Wisconsin

Construction Is Booming for Milwaukee Multifamily Market

by Kristin Harlow May 9, 2019

It is widely acknowledged among commercial real estate professionals in the Milwaukee market that we are in the midst of a renaissance of sorts — certainly the most exciting period in the past few decades to be actively involved in the industry. From the Harbor District to the Deer District (the newly branded area around Fiserv Forum), new neighborhoods and exciting destinations are sprouting up. This resurgence continues to attract residents and developers who are quickly creating the critical mass necessary to make Milwaukee a viable 18-hour city. On the multifamily front, new supply that has come online in the past few years is driving both average rental rates and overall vacancy higher. As of the first quarter of 2019, the average rental rate in the metro Milwaukee market increased 0.8 percent from the previous quarter to $1,075, continuing an upward trend that saw a 2.2 percent annual increase at year-end 2018, according to real estate data provider CoStar. The vacancy rate hovered around 5.9 percent during this same period, slightly higher than the year-end 2018 level of 5.6 percent, but lower than the recent high of 6.1 percent established in 2017. The average rental rate in the first quarter …

May 9, 2019

Healthcare Market Reports Midwest Midwest Market Reports Wisconsin

How Healthcare Adds Value to Mixed-Use Developments in Milwaukee and Beyond

by Kristin Harlow November 15, 2018

When it comes to location identification for development, you have to think creatively. In a highly competitive market like Milwaukee, mixed-use projects offer a great opportunity to showcase creativity, take advantage of complementary uses and drive tremendous value for clients and investors. The success of a mixed-use project lies in location. A high-profile location will help attract businesses, which then helps build traffic. Ideally, you want to think outside the box to generate repeat visits with businesses that will help sustain that traffic. An innovative mix of retail, restaurant, hospitality, office and even healthcare can greatly enhance a development. Mixed-use retail developments create new opportunities for healthcare projects. Health systems and physician practices are choosing to prioritize locations they may not have previously considered. There’s been a significant expansion of and increased focus on the outpatient ambulatory environment. The trend of developing specialty outpatient facilities, ambulatory surgery centers and micro-hospitals continues to gain momentum and allows for expansion to remain competitive while maintaining efficiency. An outpatient facility brings traffic. Finding a high-visibility location where customers are already engaging increases the convenience factor. Built-in traffic drivers like restaurants and retail help with trip assurance. For example, after wrapping up a clinic …

November 15, 2018

Healthcare Market Reports Midwest Midwest Market Reports Wisconsin

Milwaukee Health Systems Expand, Focus on Off-Campus Settings

by Kristin Harlow July 26, 2018

Healthcare properties present a tremendous opportunity for real estate developers in the Milwaukee market and the upper Midwest. The national and regional healthcare real estate sectors remain on solid footing, according to the 2018 Healthcare Marketplace Report from Colliers International. The sector remains attractive in terms of both stability and diversification. There will always be a demand for healthcare services as the U.S. population continues to age at an unprecedented rate. A growing number of Milwaukee-based health systems have announced plans to expand in bids to gain or maintain market share. The merger of Aurora Healthcare with Advocate Health Care Network to create a single health system known as Advocate Aurora Health is a recent example. There’s been a significant expansion of and increased focus on the outpatient ambulatory environment. Health systems face significant capital expenditures in order to maintain aging hospitals. Alternative developments such as specialty outpatient facilities and micro hospitals have gained momentum and allow for expansion to remain competitive while efficient. With the emerging trend toward population health management, hospitals and health systems take on the financial risk of providing care for a certain population across a certain geography. Having to take on the additional risk of …

July 26, 2018

Market Reports Midwest Midwest Market Reports Retail Wisconsin

Milwaukee Market Displays Strong Fundamentals Despite Retailer Struggles

by Kristin Harlow July 19, 2018

Like many other Midwestern markets, Milwaukee is experiencing a mixed bag in retail. While headlines have been dominated primarily by closures, there has also been an abundance of new activity in the market. While it’s taken its hits, the retail market has fought back and retail vacancy has actually decreased slightly to 4.4 percent in the first quarter, according to CoStar Group. Rents are edging up and Class A space is difficult to find. The inventory of Class B and C space is more robust. Due to low demand, landlords are not enjoying much negotiating leverage. Market turbulence On the surface, multiple big box closings that have occurred in metro Milwaukee this year paint a gloomy picture of the retail marketplace. Grocery, wholesale, apparel, toys, restaurants and other categories of retailers have closed fairly rapidly. These include Pick ‘n Save (Kroger) in Cudahy, Sendik’s in West Milwaukee, Sam’s Club in West Allis, Toys ‘R’ Us and Babies ‘R’ Us in Brookfield and iPic Theater at Bayshore Town Center in Glendale. Another ominous cloud is the Bon-Ton bankruptcy and the closure of seven area Boston Store locations, including the company’s clearance center and furniture gallery in metro Milwaukee. Compound that with …

July 19, 2018

Market Reports Midwest Midwest Market Reports Office Wisconsin

Downtown Milwaukee Is Experiencing Booming Development Across Sectors

by Kristin Harlow February 15, 2018

In 2017, downtown Milwaukee was unrecognizable from its former self — a year that brought additional outside investment, both public and private development and a rethinking of how we utilize office space. Developers broke a decade-long dry spell in 2016, and now nearly 500,000 square feet of office space is under construction downtown. It’s a story of persistence, as an overhaul of available office product has occurred over the past few years. Now, a vast majority of outdated Class B and C office product has been removed from downtown, bolstering rent growth and enticing the outside investment that Milwaukee deeply needed. Outside investors Prior to the close of 2017, one of downtown Milwaukee’s largest office buildings and the third largest multi-tenant office complex in the state, 310 West Wisconsin Avenue, sold to an investment group based in New York. Just as Millbrook Real Estate Co. and Fulcrum Asset Advisors finished renovating, rebranding and reopening the Two-Fifty office building — a downtown tower that struggled for years — Milwaukee’s second largest office tower, 411 East Wisconsin, sold to Middleton Partners. The repositioned property sold for $50 million more than it fetched just three years prior. Both projects are a testament to …

February 15, 2018

Market Reports Midwest Midwest Market Reports Retail Wisconsin

Milwaukee Looks to Boost Retail Market Through Tax-Increment Financing

by Kristin Harlow November 9, 2017

Milwaukee-area communities have woken up and embraced tax-increment financing (TIF) as a way to stimulate retail and commercial development. Unlike our neighboring state of Illinois, Wisconsin is not afforded the same luxury of allowing retail sales taxes to flow to municipalities, which allows for greater financial flexibility and helps offset the cost of infrastructure and municipal services as a result of retail development. Wisconsin municipalities do not impose local sales or use taxes on purchases of goods and services. Based on a 5.6 percent tax rate for average Wisconsin communities, 5 percent flows to the state, 0.5 percent flows to the county and 0.1 percent would flow to a specially created district, such as a stadium or entertainment venue. TIF allows cities or villages to finance commercial development in a designated area, called a tax incremental district (TID), to promote a tax base expansion and economic development. The property taxes within the TID are placed in a special fund and are used to pay for improvements within the district. When the property values rise within the TID, the taxes paid on the increased value can be used to pay back public project costs, which otherwise can’t occur. Developers eye mixed-use …

November 9, 2017

Market Reports Midwest Midwest Market Reports Multifamily Wisconsin

Why New Multifamily Construction Is Accelerating in Metro Milwaukee

by Kristin Harlow November 2, 2017

The Milwaukee multifamily sector is plowing forward on a number of different fronts. Development activity is continuing its impressive run with a series of high-rise towers in various stages of construction or planning. Popular neighborhoods such as Walker’s Point, Bayview and the East Side are filling in with low- and mid-rise projects, many of which feature a mixed-use component. From an investment standpoint, multifamily is still the sector du jour, with a widening investor pool of both local and out-of-state buyers. Leading the charge on the development front is Northwestern Mutual’s 7Seventy7, which is currently under construction in downtown Milwaukee with an anticipated opening in summer 2018. The 34-story complex will feature 322 apartments, ground-floor commercial and 1,400 parking spaces, many of which will service employees at the company’s recently completed 1.1 million-square-foot headquarters located only one block away. Other major projects yet to break ground but slated to reshape the skyline in the coming years include: • The Couture — Barrett Lo Visionary Development is planning to build a 44-story tower with 300-plus units, retail and parking across the street from the planned Lakefront Gateway Plaza, which will connect the area between the Milwaukee Art Museum and the Summerfest …

November 2, 2017

Market Reports Midwest Midwest Market Reports Office Wisconsin

Millennial Workforce Drives Development Wave in Downtown Milwaukee

by Kristin Harlow July 20, 2017

There’s never been a better time to live and work in downtown Milwaukee. With the recession in the rearview mirror, a massive resurgence in the multifamily and office sectors has originated in Wisconsin’s largest city. Since 2011, 2,500 multifamily units have been completed, with an additional 1,500 units under construction and 2,000 proposed. The office market has seen a similar trend with nearly 2 million square feet of new development being created, the bulk of which is Northwestern Mutual Life Insurance Co.’s new $450 million, 32-story office tower. After decades of decline, downtown Milwaukee is experiencing a surge in population growth largely attributed to the development influx. This has changed the makeup of the city’s job market and molded a new workforce hinged on modern factors. With an increase in residents migrating to urban areas to work and reside, companies are shifting gears to tap into this ever-evolving talent market. Catering to millennials Known as the job-hopping generation, millennials are the focus of companies’ recruiting tactics. Combined with competitive compensation packages, businesses have begun leveraging their chief incentive: the physical office space. A prime example of this development, the Third/Fifth Ward on the city’s southeastern side has become one of …

July 20, 2017

Market Reports Midwest Midwest Market Reports Multifamily Wisconsin

Wisconsin Supreme Court Reaffirms Subsidized Housing Valuation Methods

by Kristin Harlow June 8, 2017

In a major victory for subsidized housing developers and investors, the Wisconsin Supreme Court has reaffirmed longstanding principles governing the assessment of these properties. The Dec. 22, 2016 decision in Regency West Apartments LLC v. City of Racine confirms that the assessment of a subsidized housing project is a property-specific exercise that must take into account the type of federal program involved, specific restrictions on the property, and actual property income and expenses. The decision also affirms that the value of a subsidized property cannot be determined by comparison to conventional apartment properties that have no restrictions and can charge full market rents. Historical context The Wisconsin Supreme Court first upheld these principles in a 1993 case involving a Milwaukee apartment project subject to rental and other restrictions imposed by the U. S. Department of Housing and Urban Development (HUD). The assessor had valued the property based on market rents at conventional apartments, ignoring the property owner’s inability to legally charge market rents. The Supreme Court nullified the assessment, stating that the assessor had illegally assessed the property by “pretend[ing]” that the HUD restrictions did not apply. The new decision In the December 2016 decision, the Supreme Court reaffirmed the …

June 8, 2017

Market Reports Midwest Midwest Market Reports Retail Wisconsin

Flurry of New Development Fuels Retail Resurgence in Milwaukee

by Kristin Harlow April 20, 2017

The Milwaukee-area apartment market wasn’t the only real estate sector to benefit from continued job growth and household formation in 2016. The optimistic employment outlook, together with an influx of millennials who, according to Gallup, are spending more on nonessentials, has benefitted the local retail market as well. It’s a trend that we expect to continue in 2017. Filling a retail void A market that historically has been largely underserved in terms of new retail development has essentially reversed its standing, with approximately 1.6 million square feet delivered in the last two years alone, according to CoStar Group. A more diversified economy less susceptible to the highs and lows of other markets, taken together with Milwaukee’s public-private partnerships and lower real estate taxes compared with neighboring states, has created a pro-development environment that appeals to retailers and developers alike. Known for its older stock of shopping centers, the region has seen a surge in redevelopment activity, particularly in the suburbs, where previously underutilized assets are being rebranded and reimagined. In November 2016, HSA Commercial acquired the 217,346-square-foot Brookfield Fashion Center in Brookfield, just west of Brookfield Square Mall. Built in 1986, the center houses stalwart tenants that have been retained …

April 20, 2017

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