Abandoned Michigan Central Station

In Detroit, an Iconic Building’s Rebirth Signals Big Changes for the Automotive Industry

A building that serves as a notorious symbol of Detroit’s decline will find new life thanks to an automobile company that is the most iconic symbol of the city’s rise.

Ford Motor recently purchased the Michigan Central Station, a train depot that was once a grand entryway into the city but is now an abandoned ruin covered in graffiti. The automaker will turn the building into “the centerpiece of a new urban campus that will focus on the developing businesses that use self-driving cars, like ride-hailing services and delivery companies,” according to a June 2018 report from the New York Times.

That’s a big change from the 18-story building’s current role as perhaps the most high-profile example of Detroit’s decline following decades of upheaval in the automotive industry, which had been the city’s lifeblood since Henry Ford founded the Ford Motor Company there in 1903. The ravaged train station has been prominently featured in photography, media coverage and documentaries about Detroit’s economic troubles. It also served as the backdrop for dystopian scenes in music videos and Hollywood movies.

While Detroit stands to benefit from the rebirth of the Michigan Central Station, the acceleration of high-tech self-driving technology is affecting the commercial real estate industry outside of the city – and the state of Michigan – as well. In fact, California could become the epicenter of U.S. automaking, as Development magazine noted in “The Evolving Automotive Industry: Detroit Meets Silicon Valley,” which appeared in the Summer 2018 issue.

Today, major automobile companies are as likely to have big operations in the San Francisco Bay Area as they are in Motor City, according to the article. That includes the Ford Research and Innovation Center Palo Alto and General Motors’ Cruise automation division in San Francisco. Mercedes-Benz, Audi, BMW and Volkswagen also have major research and development facilities in the Bay Area that are working on everything from electrification and increased connectivity to shared and autonomous vehicles.

While long-established car companies are setting up shop in Silicon Valley to take advantage of the tech talent there, others such as Tesla got their start in the region. The electric car manufacturer is headquartered in Palo Alto. Tesla has the most Bay Area real estate of any automotive company, and it is also by far the largest automotive-related employer in the area.

This shift to the Bay Area is having a strong impact on the region’s real estate market, according to the article. Research from Cushman & Wakefield shows that automotive-related businesses account for more than 10 million square feet of industrial space in the market. That ranks ahead of biotech/medical (6 million square feet) and food-related industries (5 million square feet), but behind electronics/computer-related businesses and distribution/general business, which represent more than 74 million square feet of space combined.

While the future looks bright for the automotive industry in the Bay Area, the article notes that the cost of operating in the market is very steep, and it’s not likely to decline. These expenses could make large-scale manufacturing in the region a challenge.

Despite that, the article makes clear that as huge technological changes engulf the automotive industry, commercial real estate in Silicon Valley stands to benefit now and well into the future.

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