What the Suburban Office Vacancy Rate Isn't Telling You

Submitted by: L. Mason Capitani/CORFAC International

If you've looked at recent office market data for suburban Detroit, Michigan, the headline number isn't encouraging. Vacancy across the suburban office market is hovering around 22 percent, a figure that suggests a market still working through years of post-pandemic recalibration. Talk to a broker who's actually in these buildings every week, though, and the picture gets more specific and more useful.

The Anomaly Behind the Number

Recent data showed a notable uptick in large block leasing activity in the Southfield, Michigan, submarket during the first quarter of the year. It's the kind of data point that could read as a turning point, but according to Mason Capitani, Managing Partner of L. Mason Capitani/CORFAC International based in Troy, Michigan, it's better understood as a blip than a trend.

"I think this is an anomaly," Capitani said. "Although the market has stabilized somewhat, the overall trend continues to be downsizing by larger corporate tenants."

That distinction matters. A single quarter of large-block activity in one submarket doesn't reverse a multi-year pattern of corporate tenants shedding square footage. Reading too much into short-term swings is a familiar trap in an office market that’s still finding its footing.

Less Space, Better Space

What's shaping nearly every conversation Capitani has with tenants right now is a continued flight to quality. Companies aren't necessarily looking for more space. They're looking for better space, even if it costs more per square foot.

"We're still seeing a flight to quality in the market where tenants are taking less space while moving to buildings that can be considered an upgrade in terms of finish and amenities," Capitani said. "They are saving on the bottom line even though the rate per square foot may be more than they are currently paying."

That's a meaningful shift in how tenants are thinking about office economics. Square footage used to be the primary lever for controlling occupancy costs. Now, total occupancy cost is the variable that matters, and a smaller footprint in a higher-quality building can pencil out better than a larger footprint in a dated one.

The Divide Isn't Tenant Demand, It's Landlord Behavior

If there's a single insight from the past few months that cuts against the headline vacancy number, it's this: The market isn't uniformly soft. It's bifurcated, and the dividing line is landlord behavior, not tenant appetite.

"It is important to note that the most proactive landlords, who renovate their buildings, provide amenities such as conference facilities and fitness centers, and who are aggressive on tenant improvement allowances, are doing deals," Capitani said. "Older, less forward-thinking properties see higher vacancy rates."

In other words, the 22 percent vacancy rate isn't evenly distributed. It's concentrated in buildings that haven't kept pace with what tenants now expect, while landlords willing to reinvest are filling space. For owners and investors, that's a more useful signal than the aggregate number. The path forward isn't waiting for demand to return broadly; it's making the property worth choosing.

Return-to-Office Is Quietly Reshaping the Baseline

One more shift is worth watching, even if it hasn't fully shown up in absorption numbers yet. Capitani points to a continued push from employers to bring people back into the office, even on a flexible schedule.

"The overriding trend in the area is for companies to continue to mandate that their employees come back to the in-office environment, even if it is on a flex schedule basis," he said. "The work-from-home environment is definitely waning."

That trend doesn't undo years of downsizing overnight, but it does suggest the demand side of this equation is firmer than the headline vacancy rate implies. Companies mandating in-office time, even partially, need space that works for that purpose, which reinforces the same flight-to-quality dynamic already underway.

What This Means Beyond Suburban Detroit

None of these dynamics are unique to Oakland County, Michigan. Markets across the country are grappling with the same tension. Aggregate vacancy numbers look discouraging, even as very real pockets of activity emerge, driven by tenant quality preferences and landlord investment.

For CORFAC members watching similar numbers in their own markets, the lesson from Southeast Michigan is the same one Capitani would offer any broker: Don't read the headline number as the whole story. Look at who's actually doing deals and why. More often than not, the answer has less to do with how much space tenants want and more to do with whether the building gives them a reason to want it.