Southeastern Wisconsin will likely see a slight decline in commercial construction in 2003, according to Steven Chamberlin, president of C.G. Schmidt Inc.
The volume of commercial construction will dip 4% to 6% this year, as several large projects in the pipeline won’t begin until 2004 or 2005, according to Chamberlin.
"This next year will be less active than last year," Chamberlin says.
The local commercial construction scene is a "dumbbell" market, in which several large projects and several small projects are being launched, but the middle-range is flat, he says.
Still, Chamberlin is optimistic about the long-range local construction outlook, simply because many of the structures created by the post-World War II building boom need to be renovated or replaced.
"Us baby boomers are replacing what we grew up in," Chamberlin says. "A lot of the activity is not so much expansion as it is replacing outdated facilities."
Milwaukee-based C.G. Schmidt had revenues of $175 million in 2002 and had 11.7% of southeastern Wisconsin’s commercial construction market.
Several large construction projects await on Milwaukee’s skyline, including:
— the new Columbia St. Mary’s Hospital on the city’s east side;
— the Pier Wisconsin interactive center on the lakefront;
— the Pabst Brewery redevelopment, which eventually could bring $300 million in new development;
— the Harley-Davidson Museum downtown;
— the Historic Third Ward’s Public Market;
— Northwestern Mutual Life Insurance Co.’s new office building in Franklin;
— a new 22-story office tower planned to replace the downtown parking structure of the Marcus Center; for the Performing Arts on Water Street;
— the renovation of the War Memorial at the lakefront;
— and new development in the Menomonee River Valley and at the site of the Park East Freeway downtown.
In addition, General Mitchell International Airport has begun a concourse extension, the Bradley Center and the other downtown entertainment centers are in various stages of building or planning expansions, and the Shops at Grand Avenue and the former Northridge Mall are being redeveloped for mixed uses.
"There’s still a lot of activity out there — a lot of significant projects," Chamberlin says.
By sector, this is how Chamberlin sees the local commercial construction market unfolding in 2003:
— Health care – Nearly all of the region’s major hospitals are planning renovations or may need to be replaced in the next few years, as they need to adapt to new technology and new trends in health care, Chamberlin says.
"They were built in the 1950s or ’60s, and they’re not meeting the needs today," he says. "Over 80% of the local hospitals have just completed construction or are planning major construction."
Chamberlin is aware of the howls of protests from local businesses that are getting socked with double-digit increases in health care insurance costs every year. However, Chamberlin says new buildings will enable hospital personnel to be more efficient and save costs in the long run.
"Hospitals can’t afford not to build. People don’t understand that the cost of the physical plant is a low percentage of health care costs. It’s the staff and equipment" that comprise the greatest percentage, he says.
Meanwhile, the nursing home and assisted-living industries will continue to change and will grow as the baby boom generation ages.
— Industrial – Manufacturers have been and will continue to be in a holding pattern, Chamberlin says. "The economy is affecting the ability to raise money. The biggest impact is that the small and medium industrial manufacturers — many have either cancelled projects or put them on hold."
— Education – Voters in a handful of local school districts have approved referenda to renovate, expand or replace aging high schools. That trend will continue, simply because the buildings are aging, and residents must be willing to replace them, even if it will ultimately increase their taxes, Chamberlin says. The same holds true for the local colleges, he says.
"The colleges and universities have been active and will continue to be active over the next couple of years," he says.
Federal, state and local government budget constraints are likely to put a damper on other types of public construction, he says.
— Condominiums – "Booming." Chamberlin says the market can in fact support the bevy of upscale condominium projects in various stages of development in downtown Milwaukee and the Historic Third Ward. The market for condos with price tags of $250,000 to $350,000 is quite strong, but the market for pricier condos may be more uncertain, he says. "The challenge is in getting the presales," he says.
— Retail – The retail development downtown will be in a holding pattern until the new condos are built and more people with higher incomes move into them, Chamberlin says. "Retail is lagging behind, but it will follow the surge in housing downtown. In two to five years, the retail will follow."
— Offices – The tower proposed for the Marcus Center parking structure site would be a key project for the local construction industry, he says. In general, however, Chamberlin does not foresee an office building boom in the market.
— Entertainment – Southeastern Wisconsin is on the verge of a building boom in museums, Chamberlin says. The Harley-Davidson Museum, Pier Wisconsin, the War Memorial, the Les Paul Museum in Waukesha and the Racine Heritage Museum. Chamberlin wonders if the market can support all of the projects beginning to line up.
— Religious – "Very, very big," Chamberlin says. Like the hospitals and the schools built after World War II, churches and other religious facilities are needed and are aging, he says. "These are facilities that are 40 to 50 years old that just need updating, at a minimum. It will continue to be an active market. Maybe it’s the community thing after Sept. 11, that we need these places to band together."
Jan. 10, 2003 Small Business Times, Milwaukee
