasing

Health Care & Social Assistance Finance & Insurance

Information Public Administration

Other Services (except PA) Accommodation/Food Services

Retail Trade Professional, Scientific & Tech Services

RETAIL & RESTAURANT Business Mix & Rents

As of July 2018, there is 47,790 square feet of

vacant retail space in Downtown Ann Arbor, with

average asking rents for available retail space at $36

per square foot per year.

Downtown Retail Asking Rents (2018)

Main Street District $34.60 per SqftState Street District $32.00 per SqftKerrytown District $32.60 per SqftS. University District $45.00 per Sqft

Downtown Ann Arbor $35.90 per SqftDowntown Berkeley $39.00 per SqftDowntown Boulder $33.50 per SqftDowntown Chapel Hill $29.60 per Sqft

Sources: Esri, LoopNet

Top 10 Business Categories (2018)$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

0

5,000

10,000

15,000

20,000

25,000

Kerrytown Main Street South

University

State Street

Ask

ing R

en

t p

er

SF

Ava

ila

ble

Sq

ua

re F

ee

t

Asking Rent Asing Rent

Available Downtown Retail Space



$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Ann Arbor

MSA

Downtown

Boulder

Ann Arbor

City

Downtown

Berkeley

Downtown

Ann Arbor

Downtown

Chapel Hill

Groceries Dinning OutEntertainment & Recreation Apparel & ServicesPersonal Care

RETAIL & RESTAURANT Household Spending

Source: Esri, 4ward Planning Inc.

In 2018, the average Downtown Ann Arbor

household spends $679 per month on

selected retail trade and food and

beverage goods and services, less than

half of what the average MSA household

spends ($1,400) but $97 per month more

than what the average Downtown

households spent in 2016.

Retail Surplus Retail Retail (+) Surplus/

(2018, $ Millions) Potential Sales (-) Leakage

Ann Arbor MSA $6,102 $5,078 -$1,024Ann Arbor City $2,002 $1,909 -$93Downtown Ann Arbor $42 $283 $241Downtown Berkeley $59 $290 $231Downtown Boulder $15 $250 $235Downtown Chapel Hill $5 $83 $78

Monthly Household Spending Trends (2016-2018)

Average Monthly Household Spending (2018)

$0 $20 $40 $60 $80 $100 $120

Groceries

Dinning Out

Entertainment & Recreation

Apparel & Services

Personal Care

Total

Average Monthly Household Spending Change

Ann Arbor City Ann Arbor MSA Downtown Ann Arbor



18,000

14,500 12,400

11,100 9,700 8,900

5,600 4,800 4,600

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

$0

$20

$40

$60

$80

$100

$120

$140

$160

Sq

ua

re F

ee

t

Re

tail S

ale

s (

Millio

ns)

Existing Retail Sales (Millions)

Potential Retail Sales (Millions)

New Supportable Space (Sqft)

RETAIL & RESTAURANT Retail Supply & Demand

Downtown Retail Supply/

Demand (2018 - 2023)

Source: Esri, 4ward Planning Inc.

2023 Retail Demand Factors

1,220 - 1,660 New Downtown Residents1,510 New Downtown Workers

4,290 New City Population

12,700 New MSA Population108,000 New Supportable Retail Space (Sqft)



EMPLOYMENT & OFFICE Key Findings

Growth in Downtown employmentAccording to new job and business data provided by the Ann Arbor DDA, between 2012 and 2018, approximately 3,325 new jobs

were added to Downtown Ann Arbor, with total employment growing by approximately 2.1 percent per year, over the eight-year period.

Based on job estimates from the Ann Arbor DDA and the University of Michigan for the Ann Arbor campus, there are currently

approximately 29,525 jobs within Downtown Ann Arbor.

$31 per square foot per yearAccording to LoopNet, the average asking office rent in Downtown Ann Arbor is $31 per square foot per year, with average asking

rents lower within the Main Street District ($28 per square foot per year) and higher within the State Street District ($45 per square

foot per year within one Class A office property). Average asking office rents within Downtown Ann Arbor, are higher than those within

Downtown Chapel Hill ($27 per square foot per year) but lower than those within Downtown Berkeley ($39 per square foot per year).

Recent increases in office vacancy provide more breathing room in DowntownAccording to year-end 2017 data provided by Ann Arbor real estate firm Swisher Commercial, there is approximately 1,662,870 gross

square feet of leasable office space within Downtown Ann Arbor – with just 60,480 square feet of this office space currently vacant.

From 2016 to 2017, Downtown Ann Arbor’s office vacancy rate increased from 2.1 to 3.6 percent, although remaining a relatively

tight office market. According to Swisher Commercial, this increase in available vacant office space may provide a bit of breathing

room for Downtown Ann Arbor companies expecting to hire more employees in 2018.

196,000 to 240,000 square feet of office spaceBased on 2018 employment estimates for Downtown Ann Arbor and 2014 to 2024 employment projections provided by Michigan

Department of Technology, Management and Budget, there will be demand for between 196,000 to 240,000 square feet of office

space by 2023. While some of this office space demand may be met by the 60,480 square feet of office space currently vacant, new

office space may need to be developed in Downtown Ann Arbor to accommodate near-term office demand.



EMPLOYMENT Primary Jobs & Earnings

Jobs per Sq. Mi.

Jobs:Housing

Ratio

EmploymentJobs

(2018)

Downtown Ann Arbor 29,530 70,380 12.0

Downtown Berkeley 8,650 35,220 3.0

Downtown Boulder 12,250 62,600 26.5

Downtown Chapel Hill 3,170 13,550 6.0

Worker Earnings

(2018)

Workers Earnings More than $40k per Year

Source: Esri, U.S. Census Bureau, OnTheMap, Ann Arbor DDA

24,000

25,000

26,000

27,000

28,000

29,000

30,000

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018

To

tal Jo

bs

Ne

w

New Businesses New Jobs Total Jobs

Downtown Ann Arbor Job and Business Growth

0%

10%

20%

30%

40%

50%

60%

70%

Pe

rce

nt

of

Wo

rke

rs

Downtown Ann Arbor Downtown Berkeley

Downtown Boulder Downtown Chapel Hill

Downtown Ann

Arbor

Downtown Berkeley Downtown Boulder Downtown Chapel

Hill

Less than $20K $20k-$30k$30k-$40k $40k-$50k$50k-$60k $60k-$70kMore than $70k



0%

3%

6%

9%

12%

15%

18%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Downtown Ann Arbor

EMPLOYMENT Office Inventory & Rents

Ann Arbor Leasable Office Space (Sqft, 2017)

Office Asking Rents (June 2018)

Main Street District $27.80 per SqftState Street District $45.00 per SqftKerrytown District $32.40 per SqftS. University District NA per Sqft

Downtown Ann Arbor $30.80 per SqftDowntown Berkeley $39.30 per SqftDowntown Boulder $31.00 per SqftDowntown Chapel Hill $26.70 per Sqft

Office Vacancy Trends

Sources: Swisher Commercial, LoopNet

Downtown,

1,662,869 ,

15%

Ann Arbor City,

9,157,032 ,

85%



Health Care

& Social

Assistance

Educational

Services

Prof.,

Scientific &

Tech

Admin. &

Support,

Waste

Manageme

nt

Accomm. &

Food

Services

Finance &

Insurance

Real Estate

& Rental

Other

Services

(except PA)

Retail Trade Information

New Jobs 535 446 168 163 91 35 21 18 16 10

New Office Workers 257 253 150 57 7 34 - - 4 7

New Sq.Ft. Demand 80,292 66,870 25,220 24,460 13,684 5,217 3,118 2,774 2,354 1,537

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

-

100

200

300

400

500

600

Po

ten

tia

l N

ew

De

ma

nd

(S

q.f

t.)

Ne

w W

ork

ers

New Jobs New Office Workers New Sq.Ft. Demand

2023 Office Demand Factors

1,400 - 1,700 Potential New Jobs700 - 800 Potential New Office Workers

196,000 - 240,000 Potential New Office Demand (Sqft)(@ 150 Sq. ft. per Office Worker)

EMPLOYMENT Office Supply & Demand

Downtown Ann Arbor

Projected Employment Growth

& Office Space Demand:

Top 10 Industries (2018 - 2023)

Source: NCRER, Michigan Department of Technology, Management and Budget, 4ward Planning Inc., 2018



CONSTRUCTION Key Findings

3.8 million square feet of new development in 18 years

Based on data provided by the City of Ann Arbor, between 2000 and 2018 (as of June 2018), over 3.8 million square feet of

residential and non-residential space has been developed within Downtown Ann Arbor. Most notably, mixed-use development

projects compose more than half of this square footage (nearly two million square feet).

$39.7 million worth of projects currently in the MSA pipeline

Based on data provided by the City of Ann Arbor, between 2000 and 2018 (as of June 2018), nearly $506 million in residential and

non-residential projects has been submitted to be approved within Downtown Ann Arbor. According to construction data provided by

Dodge Lead Center, as of June 2018, there are 34 projects valuing $39.7 million currently in the bidding phase within the Ann Arbor

MSA, some of which is likely to be developed within Downtown Ann Arbor.

Construction costs range from $150 to $220 per square foot

According to second-quarter 2018 data provided by RSMeans, per square foot construction costs in the City of Ann Arbor range

widely by development type. For example, a three-story, 95,000-square-foot department store building (brick/steel framing) costs

$148 per square foot to build ($14.1 million in building costs), while a 15-story, 145,000-square-foot high-rise apartment building

(brick/steel framing) costs $220 per square foot to build ($31.8 million in building costs).

Construction costs comparable to the national average

According to 2018 City Cost Indexes data provided by RSMeans, Ann Arbor’s total construction cost index (98.9) is comparable to the

national average and not an obvious barrier to building in Downtown Ann Arbor. In comparison, Berkeley’s city cost index is nearly 23

points higher than the national average, and Chapel Hill’s city cost index1 is nearly 16 points lower.

1 The City of Raleigh, located outside of Chapel Hill, was used since City Cost Index data for Chapel Hill was not available at this level.



0

100,000

200,000

300,000

400,000

500,000

600,000

2000 2001 2002* 2003 2004 2005 2006 2007 2008 2009 2011 2011 2012 2013 2014 2015 2016 2017 2018

Are

a in

Sq

ft.

Restaurant

Retail

Residential

Industrial

Mixed-Use

Office Use

Recreational

CONSTRUCTION Downtown Development Projects

Between 2000 and 2018, over

3.8 million square feet of residential

and non-residential space was developed

within Downtown Ann Arbor.

Development Projects: Downtown Ann Arbor

Note: Data from Jan 2000 to April 2001 not available.

Source: City of Ann Arbor, Development Projects

Development Projects (2000 - 2018)

Sqft.Percent

Mixed-Use 1,997,309 52.3%

Residential 1,468,126 38.4%

Office Use 199,958 5.2%

Recreational 78,371 2.1%

Restaurant 32,595 0.9%

Retail 28,320 0.7%

Industrial 14,154 0.4%

Total 3,818,833 100.0%



$0

$10

$20

$30

$40

$50

$60

$70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Va

lue

(M

illio

ns)

Public

Residential

Commercial

CONSTRUCTION Downtown Building Permits

Between 2000 and 2018, nearly

$506 million in residential and non-

residential projects was submitted to be

approved within Downtown Ann Arbor.

Building Permits: Downtown Ann Arbor

Source: City of Ann Arbor, Building Permits

Building Permits

(2000 - 2018)Value Percent

Commercial $324,996,894 64.2%

Residential $82,883,058 16.4%

Public $98,738,289 19.5%

Total $506,618,241 100.0%



$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

Infrastructure Educational Retail Military Medical

Office

Office Jail Parking Residential Recreation

Va

lue

(M

illio

ns)

Bidding

Bid Results

CONSTRUCTION MSA Construction Starts

There are 34 projects valuing $39.7 million currently in the

bidding phase within the Ann Arbor MSA.

Construction Pipeline:

Ann Arbor MSA, 2018

Source: Dodge Lead Center. As of June 27, 2018.

Construction Starts: MSA

Project Type Value

Infrastructure $18,709,527Educational $10,949,995Retail $2,999,999Military $2,999,999Medical Office $1,599,997Office $999,996Jail $749,999Parking $399,999Residential $199,999Recreation $86,000Total $39,695,510

Infrastructure,

$14,428,531

Educational,

$7,800,000

Retail,

$2,999,999

Medical Office,

$299,999 Office,

$399,998



$179 $181$220

$179$212

$168$196

$161$191

$148

$193

$0

$50

$100

$150

$200

$250

Low-Rise

(3-story,

22,500 Sqft,

brick/steel

frame)

Mid-Rise

(6-story,

60,000 Sqft,

brick/steel

frame)

High-Rise

(15-story,

145,000 Sqft,

brick/steel

frame)

Office

(3-story,

20,000 Sqft,

steel frame)

Office (Green)

(3-story,

20,000 Sqft,

steel frame)

Office

(8-story,

80,000 Sqft,

steel frame)

Office (Green)

(8-story,

80,000 Sqft,

steel frame)

Office

(16-story,

260,000 Sqft,

steel frame)

Office (Green)

(16-story,

260,000 Sqft,

steel frame)

Department

Store

(3-story,

95,000 Sqft,

brick/steel

frame)

Hotel

(6-story,

135,000 Sqft,

brick/steel

frame)

APARTMENT OFFICE RETAIL

$0$10$20$30$40$50$60

Co

st

pe

r Sqft

Co

sts

(M

illio

ns)

Total Building Cost

Cost per Sqft

CONSTRUCTION Cost Indexes and Estimates

Over the past decade, Ann Arbor’s city cost

index has been similar to the national average,

while Berkeley’s index has been much higher

and Chapel Hill’s index has been much lower.

Ann Arbor’s city cost index suggests that

construction costs are not obvious barriers to

building in Downtown Ann Arbor.

In Ann Arbor, construction costs for selected

building types range from approximately

$150 to $220 per square foot.

City Cost Indexes (2018)

Average Construction Cost

by Building Type (2018)

Source: RS Means Online, 4ward Planning Inc., 2018

Ann Arbor,

98.90

Berkeley,

122.80

Boulder, 88.80

Chapel Hill

(Raleigh),

84.4070

80

90

100

110

120

130



General & Limiting Conditions

4ward Planning Inc. has endeavored to ensure that the reported data and information contained in this report are

complete, accurate, and relevant. All estimates, assumptions, and extrapolations are based on methodological techniques

employed by 4ward Planning Inc. and believed to be reliable. 4ward Planning Inc. assumes no responsibility for

inaccuracies in reporting by the client, its agents, representatives, or any other third-party data source used in the

preparation of this report.

Further, 4ward Planning Inc. makes no warranty or representation concerning the manifestation of the estimated or

projected values or results contained in this study. This study may not be used for purposes other than that for which it is

prepared or for which prior written consent has first been obtained from 4ward Planning Inc. This study is qualified in its

entirety by, and should be considered in light of, the above limitations, conditions, and considerations.

Limiting Conditions & Contact Information

For more information, please contact:Todd Poole

267.480.7133

[email protected]

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