by Dan Rafter
Two of the biggest construction projects in Milwaukee’s history are now underway at the same time. To little surprise, this is providing a boost to the city’s economy and commercial real estate market.
Construction is now taking place on the $524 million BMO Harris Bradley Center, a downtown athletic stadium that will serve as the new home of the NBA’s Milwaukee Bucks. The arena is expected to be ready by the fall of 2018.
Also rising downtown is the new $450 million, 32-story office tower that will serve as the new Milwaukee headquarters for Northwestern Mutual. This building is scheduled for completion by the end of this year.
For Stu Wangard, chairman, chief executive officer and founder of Milwaukee’s Wangard Partners, these two projects – coupled with other development in the city – are more evidence that his city is in the middle of a commercial real estate boom period.
“Milwaukee has a good story to tell right now,” Wangard said.
Wangard said that the Northwestern Mutual and Bradley Center projects aren’t just transforming the blocks on which they are rising. They are encouraging additional construction projects throughout the city.
This isn’t surprising. Both projects are major ones that promise to provide a significant jolt to the Milwaukee economy.
An entertainment center in downtown
The BMO Harris Bradley Center is a good example. Yes, the arena will provide a modern new home for the Bucks. But it is also the center of an entire entertainment district that will include new office, retail and apartment offerings.
And Northwestern Mutual Life Insurance Co. in addition to its new office tower headquarters is developing a $100 million high-end apartment tower downtown. This project will include retail and a parking garage.
“When you see large infrastructure projects such as this take place, there is an economic burst that typically follows their completion,” Wangard said. “We are seeing a burst right now, and there should be another burst right after the projects are done. There is a world of difference with something that has been announced and planned and something that is actually done. Once it’s done, it is something that people can rely on.”
A downtown boom
Wangard said that Milwaukee is no different than other major cities across the Midwest. The city is seeing an influx of residents who want to live the urban experience in the center of the city.
These residents want to live in downtown apartment buildings close to public transportation, shops, restaurants, bars and their jobs.
“We are seeing people continuing to move in from rural areas and smaller towns into the major urban centers,” Wangard said. “That has been accelerating the last couple of years. So more companies want to set up locations in the center of the city. They want to attract the talented people within the Millennial demographic.”
Wangard said that all of the commercial sectors in Milwaukee are on the rise today, except for office, which Wangard said is “well in balance right now.”
The hottest market today in Milwaukee, though, might be industrial, Wangard said. He points to the shift in the way people are buying products. Traditional brick-and-mortar retailers are downsizing and closing stores. They are now pushing their online storefronts, as more consumers flock to the convenience of ordering products from their computer screens.
The companies behind these Web sites need distribution centers and warehouses in more markets so that they can ship their products in fewer days to their customers. This has provided a boost to the industrial market as Midwest cities like Milwaukee become important shipping hubs.
“The purchasing power is shifting more to the direct consumer approach,” Wangard said. “That is changing the way products are shipped throughout the whole metropolitan area.”
A shifting retail market
Wangard said that Milwaukee’s retail market is seeing a bit of a rebirth. But it is a changing market.
The Milwaukee retail market is moving from large traditional department stores to smaller specialty stores, he said. Service businesses are on the rise, too, everything from fitness clubs to nail salons.
The retailers that are thriving? Those that are offering products and services that customers can’t simply order from a Web page.
“It’s obvious who the winners are and those who are going through downsizing,” Wangard said. “In each category, there is a winner. Those dominant winners are adding square footage at the right spot and the right size.”
The office market in Milwaukee might not be booming. But it is certainly steady, according to research from CBRE. The company found that Milwaukee ranked in the top 15 markets across the country in 2016 when it came to the amount of office space absorbed.
CBRE found that the Milwaukee-area office market saw more than 1.1 million square feet of absorption in 2016. That came out to 2.6 percent of the office market’s net rentable area in Milwaukee. That figure ranked 11th in the country last year.
Marcus & Millichap reported that 2017 will be a busy year for the Milwaukee-area office market. The company said that office deliveries are set to reach a record high this year with 1.4 million square feet of new office space added to the market. Last year, 757,000 square feet of office space was built, according to Marcus & Millichap.
This new construction will add to the area’s office vacancy rate, pushing it up to 13.8 percent in 2017, according to Marcus & Millichap.
Demand still strong for multifamily
There is concern in some major metropolitan markets that developers are building too many apartment buildings.
But Wangard said that the Milwaukee-area apartment market is still in balance.
“Supply is still ahead of demand,” he said. “There is still strong demand for multifamily housing.”
There are some changes in the multifamily market, though. Wangard said that there is more rollover in the apartment market today than there was two, three or five years ago. A greater number of renters are leaving apartments and now buying single-family homes.
But the good news for apartment developers and owners? Wangard said that there is still plenty of demand to fill in the units that renters are leaving behind.
What amenities are Milwaukee renters looking for today from their apartment spaces? Wangard said that all multifamily buildings must have the most robust wi-fi service possible. Renters in the Milwaukee area also want concierge-type services. Many renters expect their apartment buildings to boast large clubhouses and pools.
There is also a rising demand for quiet spots in clubhouse areas in which renters can work on their laptops. It’s why Wangard often builds business offices within their apartment building clubhouses.
“More people are working out of their apartments,” Wangard said. “Their apartments are doubling as their offices. And sometimes they need a space to get away from the apartment. They need those quiet spaces in the common areas to work.”
When it comes to the units themselves, the quality of construction is key, Wangard said. Renters want high-end appliances and countertops. They also want plenty of natural light and apartments that filter out the noise from outside.
As Wangard watches the big Northwestern Mutual and arena projects move through the construction process, he predicts that the busy times in Milwaukee are not about to slow any time soon.
“Milwaukee can be a tougher market to bring people to. But once people are here, they love it,” he said. “You get short commutes. There’s a friendly atmosphere. It’s a great area for families and for young people. Milwaukee is a great value, a great place to live. A lot of people don’t know what a wonderful lifestyle they can have in Milwaukee.”