Detroit is experiencing a generational construction boom. From the $1.4 billion Hudson's Detroit skyscraper rising on Woodward Avenue to the $198 million Detroit City FC stadium taking shape in Corktown, billions of dollars in new development are reshaping the Motor City's skyline and neighborhoods. For developers and investors ready to build, understanding how construction loans work in this market is essential to turning Detroit's momentum into profitable projects.
This guide covers everything you need to know about securing construction financing in Detroit, from loan structures and rates to draw schedules, local permitting requirements, and the environmental considerations unique to this market.
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Why Is Detroit One of the Best Construction Loan Markets in the Midwest?
Detroit has earned a spot as one of the most compelling commercial development markets in the country. The Emerging Trends in Real Estate report ranked Detroit at number 17 out of 81 markets nationally, making it the highest-ranked Midwestern city on the list. This surge in investment confidence is driven by several converging factors that make construction financing both available and attractive.
Dan Gilbert's Bedrock has invested more than $7.5 billion in downtown Detroit since 2011, acquiring and renovating over 140 properties totaling more than 21 million square feet. This massive private investment has fundamentally changed how lenders view Detroit construction risk. Where banks once saw uncertainty, they now see a market with institutional backing, rising property values, and proven tenant demand.
The development pipeline confirms the market's strength. Metro Detroit has approximately 3,700 multifamily units under construction, with roughly 27,000 more in the planning stages. The $377 million Mid Project in Midtown includes a 15-story Thompson Hotel with 216 luxury rooms, a seven-story apartment building, and over 55,000 square feet of retail space. In Corktown, the Detroit City FC stadium project will add 76 units of affordable housing and 8,500 square feet of retail alongside the 15,000-seat venue.
Detroit also offers a meaningful cost advantage for builders. Commercial construction costs in Detroit average around $155 per square foot, roughly 20% below the national average of $195 per square foot. Lower labor costs, with the local labor cost index sitting at approximately 88 versus a national baseline of 100, help developers stretch their construction budgets further than in most peer markets.
For developers exploring financing options, construction loan programs tailored to Detroit's market characteristics can make the difference between a project that pencils and one that does not.
What Types of Construction Loans Are Available in Detroit?
Detroit developers have access to several construction financing structures, each designed for different project types and borrower profiles. Choosing the right loan structure can save significant money over the life of your project.
Ground-up construction loans are the most common option for new commercial development in Detroit. These loans fund the entire building process from site preparation through certificate of occupancy. Rates typically run Prime plus 1% to 3%, with loan-to-cost ratios between 65% and 75%. Most Detroit lenders structure these as 12 to 36 month terms with interest-only payments during the construction period.
Construction-to-permanent loans offer a single closing that covers both the building phase and the long-term mortgage. This structure eliminates the need to refinance after construction, saving on closing costs and reducing the risk of rate changes between construction completion and permanent financing. These are particularly popular for owner-occupied commercial properties in Dearborn and the suburban corridors.
SBA 504 construction loans deserve special attention for Detroit business owners planning to occupy their new building. The SBA 504 program allows loan-to-cost ratios up to 90%, with below-market fixed rates on the CDC portion. For a manufacturer building a facility along the I-94 corridor, or a healthcare provider constructing a medical office in New Center, this program can dramatically reduce the upfront capital requirement. Visit our SBA loan programs page for detailed eligibility requirements.
Renovation and rehab loans fund the transformation of existing Detroit properties. With a massive inventory of historic commercial and industrial buildings throughout the city, adaptive reuse is one of the most active segments of the Detroit construction market. These loans support projects ranging from warehouse-to-loft conversions in Eastern Market to office building rehabilitations in the David Whitney Building corridor.
Bridge-to-construction financing covers the gap between land acquisition and the start of construction. For developers who need to secure a site while completing entitlements and architectural plans, this two-stage approach provides flexibility without the pressure of a construction timeline ticking from day one.
Where Are the Most Active Construction Zones in Detroit?
Detroit's construction activity is concentrated in several key neighborhoods, each offering distinct opportunities for developers and distinct considerations for construction lenders.
Downtown Detroit leads all neighborhoods with approximately $2.5 billion in active or planned development investment through 2027. The centerpiece remains Hudson's Detroit, where the 49-story tower will house The Detroit EDITION hotel and luxury residences when it opens in 2027. The 12-story Block Building has already opened with General Motors, JPMorgan Chase, and Accenture as anchor tenants. Bedrock's planned $1.6 billion reimagining of the Renaissance Center into a mixed-use waterfront destination represents the next wave of downtown construction opportunity. Construction lenders view downtown favorably due to Bedrock's institutional presence and the concentration of corporate tenants.
Corktown has emerged as Detroit's most exciting development frontier. Ford Motor Company's Michigan Central Station redevelopment, valued at over $950 million, has catalyzed surrounding investment. The $198 million Detroit City FC stadium is expected to break ground in spring 2026, with a mixed-use component including 76 affordable housing units and a 421-space parking deck. The $70 million Detroit Mobility and Innovation Corridor will rebuild a two-mile stretch of Michigan Avenue connecting Corktown to downtown. A NoMad Hotel with approximately 180 rooms is planned for the upper floors of Michigan Central Station, targeting a 2027 opening. For construction borrowers, Corktown offers strong lender interest driven by Ford's anchor presence.
Midtown is anchored by Wayne State University, the Detroit Medical Center, and the Detroit Institute of Arts. The $377 million Mid Project on Woodward Avenue began construction in early 2025, bringing a luxury hotel, apartments, and retail to one of Detroit's most walkable neighborhoods. The 184-unit Brush Watson Midblock Building is also under construction, adding mixed-income housing to this established corridor. Occupancy rates for existing multifamily in Midtown exceed 95%, giving lenders confidence in new residential construction.
Eastern Market offers opportunities for smaller-scale construction and adaptive reuse projects. The 130-year-old public market anchors a district of historic industrial buildings increasingly attracting food and beverage, creative, and technology tenants. A portfolio of 21 properties totaling 450,000 square feet was listed for roughly $31 million in late 2025.
New Center and Dearborn round out the active construction zones, with New Center benefiting from Henry Ford Health System expansion and Dearborn anchored by Ford Motor Company's global headquarters and the broader automotive supply chain.
For a comprehensive view of Detroit's commercial lending landscape, visit our Detroit commercial loans hub.
How Much Does It Cost to Build Commercial Property in Detroit?
Detroit offers one of the most affordable construction environments among major Midwestern metros. Understanding local building costs is critical when structuring your loan request and projecting returns.
Commercial construction costs in Detroit average approximately $155 per square foot, compared to the national average of $195 per square foot. This roughly 20% cost advantage is driven by Detroit's lower labor costs and proximity to regional building material suppliers, including the steel and automotive supply chain infrastructure that provides competitive pricing on structural materials.
However, costs vary significantly by property type and location within the metro. A Class A high-rise in downtown Detroit may run $275 to $375 per square foot, while a suburban medical office in Troy or Dearborn might cost $140 to $180 per square foot. Industrial and warehouse construction along the I-94 and I-75 corridors tends to be the most affordable at $75 to $120 per square foot.
Material costs rose approximately 2.8% year over year through 2025, though the rate of increase has moderated compared to the post-pandemic spikes. Detroit's proximity to domestic steel production and the broader automotive manufacturing supply chain provides some insulation from the material cost volatility that affects markets more dependent on imports.
One cost factor unique to Detroit is environmental remediation. Many urban construction sites, particularly those with prior industrial use, require Brownfield cleanup that can add $10 to $50 per square foot to total project costs. Michigan's Brownfield Redevelopment Financing Act offers tax increment financing to offset eligible cleanup costs, but developers should budget for environmental work and build it into their construction loan request.
Use our commercial mortgage calculator to estimate monthly payments on your Detroit construction project, or try our DSCR calculator to evaluate whether your projected income will support the permanent financing.
What Does the Construction Loan Process Look Like in Detroit?
Securing a construction loan in Detroit follows a structured process with several critical milestones. Understanding each step helps you prepare the right documentation and set realistic timelines.
The process begins with pre-qualification, where you submit a project overview, financial documents, and preliminary construction plans. Detroit lenders evaluate your experience as a developer, your financial strength, and the basic feasibility of your proposed project within the specific Detroit submarket you are targeting. This stage typically takes two to four weeks.
Site analysis and appraisal come next. The lender orders an as-completed appraisal, which estimates what your property will be worth once construction is finished. For Detroit projects, the appraiser considers comparable developments in your target neighborhood, current absorption rates, and projected rental income. The lender also reviews Detroit-specific factors including zoning compliance, environmental reports, and any Brownfield considerations that could affect the construction timeline or budget.
Underwriting involves a deep review of your general contractor's qualifications, the detailed construction budget, a market analysis specific to your Detroit submarket, and your personal and business financials. Detroit lenders typically want to see a minimum credit score of 680, at least 20% to 25% equity in the project, and a clear exit strategy through either permanent financing or sale.
After closing, the draw process begins. Your loan funds are not released all at once but disbursed in stages as construction milestones are completed. Each draw request requires a third-party inspection to verify that work has been done according to the approved plans and budget.
How Does the Draw Schedule Work for Detroit Construction Projects?
The draw schedule is one of the most important elements of any construction loan. It determines when and how you receive funding throughout your project.
A typical Detroit construction project has five to seven draws, each tied to specific milestones like foundation completion, structural framing, mechanical rough-in, and final finishes. The table above shows a sample draw schedule for a $3 million mixed-use project.
During the draw process, you submit a formal request with supporting documentation including invoices, lien waivers from subcontractors, and progress photos. The lender dispatches a third-party inspector to verify that work matches the draw request. Once approved, funds are typically released within three to five business days.
Retainage is an important consideration. Most Detroit construction lenders hold back 5% to 10% of each draw as a safety net. These retained funds are released after final completion and after the lien-free waiting period expires under Michigan's Construction Lien Act. Plan your cash flow to account for this holdback, and make sure your general contractor understands the structure.
Interest accrues only on funds that have been disbursed, not on the full loan amount. At a rate of 7.5% on a $3 million project, your first monthly interest payment might be only $2,813, growing to $18,750 by the final draw. This interest-only structure during construction helps preserve your cash for project-related expenses. Learn more about how construction financing structures work across different property types.
What Are the Biggest Risks of Construction Loans in Detroit?
Construction lending carries inherent risks that differ from traditional commercial mortgages. Understanding these risks in the Detroit context helps you mitigate them before they become costly problems.
Cost overruns rank as the number one risk in any construction project. While Detroit's construction cost environment has been relatively stable, unexpected site conditions are more common here than in many markets due to the age of existing infrastructure and the potential for environmental contamination on previously developed sites. Build a contingency of at least 10% to 15% into your project budget, and consider a larger buffer of 15% to 20% for sites with prior industrial use.
Timeline delays can turn a profitable project into a money-losing one. Every month of delay adds interest expense to your project cost. Detroit-specific factors that can cause delays include environmental remediation that takes longer than anticipated, City of Detroit permitting timelines (which have improved but can still extend beyond expectations), Michigan winter weather that limits exterior work from roughly December through March, and skilled labor availability during peak construction seasons. Work closely with your general contractor to build realistic timelines with appropriate buffers.
Interest rate risk affects construction loans because most use variable rates tied to Prime or SOFR. If rates rise during your 12 to 24 month construction period, your interest costs increase with each draw. Some Detroit lenders offer rate caps or limited fixed-rate construction options that can help manage this risk.
Market risk is the possibility that conditions change between when you start building and when you finish. Detroit's improving fundamentals and population stabilization reduce this risk compared to historical levels, but the office market in particular carries uncertainty. Developers building projects with significant office components should secure pre-leasing commitments before breaking ground to mitigate market risk.
How Should You Handle Environmental Considerations for Detroit Construction?
Environmental assessment and remediation are more significant factors in Detroit construction than in many markets. The city's industrial heritage means that many desirable development sites have prior uses that require environmental clearance before construction can proceed.
Phase I Environmental Site Assessments are standard requirements for any Detroit construction loan. This assessment reviews historical property use, regulatory records, and site conditions to identify potential contamination. If the Phase I identifies concerns, a Phase II assessment involving soil and groundwater testing may be required. Costs range from $2,500 to $5,000 for a Phase I and $10,000 to $50,000 or more for a Phase II, depending on the site's complexity.
Michigan's Brownfield Redevelopment Financing Act is a powerful tool for Detroit developers. The program allows municipalities to create Brownfield Redevelopment Authorities that capture incremental property tax revenue generated by new development to reimburse eligible environmental cleanup costs. Detroit's Brownfield Redevelopment Authority has supported hundreds of projects, and experienced developers factor these incentives into their construction budgets and loan applications.
The Michigan Department of Environment, Great Lakes, and Energy (EGLE) oversees contamination assessments and cleanup standards. Lenders require evidence that EGLE requirements are met or that a remediation plan is approved before funding construction draws on affected portions of a site.
For developers, the key takeaway is to engage an environmental consultant early in the pre-development process. Identifying environmental issues before applying for a construction loan allows you to incorporate remediation costs into your budget, explore Brownfield incentives, and present a complete picture to lenders that reduces underwriting uncertainty.
What Credit and Financial Requirements Do Detroit Lenders Expect?
Detroit construction lenders evaluate several key financial benchmarks when reviewing your application. Meeting or exceeding these thresholds significantly improves your chances of approval and may unlock better terms.
Credit score requirements typically start at 680 for conventional construction loans, though some programs accept scores as low as 640 if you have strong compensating factors like significant equity or extensive development experience. SBA construction loans may have slightly more flexible credit requirements.
Down payment expectations in Detroit generally range from 20% to 35% of total project cost, depending on the property type and your experience level. First-time developers should expect to contribute closer to 30% to 35%, while experienced builders with a track record of successful Detroit projects may qualify with 20% to 25% equity.
Lenders also look for adequate liquidity beyond your down payment. Most Detroit lenders want to see six to twelve months of interest payments held in reserve, either as cash or through an interest reserve built into the loan structure. This protects both you and the lender from cash flow disruptions during the construction period.
Experience carries significant weight in Detroit construction lending. If this is your first commercial construction project, consider partnering with an experienced Detroit developer or general contractor. Lenders view experienced teams as lower risk, which can translate to better rates and higher leverage. Detroit's revitalization has attracted many out-of-state developers, and partnering with a local operator who understands the city's permitting process, contractor networks, and neighborhood dynamics strengthens your application considerably.
How Do You Choose the Right Construction Lender in Detroit?
Selecting the right lender for your Detroit construction project involves more than comparing interest rates. The best construction lender for your project depends on your experience level, project type, and financing needs.
Local and regional banks like Flagstar Bank, Chemical Bank (now part of Old National), and Comerica offer competitive construction loan terms for mid-size Detroit projects. These banks understand the local market intimately, which can speed up the underwriting process and reduce the need for extensive market justification. Their familiarity with Detroit's neighborhoods, permitting processes, and contractor networks provides a meaningful advantage.
National commercial lenders and debt funds may offer higher leverage or more flexible terms for larger projects. These lenders are particularly active in downtown Detroit and Midtown, where project sizes often exceed $20 million and institutional-grade developments attract national capital.
SBA-preferred lenders are essential if you are pursuing an SBA 504 construction loan for an owner-occupied property. Michigan has an active network of Certified Development Companies that partner with banks to structure these loans for Detroit business owners.
Private lenders and hard money sources fill gaps where traditional banks cannot lend, such as highly speculative projects, borrowers with credit challenges, or deals that need to close quickly. Rates are higher (typically 10% to 14%), but the flexibility can be valuable for time-sensitive acquisitions or projects that traditional banks decline due to environmental or market risk factors.
No matter which lender you choose, compare at least three to four quotes before committing. Pay attention to not just the interest rate but also the origination fee, draw inspection fees, extension options, and any prepayment penalties. Contact our team to get connected with construction lenders who specialize in the Detroit market.
What Major Projects Are Shaping Detroit's Construction Lending Market?
The scale and quality of Detroit's current development pipeline directly influences how construction lenders evaluate new projects. Understanding the major developments underway provides context for your own construction loan application.
Hudson's Detroit is the most significant development in the city's modern history. The $1.4 billion complex on Woodward Avenue includes the 12-story Block Building (now open with GM, JPMorgan Chase, and Accenture as tenants) and the 49-story Tower featuring The Detroit EDITION hotel and luxury residences. This project has fundamentally shifted lender perceptions of downtown Detroit development risk.
The Mid Project in Midtown is a $377 million development spanning 3.8 acres on Woodward Avenue. The project centers on a 15-story Thompson Hotel with 216 luxury rooms, supplemented by a seven-story apartment building, a 13-story apartment complex, and over 55,000 square feet of retail. Completion of the hotel component is anticipated by 2027.
Detroit City FC Stadium (AlumniFi Field) is a $198 million, 15,000-seat venue in Corktown. Demolition of the former Southwest Detroit Hospital began in December 2025, with stadium construction targeting a spring 2026 start. The mixed-use component includes a 76-unit apartment building and 421-space parking deck.
Michigan Central Station in Corktown has been transformed by Ford Motor Company into a technology and innovation campus. An approximately 180-room NoMad Hotel (a Hilton affiliate) is planned for the upper floors, with a target opening in the first half of 2027.
These marquee projects create a halo effect for smaller construction projects throughout the city. When lenders see that institutions like Ford, GM, and Bedrock are making multi-billion-dollar commitments to Detroit, they become more willing to finance the $3 million to $20 million construction projects that fill in the gaps between the headline developments.
Frequently Asked Questions About Construction Loans in Detroit
What is the minimum down payment for a construction loan in Detroit?
Most Detroit construction lenders require a minimum down payment of 20% to 25% of total project cost for experienced developers. First-time builders typically need 30% to 35% equity. SBA 504 construction loans may allow as little as 10% down for qualifying owner-occupied properties, making them the most accessible option for business owners building their own facilities. The exact requirement depends on the project type, location within the metro, and the borrower's development track record.
How long does it take to close a construction loan in Detroit?
The typical timeline from application to closing for a Detroit construction loan is 60 to 90 days. This includes two to four weeks for pre-qualification, three to six weeks for appraisal and underwriting, and two to three weeks for closing. Projects requiring environmental assessment or Brownfield clearance may take longer. Having your construction plans, contractor agreements, environmental reports, and financial documents prepared before applying can help accelerate the process.
Can I get a construction loan with no experience in Detroit?
Yes, but it will be more challenging. Detroit lenders strongly prefer borrowers with commercial construction experience. If this is your first project, you can improve your chances by partnering with an experienced general contractor with a strong Detroit track record, bringing a larger down payment of 30% or more, demonstrating strong personal financials, and starting with a smaller, less complex project. Some lenders and local development organizations offer mentorship or co-borrower programs for first-time developers.
What happens if my Detroit construction project goes over budget?
Cost overruns on a construction loan must typically be funded by the borrower, not the lender. If your project exceeds the approved budget, you will need to contribute additional equity to cover the difference. This is why building a 10% to 20% contingency into your original budget is critical, especially for Detroit sites with potential environmental remediation needs. Some lenders allow a loan modification to increase the loan amount if the property's as-completed value supports additional financing, but this requires new underwriting and is not guaranteed.
Are construction loan rates higher than regular commercial mortgage rates in Detroit?
Yes, construction loan rates in Detroit are typically 1% to 3% higher than permanent commercial mortgage rates. As of early 2026, Michigan commercial mortgage rates start around 5.11%, while construction loans generally range from 7% to 10% depending on the project type and borrower profile. Multifamily construction projects tend to receive the most competitive rates, while speculative office or retail construction faces higher pricing. The higher rates reflect the increased risk associated with construction projects, including completion risk, cost overrun risk, and the absence of existing cash flow during the building period.
Do I need a general contractor to get a construction loan in Detroit?
Yes, virtually all Detroit construction lenders require a licensed general contractor with a valid Michigan builder's license. Lenders evaluate the contractor's experience, financial stability, bonding capacity, and track record of completing similar projects on time and on budget. Owner-builder arrangements are rarely accepted for commercial construction loans. For Detroit projects specifically, lenders prefer contractors with local experience who understand the city's permitting process, union labor requirements, and the environmental considerations that are common across many development sites.
Building Detroit's Future With the Right Construction Financing
Detroit's construction boom is creating opportunities that few Midwest markets can match. The combination of institutional investment momentum, below-average building costs, improving population trends, and a development pipeline worth billions makes this one of the most compelling construction lending markets in the country. From the high-rise towers redefining downtown to the adaptive reuse projects breathing new life into historic neighborhoods like Eastern Market and Corktown, the Motor City is actively being rebuilt.
Whether you are planning a ground-up multifamily project in Midtown, a manufacturing facility in the I-94 corridor, or a mixed-use development near the new stadium in Corktown, the key to favorable construction loan terms is matching your project with the right lending program and presenting a complete, well-documented application that addresses the unique characteristics of the Detroit market.
Contact Clearhouse Lending to discuss your Detroit construction loan requirements and connect with lenders who specialize in Michigan commercial construction financing.