by Dan Rafter
Worried that the Milwaukee multifamily market is set for a slowdown soon? Don’t be. Just ask Joe Eldredge, vice president in the Milwaukee office of Colliers International. He’ll tell you that the Milwaukee multifamily market is still hot, and that new construction isn’t about to slow anytime soon.
Midwest Real Estate News recently spoke with Eldredge about the strength of Milwaukee’s multifamily market. Here is what Eldredge had to say about the apartment sector in Wisconsin’s biggest city.
Holding onto their properties: We are seeing a lot of transactions when it comes to multifamily construction in the Milwaukee area. We are not seeing as many sales transactions. That’s because most who have portfolios don’t want to sell their properties. The market is too strong here. Very little apartment properties are trading.
Arriving too late? When it comes to construction activity in multifamily, though, we are extremely busy in the Milwaukee market. It’s almost to the point where developers just hitting the market now are coming late to the dance. The number of apartments coming online is impressive. And these apartments will be filled. We’re not worried that there will be too many apartments here for demand.
Disciplined developers: We’re not worried about too much multifamily construction now. Most of the projects coming out of the ground now are being built by very disciplined developers. They will be OK. These developers have done a lot of research on locations and rental rates, on the levels of finishes that they need to provide. There is a challenge to this market, though. The people who used to build smaller-scale developments are falling by the wayside. Most municipalities have taxes that are too high for smaller apartment developments. The only way to make a smaller-sized project work is with the help of tax-increment financing. And communities are reluctant to put TIFs in place unless developers are proposing very substantial projects. Even then, they are often reluctant to TIFs in place for a residential project.
Building a 16-unit project almost becomes cost-prohibitive today. For a development to pencil out, you need a larger project.
Walkability matters: One of the most important amenities that renters want to today is walkability. That is much more important than it was in the past. Today, renters want to live in a walkable neighborhood, where they can get to stores, restaurants and public transportation without their cars. Renters want concierge services in their buildings. It’s all about getting more services and more walkability today.
A walkable Milwaukee? How walkable is Milwaukee? Well, there are never enough walkable neighborhoods. But we do have some very walkable communities. The Third Ward in particular is very walkable. The Bay View neighborhood is quite walkable. We are seeing historically low apartment vacancy rates in these communities. No one is expecting that to change soon. The rental rates in these walkable communities are exceeding $1.65 a square foot. Some projects are flirting with $2 a square foot. People will pay those rents if the amenities are commensurate. Today, it’s actually more about the common space than it is the square footage of the apartments. People are willing to rent smaller units if it means more expansive common areas and more shared amenities such as fitness centers and rooftop decks.
No slowdown in the near future: We expect the Milwaukee market to continue to be strong when it comes to multifamily development. This sector very much has legs. The challenge for me as a broker is finding people who will sell apartments. That is not an easy thing to find today.