Facing delays and rising construction costs, The Mid scales back

Even though the weather has been unseasonably warm for winter, there’s a chill on construction in Detroit.

When announced in March last year, The Mid was hailed as the largest development north of Mack Avenue since the 1920s. But it’s yet to break ground and other problems are beginning to pile up for the mega-project just north of Whole Foods in Midtown.

Soon after the Michigan Strategic Fund awarded the project $58.3 million in incentives through the state’s Brownfield Redevelopment Program, developer Real Estate Interests expected to break ground in September.

But now, Crain’s Detroit Business reports that the developers still have a financing gap to close and the nine floors of luxury condominiums are unlikely to be built. The total cost of the project rose over $60 million just five months after it was announced, and profit margins do not justify their inclusion.

The rest of the designs for the multi-building project are being reevaluated. Original plans called for a 225-room hotel, 60 for-sale condos, 180 apartment units, a 12-story “co-living” tower, and 100,000 square-feet of retail space across 3.8 acres and several buildings on Woodward Avenue. It was last expected to cost $377 million.

Despite these issues, the developers say the project is still moving forward.

“While you haven’t seen much physical activity at the site, there has been a lot of work in process to push the project forward, including finalizing construction drawings, financing, and negotiating with potential tenants, among other important planning for the construction phases,” Turkia Mullin, first vice president with CBRE | Capital Markets, the broker of record on the project, told Curbed Detroit by email.

She added that construction is expected to begin by the end of February.

Crain’s notes that this is one of many Detroit developments delayed by rising construction costs. Other residential developments facing similar challenges include the stalled Monroe Blocks downtown, small-scale Meijer on Jefferson Avenue that will no longer be mixed-use, scrapped plans from The Platform for luxury condos at Cass & York, Lafayette West high-rise at the site of the old Shapero Hall, Cambria Hotel project replacing luxury condos, and more.

Many projects face a significant financing gap that’s only made up through large subsidies or low-interest loans. As we wrote last year...

Despite its identity as a comeback city, Detroit still remains a “weak market” in development terms. Most projects are unable to secure sufficient financing, leaving a “gap”—the difference between development costs and what market rents or projected commercial revenue can support. For Detroit, that gap can be significant.

Exactly when or if construction costs will level off is one of the biggest questions facing Detroit in the coming years.