- October 1, 2019: Vol. 6, Number 9

Investing in a ‘comeback city’

by Richard Broder

In 2012, television viewers watching Super Bowl XLVI heard Clint Eastwood’s gravelly voice extol the toughness and resilience of the City of Detroit. Toward the end of the Halftime in America commercial for Chrysler, the actor declares, “Our second half is about to begin,” capturing both the sense that things were turning around and the promise of good things to come.

Happily for Detroit, that ad was more than just smoke and mirrors. The city has continued to expand, and a sustained and ongoing civic and economic renaissance has made Detroit one of the nation’s hottest markets for retail expansion, residential and mixed-use development, and intriguing investment opportunities. Detroit’s reputation as a comeback city has been even further cemented following a citywide bankruptcy in 2013. In the past six-plus years, the Motor City has come roaring back to life, with new developments throughout the downtown corridor and central business district.

Outside investors may still feel uncertain about comeback cities, even with the transformative impact of new dollars and new developments. Is there a reason to be cautious about committing development dollars to a city undergoing a growth spurt? Instead, investors should think about how to weigh the benefits of potentially lucrative investment opportunities against the challenges of investing in such comeback cities.

Gaining a better understanding of not only what makes these comeback cities a potentially exciting investment opportunity, but also what challenges and uncertainties remain — as well as how to navigate them — provides important insights into what to look for when considering an investment in cities on the rise.


Out-of-market investors looking to sink their teeth into a comeback city will be gratified to note that these cities, like Detroit, often have quite a few factors stacked in their favor. Key attributes include an abundance of successful educational institutions, a strong healthcare presence, and dedicated hallmark families with a committed history to the city. In Detroit, some of the influential individuals who have had and who continue to have a profound impact on the city’s fortunes include names like Gilbert, Ilitch, Karmanos and Penske.

While every city has patrons with the means and motivation to make a defining difference in the economic and civic fabric of a city, we’ve seen over the last decade that those efforts and investments can have an outsized influence in a city the size of Detroit. Perhaps in no city in recent memory have we seen a relatively small handful of individuals have such a dramatic impact on a city’s circumstances.


Investment opportunities exist in any market. But there are certain markets that are truly unique. You have to see it firsthand to believe it — and to understand it — before you literally and figuratively buy in, which is why potential investors considering Detroit should first make plans to visit, and to learn the subtle nuances you simply cannot get from reading media accounts. That’s different from Manhattan or Chicago or other more mature and well-understood markets. There is still a higher-than-usual degree of variation in Detroit, and some of the fundamentals of real estate investing in stable and established markets do not necessarily hold true. Key variables might be very different from one neighborhood to the next, or even from one corner to the next. Those hyper-local nuances are critical, both because of the sheer size of the city (in Detroit’s case, second only to Chicago in the Midwest), and because comeback cities are typically still in a transitional state of recovery, meaning those idiosyncrasies and inconsistencies are much more prevalent and apparent. A little extra legwork and a little local knowledge and insight can go a long way. And the upside rewards can be exciting and lucrative.


Judging by glowing media reports about Detroit and other comeback cities, it’s clear when people believe the heavy lifting is done and the city is off to the races. I think that’s a mistaken view. For a comeback city, being on the way is not the same thing as having arrived. Like all market or trends and civic turnarounds, a recovery can be somewhat fragile before a robust and sustainable long-term transformation is ensured.

It’s also that incompleteness that makes comeback cities enticing for businesses and investors. The most significant investment opportunities exist in a city on the rise, not a city that has already risen. Real estate, of course, tends to follow rather than lead. First we see job opportunities, then customers and rising disposable incomes. That’s followed by residential, then restaurants, then retail.

The good news: that classic progression is exactly what’s been happening in Detroit. Nearly a decade into the city’s renaissance, the biggest national names have just recently begun to recognize the opportunity and return to the city. With dollars and dynamic businesses starting to stream into Detroit, some of that initial investment skepticism or caution seems to be breaking down.


To some extent, places such as Cleveland, Pittsburgh or Grand Rapids have either gone through this process, or are in the thick of it. No matter where comeback cities are in the process, it can be an exciting time for investors looking to capitalize on a opportune moment in that city’s resurgence.


Richard Broder is founder and CEO of Broder & Sachse Real Estate.

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