We’ve been exploring a series of Heartland metros that could be appealing to investors interested in workforce housing. So far, Cincinnati, Rochester, and Morgantown shared some common characteristics:
- Economic resilience
- Strong multifamily sectors
- Upside potential
- Built-in downside protection that affords investors a lower risk profile than more traditional coastal markets
Last week, we also shared some macro-level thoughts about analyzing new markets.
This week, we’re diving headfirst into the American comeback story: whether you call it Motown, the Renaissance City, the 313, the Arsenal of Democracy, or the Automotive Capital of the World, you guessed it — it’s Detroit.
Detroit began life as a humble frontier settlement, founded in 1701 by Antoine de la Mothe, sieur de Cadillac ( it’s no Zackquill Morgan, but we still think it's a decent name) as Fort Pontchartrain du Détroit, a river commerce and fur trading outpost. By the late nineteenth century, Detroit had left the fur trade behind. Wealthy shipping and industry magnates brought capital into town and constructed some of the Gilded Age’s most iconic mansions, earning Detroit the moniker “The Paris of the West.”
In the early 20th century, Detroit ascended to the pinnacle of American industry as the world’s largest automotive manufacturing hub, with Ford, Dodge, Packard, and Chrysler anchoring the local economy and propelling explosive expansion. By 1920, Detroit was the nation’s fourth-largest city.
The auto’s industry’s local predominance — which at one point employed over 60% of the city’s workers — was not to last. The mergers and subsequent departure of auto giants, suburbanization, racial tensions, ill-considered housing policy, and substandard infrastructure have all been cited as causes of Detroit’s complex, well-known decline. The bottom line is that industrial reorganization and suburbanization caused mass flight from the urban center until the 1980s. What followed was years of hardship and capital exodus that plagued the city until 2013, when the local government declared bankruptcy.
Today, Detroit is transforming into a more diverse, resilient economy -- especially within the roughly seven-square-mile city center. Automotive manufacturing still employs a significant proportion of the city’s population; Ford and GM are still the two largest individual employers in town, and the manufacturing sector expanded by 3.8% against a national average of 0.9% between 2009 and 2019.. However, Detroit’s largest economic sector is now — you guessed it — “Meds and Eds,” occupying 17% of the city’s nonfarm workforce and including four of the metro area’s ten largest employers. The University of Michigan and Beaumont Health are the two largest players in this corner of the local economy. The convergence of traditional manufacturing, healthcare, education, and a growing service economy bolstered by professional and business services shows that Detroit is transforming and bouncing back.
The city that paved the world’s first mile of concrete and has more registered bowlers than any other U.S. city (you learn something new every day, right?) is entering the 21st century with grit, and offering real estate investors a set of promising opportunities.