Seeking economic equilibrium

2016 has come in like a lion – significant market movements, a strengthening dollar, low oil prices and lofty promises from presidential hopefuls. Will it go out like a lamb? At a local level, we recently invited three experts in their field to share their views on the trends impacting business owners in the Milwaukee region. Here are the highlights; you can dig deeper by viewing the full set of charts, graphs and trends.

Real Estate

Overall real estate trends:

• Rental rates in most categories (commercial, retail, office, multi-family) are increasing, but expect multi-family rents to flatten as 3,242 units under construction near completion.
• Out-of-state investment is coming into southeastern Wisconsin (250 E. Wisconsin, Gas Light and 411 buildings).
• Re-purposing of property such as the Schlitz, Pabst, Germania and Commerce Buildings (office to multi-family, industrial to office, office to hotel) will continue.
• Hotel development is in a growth phase (Kimpton, Westin, Cambria, SpringHill Suites).
• Continued expansion of retail development throughout southeastern Wisconsin (Mayfair Collection, Corners of Brookfield, The Corridor Brookfield, Calhoun Crossing, Drexel Town Square and Whitestone projects).
• Adaptive reuse of infill buildings on the industrial side is on the rise, along with an increase in vacancy due to slowing manufacturing and speculative development in Racine and Kenosha.

Manufacturing

Manufacturing outlook for the mining, marine, port and commercial markets:

• Cyclical lows in mineral prices (copper, coal, iron ore and gold) have led to reduced investments; watching to see if this is a cycle or a structural change. Pricing from Asia is very competitive.
• Only a sustained uptick in oil prices will jumpstart investments.
• The port market, driven by world trade, is most resilient and grows even in recessions.
• Industrial properties is a healthy market with strong investment and low vacancy rates.
• Invest now for the upturn: faster product development is required in this economy; control spending versus halt plans; and go where the business is (new markets and new products).

Health Care

Health Care and Cost Outlook

• Relative to double-digit cost increases of the early 2000s, the health care cost trend remains low, yet still well above the rate of inflation.
• Health care costs vary widely across industries, with average costs per employee ranging from $8,706 to $15,440.
• 80 percent of employers are aggressively focusing on changing health and pharmacy plan design in the next three years as a way to control costs.
• 60 percent of employers are anticipating adopting a spousal surcharge, compared to 27 percent presently.
• 40 percent of employers are looking to structure employee contributions based on their activity.
• Employees in poor health report over triple the days absent and almost 50 percent more lost time while at work compared to those in very good health.

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