The Milwaukee multi-family market will be a strong one in 2015 and beyond. But real estate pros should expect vacancies in this sector to rise next year. Why? Developers have flocked to Milwaukee to build new apartment properties.
That’s the takeaway from Marcus & Millichap’s fourth-quarter Milwaukee apartment report. According to the report, even though vacancies in the Milwaukee multi-family market will rise in 2015, they should stay in the 4-percent range, a solid figure even with the increase.
Marcus & Millichap predicts that developers will complete nearly 1,000 apartment units in the final quarter of 2014. The majority of these units will be in the city itself. For all of 2014, the Milwaukee market will see about 1,300 new units. That’s up from 900 new apartment units delivered in 2013.
In the last two years, then, developers will have added about 2,200 new apartment units to the Milwaukee market.
This surge in inventory will result in vacancy rates inching up to 4.2 percent during the fourth quarter. That would be an increase of 10 basis points from the fourth quarter of 2013.
But as demand for Milwaukee apartment units increases, so will the rents that landlords can charge. Marcus & Millichap says that effective rents will rise 2.7 percent this year to $940 a month. Most of this gain took place in the first quarter. In 2013, effective apartment rents rose 1.9 percent.
Why so many new apartments in Milwaukee? As the Marcus & Millichap report says, unemployment is down and retailers are increasingly targeting this metropolitan area. It doesn’t hurt, either, that Millennials want to live in urban downtowns, and that Milwaukee’s downtown is seeing more commercial activity.
Marcus reports that the unemployment rate in the Milwaukee area has fallen to 6 percent. During the past four quarters, 17,100 jobs have been created here.
At the same time, big-name retailers are opening new locations in the region. Meijer and Costco are among these retailers opening multiple stores in the Milwaukee market.