GM says it will move headquarters from RenCen to Hudson's site in 2025

DETROIT — General Motors Co. on Monday said it will move its global headquarters to the Hudson’s Detroit development next year as it works with billionaire mortgage mogul Dan Gilbert's real estate firm to redevelop the Renaissance Center, its current home a mile away.

GM CEO Mary Barra alongside Gilbert, Mayor Mike Duggan and Wayne County Executive Warren Evans made the announcement at an afternoon news conference at the under-construction former J.L. Hudson’s department store site, which is set to open this year. The automaker will lease the top two office floors of the building adjacent to the 685.4-foot-tall tower for 15 years.

The partnership would represent a new era for Michigan's tallest skyscraper amid raised questions over its future in the wake of the COVID-19 pandemic that disrupted workplace models and sent many to do their jobs remotely. Earlier this year, southeast Michigan and parts of central Michigan were ranked as the metropolitan area with the nation’s highest office vacancy rate at 25%.

Gilbert's Bedrock LLC previously looked at purchasing the 47-year-old Renaissance Center. The real estate firm, which has made strides in contributing to the refresh of the city's downtown, has snatched up a portfolio of properties along the Detroit Riverfront, citing a vision for a "sustainable urban neighborhood." In addition to acquiring some vacant parcels and parking lots that had been given to a creditor during Detroit's bankruptcy, Bedrock also has bought the shuttered Roberts Riverwalk Hotel on River Place Drive, Stroh River Place on River Place Drive and the former UAW-GM Center for Human Resources on Walker Street.

Last week at the Hudson's site on Woodward Avenue, Bedrock and contractor Barton Malow held a topping-off ceremony, placing the final steel construction beam on the project's 685.4-foot-tall tower. Bedrock broke ground on the project in 2017.

The two-building development will include 1.5 million square feet of office, retail, food, residential, hotel and event space. Bedrock plans to continue construction through the spring in a phased approach with crews installing the remaining elements of the glass façade. The project along with Bedrock's Monroe, Book Tower and One Campus Martius expansion projects received$618 million in transformational brownfield tax credits over 30 years, and the city approved an additional $60 million in tax breaks over 10 years in 2022.

The city's first addition to its skyline capable of attracting a headquarters like GM's in a generation is a milestone for Detroit's renewal, said Erik Gordon, a professor at the University of Michigan's Ross Business School.

"The bad news is the decline of RenCen, the most identifiable building in Detroit's skyline," he added in an email. "It's going to be difficult to find tenants for all that space, and they are unlikely to be as prestigious as GM."

But that's OK, said Noah Rernick, associate dean at the University of Detroit Mercy’s School of Architecture & Community Development. Investment in the building that's a symbol for the city itself can attract other plans in the area.

"There's so much potential for the riverfront," he said. "The Renaissance Center can still be that icon, that focal point, even if it's not the lead tenant anchor."

However, it's going to take some creativity, likely partnerships and deep pockets, he added. It'll involve a rethinking of what the RenCen is and can be, whether that includes housing, a different approach to retail or something else.

"The biggest problem is it's a skyscraper that was completed in 1977," Resnick said. "Everyone would agree it would probably cost less to tear down the Renaissance Center and build something new. No one wants to do that."

That makes Bedrock and Dan Gilbert strong partners in the project, he added: "If (Gilbert's) vision can still be held as a touchpoint, he understands the value the Renaissance Center as an icon and an anchor to additional development."

GM is the latest example of a corporation making moves concerning its headquarters after the COVID-19 pandemic has revolutionized workspaces. Most GM employees are expected to be in the office Tuesdays through Thursdays, and it has moved a number of teams from the RenCen to its Warren Technical Center in recent years.

Crosstown rival Stellantis NV also has discussed selling its Auburn Hills headquarters in a leaseback agreement where it would remain in the Pentastar-topped tower and technical center off Interstate 75 as a tenant.

Troy's staffing company Kelly Services Inc., Chicago's Motorola Solutions Inc. and Cleveland's Sherwin-Williams Co. all have said they're selling off their headquarters and instead leasing space. It provides them a source of liquidity with employees working remotely or partially so.

Additionally, Silicon Valley companies like electric maker Tesla Inc. and software company Oracle Corp. have moved their headquarters to Austin, Texas, for flexibility and to save on costs.

"It isn't isolated in terms of moving headquarters, but they've gone out of state, Oracle, Tesla, among others," said Daniel Ives, analyst at investment firm Wedbush Securities Inc. GM's decision to stay in Detroit "is a big vote of confidence for Detroit."

It also underscores the "modernized GM," he added, that's willing to make big changes in order to be flexible amid a costly, bumpy and historic transformation toward zero-emission vehicles, including electric ones, and other new technologies.

Additionally, remaining in an urban core could be helpful in attracting software and tech talent that increasingly are drivers of value in the auto industry. That was part of reasoning behind Ford Motor Co.'s acquisition of Michigan Central Station for an electric and autonomous vehicle campus in Corktown.

"A lot of developers would rather work in the city" over a suburban community like Warren, Ives said. "Especially the buildout that’s happening in Detroit is attractive to those who would move from the West Coast."

Municipal leaders expressed optimism for what the move will mean for Detroit. City Council President Mary Sheffield, who represents the downtown district, said GM isn't only an integral part of the city’s history, it's a significant part of the global economic engine.

“The iconic company’s decision to stay in Detroit and take up roots in the new historic Hudson’s Detroit building is a major feather in our city’s cap and further cements our legacy as a major American metropolis,” Sheffield told The Detroit News.

“Bedrock under the leadership of Dan Gilbert and General Motors under the leadership of Mary Barra, coming together to preserve and reimagine the Renaissance Center is welcomed news and a shining example of both organizations’ commitment to honoring Detroit’s history and culture.”

Construction on the Renaissance Center began in 1973 under the vision of Henry Ford II in partnership with 26 other business leaders in an effort to encourage building activity in Detroit in the aftermath of the 1967 Detroit uprising. The $350 million project (roughly $1.7 billion today) was the country’s largest privately funded real estate development at the time. Upon opening in 1977, the center hotel tower was the largest in the world. Towers 500 and 600 were added in 1981, and a third phase that was supposed to include residential housing never came to fruition as Detroit's population continued to decline.

GM bought the complex as its global headquarters in 1996 for $73 million (about $142 million today), immediately planning a $500 million ($971 million) renovation. It moved from Cadillac Place in the New Center district. In 2008 leading up to its bankruptcy, General Motors Corp. explored the possibility of a sale leaseback for the RenCen, but it didn't have any takers.

GM for a while has been looking to unload the more than 5.5 million-square-foot, seven-tower complex. Crain's Detroit Business previously reported Gilbert's Bedrock and GM had been in discussions in the fall of 2018 about a sale of the site; they fell apart because of costly renovations, including an overhaul of the heating, venting and air conditioning system.

The Renaissance Center, which sits on 14 acres, is a city within a city that features a Marriott International Inc. hotel as well as a People Mover stop.

Farmington Hills-based Friedman Real Estate in December purchased the 500 and 600 towers in downtown Detroit from Public Service Enterprise Group Inc., a New Jersey energy company. Blue Cross Blue Shield of Michigan has a long-term lease for the 500 River East Tower.