HEARTLAND SNAPSHOT, JANUARY 2005

Milwaukee Multifamily Market

John McCardle, Broker, NAI MLG Commercial

There are two separate and distinct trends in the Milwaukee market related to multifamily housing, according to John McCardle, a broker associate with Brookfield, Wis.-based NAI MLG Commercial. First, there are high-end condominiums being developed and absorbed in the downtown market (where housing previously had been fleeing for the suburbs). Also, mixed-use developments are being designed and built as city center concepts with multifamily rental units and retail space. Such developments have and are occurring in Brookfield at Norhardt Crossing and Towne Center; in New Berlin at the New Berlin City Center; and in Oconomowoc at the Pabst Farms Development.

The downtown Milwaukee market has exploded with multifamily rental and condominium developments as more people are looking to move closer to the city as Milwaukee’s downtown reemerges as a thriving area where people want to live, work and be entertained. “This is a relatively recent change in the landscape,” McCardle says. “In the past, there had been a trend of more residents leaving the city than entering. This trend has slowed and is reverting as more new, high-end units come on line. Also, the focus from rental units to condominiums has transitioned as the interest rate structure has drastically affected each market. And redevelopment also has supported multifamily development in Milwaukee.”

Mixed-use developments and lifestyle centers that provide public, residential, retail, office and industrial uses are beginning to emerge in Southeastern Wisconsin as well. “On the residential multifamily side, a middle- to upper-income tenant is being sought,” McCardle says. “Retail is drawing larger first-tier retailers to what has been viewed as a tertiary market. This specific change is presenting a new mix to the area that is allowing the concept of city or town centers.”

Within the past year, the city and county of Milwaukee have begun preparing for a mixed-use development known as the Park East with higher-end condominiums along the Milwaukee River waterfront. This has spurred multifamily rentals and condominium developments and redevelopments within the city of Milwaukee. The Mandel Group has major multifamily rentals and condominium developments in the area, and they are in the process of converting industrial space along the river into high-end condominiums.

The suburbs that immediately surround Milwaukee have been expanding with new multifamily developments as well. These new multifamily projects are typically a part of mixed-use developments, such as lifestyle centers, city centers, regional malls or high-rises with underground parking, retail, office and housing above. In Brookfield, Mandel has developed townhouse condominiums and apartments called Norhardt Crossing directly abutting a retail center and within walking distance to the city hall. Also in Brookfield, VK Development is currently building a senior multifamily facility called Capitol Hill that will have retail incorporated into separate buildings on the property, and Thomson Corporation has built a mixed-used retail center called Towne Center with multifamily being built around it.

Out-of-state developers are coming into the Milwaukee market in order to take on larger mixed-use developments that have worked in larger markets. “They are now seeing viability of such projects in Milwaukee,” he says. Some examples of these mixed-use developments are Pabst Farms in Oconomowoc; Pabst City in downtown Milwaukee; the redevelopment of Bayshore Mall in Glendale; and the proposed development of a mixed-use corridor on a major thoroughfare along the boundaries of Oak Creek and Franklin.

There are a handful of smaller developers, such as Mandel and VK, that have grown to such a point that they are beginning to tackle larger projects. For larger developments, there are groups coming from other facets of the real estate spectrum.

The rental ranges vary greatly for Milwaukee multifamily housing; however, the following reflect the current market: efficiencies start at $350; one-bedroom units start at $550; two-bedroom units start at $700; and three-bedroom units start as $975.

“The vacancy rates in the multifamily market have changed drastically in Milwaukee during the past 2 to 3 years,” McCardle says. The rates had been fairly steady at 2 percent to 3 percent, and swung from 5 percent to 10 percent as the interest rates dipped and renters turned instead to ownership. As interest rates have crept up and the housing market has begun to cool, the vacancy rates have leveled off and reverted back to the 3 percent to 5 percent range.

“Milwaukee has two specific corridors to focus on in the near future,” he says. The stretch from Milwaukee west to Madison along the Interstate 94 corridor and the stretch from the Illinois border to Milwaukee along the I-94 corridor will continue to grow as industry and jobs spread farther west and south from Milwaukee and more households work in either Milwaukee and Madison or Milwaukee and Illinois.

Both condominiums and rentals will continue to grow. The balance, however, will shift toward rentals as interest rates rise. The infill within Milwaukee has been evolving in the downtown market and will likely continue in the old Park East Freeway footprint and Pabst City, both in the heart of downtown. “Milwaukee continues to morph from an off-the-radar market to one with a revitalized image,” McCardle says. “As the image of Milwaukee continues to change, draw and retain residents, jobs and tourism, the market will grow.”

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