Back to the city

For decades, millions of Americans moved out of the cities, seeking a better life in outlying areas with wide open spaces. That trend continues today, especially for families who prefer big back yards and suburban schools.

However, a significant reverse migration is taking place in many American cities, as empty nesters flock to downtown condos and young professionals, having grown bored of the suburbs they grew up in, move to the city, seeking an exciting, diverse and interesting place to live.

Both the empty nesters and the young professionals moving to the cities want to live in a place where they can walk from their homes to stores, restaurants, cultural and entertainment venues.

This renewed interest in urban living has revitalized downtown Milwaukee. Since 2000, 3,200 new housing units have been built downtown and another 2,300 units are in the pipeline for projects that are proposed or under construction, according to the Department of City Development. In 2001, the downtown Milwaukee condo market absorbed about 100 to 150 units. From 2004-06 the downtown absorbed 340 to 380 condominiums a year, according to S. B. Friedman & Company, a Chicago-based real estate and development consulting firm.

“There has been a national resurgence in the concept of downtown housing,” said Tony Smith, practice leader at S. B. Friedman & Company. “Milwaukee is certainly participating in it.”

However, not everyone wants to live in the big city. Some empty nesters and young professionals are interested in downtown condo living, but they prefer a smaller town environment.

That has led to miniature housing booms in the downtowns of smaller cities in the region:

• In Racine, KeyBridge Development Group plans to build 434 condominiums, 90 apartments, 75,000 square feet of boat storage space and 50,000 square feet of commercial space on a 20-acre site northwest of Lake Michigan and the Root River. Developer Robert Watring wants to build a 12-story, 134-unit condominium building in downtown Racine, at the southeast corner of Lake Avenue and Eighth Street.

• In Kenosha, Skokie, Ill.-based New England Builders Inc. built about 400 condominiums and townhouses on the site of a former Chrysler Corp. factory on the downtown lakefront.

• In West Bend, the downtown area is on pace to add about 500 new downtown housing units. The biggest downtown West Bend project is the River Shores development, which is being built on the east side of the river at the former West Bend Co. site by Milwaukee developer Tim Dixon and Beloit developer Ken Hendricks. Once fully completed, River Shores will have about 385 residential units, some in new buildings and some in a former West Bend Co. building. A YMCA and some residential units have already been completed in that building.

Many of the cities that have attracted development to their downtowns have taken advantage of their location along lakes and rivers, an amenity that many suburban developments built on former cornfields lack.

In Milwaukee, several high-rises have been built for condo owners who want a view of Lake Michigan, and several condo developments have been built along the Milwaukee River. In the mid 1990s, the city began building a riverwalk to enhance the waterway and spur development there.

“If you look at where all of the development has occurred, there is a high concentration on the river,” said Richard “Rocky” Marcoux, commissioner of the Department of City Development. “It was such an underutilized asset.”

Some smaller cities have followed suit. Sheboygan built a boardwalk along the Sheboygan River, spurring redevelopment of old fishing shanties into stores. Waukesha also built a riverwalk connecting Frame Park to the rest of the downtown. West Bend has also built a riverwalk, making its downtown more attractive.

As more people move into downtown areas, city leaders are hoping they will help attract more commercial development to their downtowns.

In Milwaukee, the condo boom has led to a restaurant boom. So many restaurants have opened in recent years that some have speculated that there are now too many restaurants in the downtown area. Indeed some of the new restaurants have closed, such as Moceans, but even more are on the way.

Retail development in much of downtown Milwaukee is still slow, and the Shops of Grand Avenue still has large amounts of vacant space. However, the Historic Third Ward has attracted several stores, including an Anthropologie store that is under construction, and the block of Water Street just north of the Third Ward has also attracted some new stores.

About a dozen hotel developments have been proposed in downtown Milwaukee, but many industry observers are skeptical that they will all be built. City officials have resisted requests for tax incremental financing (TIF) subsidies for hotel developments, saying the marketplace will determine which projects will succeed.

The new Manpower Inc. headquarters and the Harley-Davidson Museum (under construction in the Menomonee Valley) should help increase the demand for downtown hotel rooms.

“The demand will drive how many hotels are built,” Marcoux said. “That demand will not be created artificially by the city.”

The city has provided TIF funding for some downtown projects. The Common Council approved $29 million in TIF for Joseph Zilber to redevelop the former Pabst brewery into a mixed use neighborhood, $8.8 million in TIF to Mandel Group Inc. to redevelop the former Pfister & Vogel factory into several buildings with condos, apartments and stores and $25 million in TIF to attract Manpower’s corporate headquarters. The city will consider providing TIF for projects like those that will have a catalytic affect, Marcoux said.

“We will continue to look at projects as they present themselves,” he said.

The office market in downtown Milwaukee remains soft, and several proposed office buildings remain on the drawing board because developers are unable to find an anchor tenant. However, office space vacancy rates have been declining in recent months. The downtown office space vacancy rate declined from 15.3 percent at the end of the first quarter to 14.1 percent by the end of the second quarter, according to Colliers International. The downtown class A office space vacancy rate fell from 12.1 percent to 9.5 percent.

In addition to Manpower, smaller firms, with the potential to grow, also are moving downtown, Marcoux said.

“People love the ability to leave work and walk to a restaurant, shop and eventually to their domicile in an area that is vibrant and has the buzz that downtown has now,” he said.

Even some manufacturers, struggling to find workers in the suburbs, are moving back to the city.

Milwaukee’s efforts to redevelop the once heavily blighted Menomonee Valley have attracted several firms to move or make plans to move there from the suburbs, including Derse Inc., The Sigma Corp., Proven Direct, Taylor Dynamometer Inc. and Caleffi North America Inc.

“What the companies are acknowledging, the biggest challenge that manufacturers are faced with right now is the labor force,” Marcoux said. “Where is the labor force? It’s in the city.”

The city’s success in attracting firms to the valley, and its large supply of workers and residents needing jobs give Milwaukee officials confidence they can redevelop another struggling industrial area, the 30th Street Industrial Corridor.

“It’s actually more accessible to the workforce than the valley,” Marcoux said. “A lot of people will be able to walk to work in the corridor, like they did in the past.”

As the national housing market has collapsed, some wonder if the downtown housing surge will continue. City officials are optimistic it will, pointing out that the massive baby boom generation should provide fuel for more downtown housing development for years to come.

A study by S.B. Friedman & Company said that the number of young professionals and empty nesters in the Milwaukee area with a household income of more than $100,000 is expected to grow through 2011, meaning the pool of potential downtown condo buyers also will grow.

“That migration (of baby boomers) has only begun,” Marcoux said. “That’s a huge demographic, and it’s only beginning to retire now.”

Growth also will create some challenges for downtown Milwaukee. More development increases the need for more parking spaces. Marcoux said city officials will study downtown Milwaukee’s parking needs as part of the update of the downtown’s master plan. If necessary, more parking facilities will be added, he said.

However, the downtown cannot reach its full potential relying only on cars to get thousands of people into and out of the central business district each workday. The city must establish an “integrated mass transit system” that includes roads, parking facilities, express buses and rail systems, Marcoux said.

“We are losing out on development now because we don’t have an integrated transit plan,” Marcoux said. “And fixed rail needs to be part of that.”

A rail transit system is the most important step that the region needs to take to revitalize downtown, said Smith, the S.B. Friedman practice leader.

“One of the things that keeps striking me about downtown Milwaukee is the lack of a fixed guided transit system that spurs development, density and establishes a hub,” he said.

The political environment in the Milwaukee area has killed rail plans for years as conservative politicians have maintained a stiff opposition, saying rail systems would be a waste of the taxpayers’ money. Plans for the KRM commuter rail service between the downtowns of Kenosha, Racine and Milwaukee were thwarted recently when Republicans in the state legislature refused to include a car rental tax increase in the state budget to pay for the system.

Furthermore, Milwaukee County Executive Scott Walker has blocked Mayor Tom Barrett’s plan to allocate long-unused federal funds to establish a downtown Milwaukee streetcar loop that would connect the downtown Amtrak/Greyhound intermodal station with the rest of downtown.

“We need KRM,” Marcoux said. “The region will benefit with a transportation policy of commuter rail, a downtown streetcar loop and bus rapid transit. We need that integrated system.”

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