Members of the Commercial Association of Realtors Wisconsin remain overwhelmingly bullish about the commercial real estate market, according to the results of an annual poll of CARW members conducted by BizTimes Milwaukee.
This is the third consecutive year CARW members have expressed an overwhelmingly optimistic view of the commercial real estate market. Of 104 CARW members that responded to this year’s survey, 84 percent said the commercial real estate market is “improving,” 15 percent said the market is “flat” and only one percent described the market as “weak.” That is similar to 2014, when 86 percent of CARW members said the market was “improving.”
CARW members have been far more optimistic in the past three years than they were five years ago, when only 32 percent of survey respondents described the commercial real estate market as “improving.”
CARW members’ impression of CRE Market Conditions
CARW members are also optimistic about 2016. When asked if they believe the commercial real estate market will improve next year, 88.5 percent of survey respondents said “yes.” That is a very high number, but down from last year’s survey, when 94.6 percent of CARW members said the commercial real estate market would improve in 2015.
“CARW members show continued optimism about the commercial real estate market for the year ahead,” said Tracy Johnson, president and chief executive officer of CARW. “They cite pent up demand, a positive political climate, strong investor activity, and several key projects downtown and throughout the region coming to fruition. Momentum will only build if our region can attract and create additional jobs to support the development and activity.”
The capital markets for commercial real estate also continue to improve, CARW members say. Of those surveyed, 72 percent said the capital markets are “improving,” 28 percent said they are “flat” and none said the capital markets are “declining.” In the 2014 survey, 77 percent of CARW members said the capital markets were “improving” and in the 2013 survey, 60 percent said the capital markets were “improving.”
The industrial market remains the strongest sector of the southeastern Wisconsin commercial real estate market, based on Xceligent data and the CARW survey results. Of CARW members surveyed, 83 percent said the region’s industrial market is “improving,” 14 percent said it is “flat” and 3 percent said it is “declining.” Last year, 90 percent of survey respondents said the region’s industrial real estate market was “improving.”
Xceligent data backs up the CARW survey results. The region’s industrial space vacancy rate fell to 4.9 percent in the third quarter, down from 5.5 percent a year ago. The region’s industrial market has had 22 consecutive quarters of positive absorption and has absorbed more than 23 million square feet of space since that trend began in the second quarter of 2010.
The retail market is also hot in southeastern Wisconsin. Several stores have been added at Mayfair Mall in Wauwatosa, most notably the 140,000-square-foot Nordstrom department store and The Container Store. Construction continues on the second phase of The Mayfair Collection in Wauwatosa, which will add a Whole Foods store. Construction is also ongoing at The Corners development in Brookfield, which will have 400,000 square feet of retail and restaurant space and will be anchored by a 140,000-square-foot Von Maur department store. The Corridor development in Brookfield will have 140,000 square feet of retail space. Meijer has opened several stores in the region this year and more are planned. Costco is opening stores in New Berlin and Menomonee Falls.
Considering all of that development activity, it’s not surprising that CARW members are overwhelmingly bullish on the region’s retail market. Of those surveyed, 81 percent said the region’s retail market is “improving” and 19 percent said the region’s retail market is “flat.” None said the region’s retail market is “declining.” Last year, 71 percent of CARW members said the region’s retail market was “improving.”
The region’s retail market had an 8.1 percent vacancy rate and absorbed 590,409 square feet of retail space during the third quarter, according to Xceligent.
The area’s long-struggling office market is finally showing signs of improvement. Of the CARW members surveyed, 64 percent said the region’s office market is “improving,” 32 percent said the region’s office market is “flat” and 4 percent said the region’s office market is “declining.” Last year, 53 percent said the region’s office market is “improving,” and in 2013, only 43 percent said so.
The region’s office space vacancy rate dipped to 18.4 percent in the third quarter, down from 19.1 percent a year ago and 20.6 percent two years ago, according to Xceligent data. The region’s office market absorbed 121,389 square feet of space during the third quarter of 2015. Highlights of the region’s office market include the 17-story, 358,000-square-foot 833 East Michigan St. office building Irgens is building downtown and the Northwestern Mutual Life Insurance Co. expansion that includes construction of its $450 million Northwestern Mutual Tower and Commons project at the company’s downtown headquarters campus.
