For Rocket Cos. founder Dan Gilbert, a $6 billion bet on Detroit’s comeback is starting to pay off.
General Motors Co. agreed in mid-April to move its headquarters from an isolated pair of towers on the Detroit River to Hudson’s Detroit, a shiny glass and gold complex that the billionaire built in the heart of downtown. Less than two weeks later, more than 800,000 people packed the streets for the NFL draft, which Gilbert helped land thanks to his relationship with the league’s commissioner.
And in a downtown where not long ago few dared to walk around after dark, longer-term residents are arriving as well: New data show Detroit’s population increased last year for the first time in almost seven decades.
For Gilbert and the many young people who are flocking to the city’s tony condos and trendy restaurant scene, Detroit bears little resemblance to the crime-ridden emblem of America’s industrial decline that went bankrupt just over a decade ago. As downtowns of cities such as Los Angeles and Chicago struggle with empty offices and a slow rebound from the pandemic, Motown is having a renaissance, thanks largely to a small coterie of billionaires.
Gilbert, Ford Motor Co.’s Ford family and the Ilitch family, which built a fortune through the Little Caesars pizza chain, collectively have invested billions in Detroit — so much so that they or their companies have amassed about 70% of the downtown office space, according to data from Colliers and company filings. They’re filling properties with their workers and have attracted employers including Amazon.com Inc. and Microsoft Corp., which moved to downtown from the suburbs. This week, Ford will open Michigan Central Station, where the automaker and Alphabet Inc.’s Google will be taking offices in an overhauled train depot that had been an edifice of razor wire, graffiti and broken windows for decades.
The city’s improving fortunes have lured yet another billionaire: real estate mogul Stephen Ross, a Detroit native better known for his developments in New York and, more recently, South Florida. He and the Ilitches have hatched plans for a $1.5 billion development that starts with a University of Michigan graduate and technology campus along with more offices, hotels and housing.
“Anyone who looks back to 2013 with the bankruptcy, it’s night and day,” Gilbert, 62, said in an interview. “The city has an energy it never used to have.”
It also has a high-brow vibe for a gritty town that had Bruce Springsteen crooning about “snakeskin suits packed with Detroit muscle.” Gilbert said Hudson’s Detroit has sold most of its new $1 million condos. Longtime Detroiters can still find a Coney Island franchise selling the city’s culinary staple, a hot dog smothered in chili, onions and mustard, but these days there are wait lists for restaurants selling aged steaks at $70 a cut and braised lamb Provencal for almost $50. The metro area’s median apartment rent jumped almost 5% in April to $1,400 a month, five times the national increase.
But Detroit faces challenges to keep that momentum going. The triumvirate has projects planned that will bring another 2 million square feet of new office space to an area with a 14% vacancy rate. To make these new developments work, the city needs to attract more companies from out of town — not to mention workers who have clung to pandemic-era home offices.
At a time of high interest rates and lender wariness over commercial real estate, the Ross-Ilitch project has yet to get financing. And while the downtown has attracted affluent young workers, the city as a whole is still struggling with a 30% poverty rate that’s triple the national average and crime rates that have improved but still rank among the worst in the US.
“We’re at a pivotal point for the city,” said Randall Book, executive vice president of Colliers in Michigan and grandson of Frank Book, one of three brothers who built the Book Tower, one of the buildings Gilbert rehabilitated. “We’ve had three or four investors put a lot into the city but the community and the education system need to step up to lure other companies here.”
Gilbert’s Gamble
No one has made a bigger impact on the downtown than Gilbert, with a fortune estimated at $29.3 billion, according to the Bloomberg Billionaires Index. His plan for Detroit started with a meeting at his Quicken Loans headquarters in the suburb of Livonia in 2007. His mortgage company had grown rapidly and he wanted to get everyone in one place, so he suggested moving to downtown.
He moved his first 1,500 people into leased space in 2010. Once the economy started recovering from the mortgage crisis, Gilbert started a buying spree of Detroit real estate, often paying cash since no traditional lenders would finance deals. He said he got most of the buildings cheaply because many were completely vacant or in need of major upgrades.
At the time, downtown Detroit’s crime wasn’t policed as well as it is today and basic services like street lights and snow plowing were spotty at best. The city’s government had a balance sheet that was on a path to bankruptcy. After decades of flight, the population had dwindled — it’s now about 633,000 people, a third of what it was at its peak in 1950.
“Downtowns have always been places where the rich and powerful accumulate property,” said Conrad Kickert, a University of Buffalo professor who studied Detroit’s comeback. “Downtown Detroit is one of the most extreme examples. In this case, no one else wanted it. No one in their right mind would have financed Gilbert’s acquisitions.”
Gilbert’s Bedrock Detroit real estate arm eventually accumulated 131 properties and 18 million square feet of space, according to filings from Rocket. Gilbert said 90% of the space he owns downtown is leased, with 34% filled by his 20,000 employees.
“We took the Big Bang approach,” Gilbert said. “We had a belief that if we put our people here other people would come down.”
His latest project, Hudson’s Detroit, will open next year with an office building next to a 49-story skyscraper with shops, restaurants, a hotel and apartments. GM signed a 15-year lease that will keep it as the only major automaker based in the city.
But even that move shows some of Detroit’s headwinds. GM’s two floors are less than half the space Gilbert wanted the company to occupy, meaning he still needs other tenants. The two sides are still negotiating, said people familiar with discussions. Some GM staff would move from its suburban tech center to the new downtown building, not the existing headquarters. So the automaker could take more space, one of the people said.
The automaker has fewer than 2,000 employees downtown. Most of its 26,000 white-collar staff in Michigan are located in the northern suburb of Warren, where the company recently spent $1 billion to revamp its 700-acre campus. The executives who run storied divisions like Cadillac and Chevrolet moved there years ago. CEO Mary Barra and her top reports are there more often than they are downtown.
Gilbert and Barra said they have an understanding to redevelop the Renaissance Center, a six-tower complex on the Detroit River that has been GM’s home since the 1990s. When the company moves into Gilbert’s building next year, that leaves another hole to be filled.
“GM really just has a token presence downtown,” Ross said in an interview.
Ross, for whom the University of Michigan named its business school, had long thought about a return to Detroit before finally linking up with the Ilitch family. Detroit Mayor Mike Duggan made annual trips to New York to visit the billionaire and ask him to invest in his hometown. And every year the answer was the same. “He said the time isn’t right, the time isn’t right,” Duggan said in an interview.
He finally got interested around 2019. Ross, 84, said he saw what Gilbert had done in Detroit and felt the risk was low and energy was high. He saw an opportunity to create a talent incubator with the University of Michigan, which would later be called the Detroit Center for Innovation.
“I saw things coming together,” Ross said. “I suggested to Mayor Duggan that growth is dependent on talent and jobs. He said that was exactly what the city needed.”
He first had an agreement with Gilbert for space to create the University of Michigan innovation center. But Gilbert had a stroke in 2019 and was struggling with complications. Without him at the helm, his organization was unable to close the deal, Ross said. At Duggan’s suggestion he called Chris Ilitch, who has run Ilitch Holdings Inc. since his father, Mike, died in 2017.
Mike Ilitch had been instrumental in creating an entertainment district in the city, starting when he bought the historic Fox Theater in 1987 and moved Little Caesars headquarters in its upstairs office space from the suburbs two years later. He negotiated a deal to get Comerica Park built for the Detroit Tigers, which the family owns. In 2017, they opened Little Caesars Arena for hockey and basketball, replacing an ancient facility that had the ambience of a warehouse and was stashed in a dark corner of downtown.
The stadium deals anchored the entertainment district, which also includes Ford Field for the Detroit Lions. During that time. Ross said the Ilitch family had acquired about 320 acres of land over 20 years that sat largely undeveloped and had potential. He and Chris Ilitch sketched out a master plan to locate a business and educational district near the stadiums and theaters, featuring two hotels, housing and office space built on a parking lot with the baseball stadium on one side and Fox Theater on the other.
Ross and Ilitch have gotten approval from the city and state of Michigan for a public incentive package worth $800 million, which is half the cost of the project. Still, lenders are staying on the sidelines.
“With interest rates where they are and with remote work, it will take a while for the real estate segment to normalize,” Ilitch said. “We’re confident it will, and when the markets align we’ll be ready.”
That could take time. Tenants are renewing leases, but thanks to flexible work-from-home plans many are taking less space than they had. Detroit office rents rose more than those in most cities last year, but leasing demand has cooled, said AJ Weiner, a managing director with JLL. “You have a lot of great space, but there aren’t a lot of tenants looking for it,” he said.
Ilitich said the desire of young professionals to live in the city will in turn attract more companies. But attracting young workers to high-tech jobs won’t necessarily help the lower-skilled workers who live in the neighborhoods outside of the core downtown area, said Avis Vidal, professor emerita of urban planning at Wayne State University.
“There isn’t enough spillover to improve the neighborhoods,” she said. “The city doesn’t have the resources to get those people out of poverty.”
Ford’s Incubator
Ford’s Michigan Central project, located in Corktown, Detroit’s oldest neighborhood, aims to be a site for new talent. The company will use the former train station’s offices for young tech staff developing electric vehicles. Google has also joined as a tenant, using the building to house staff that develop drones and electric charging solutions.
“We’re in a war for talent,” said Ford Executive Chair Bill Ford. “We need to attract people to amazing work spaces. A suburban office park won’t cut it.”
He signed Newlab, a Brooklyn-based incubator for technology companies that want to manufacture new products, into a property next door to the old train station called the Book Depository Building.
Multiple cities tried to lure Newlab. Ford’s pitch was that Detroit has engineers who can manufacture things, Bill Ford said. The property opened in October and now houses more than 100 startups, working on advances like fire-resistant technology for electric-vehicle batteries, robotics and air-traffic control for drones. The automaker also is developing housing near Michigan Central, hoping young grads will move there.
As developments keep moving forward, Gilbert says he isn’t done. GM’s current headquarters will need to be redeveloped, and though he doesn’t see too many buildings left to overhaul, he’s open to more deals.
“We’re all in,” he said. “I invest my wealth in Detroit.”
This article was provided by Bloomberg News.