With an economic future clouded by inflation, supply chain issues, and the possibility of recession, commercial real estate professionals across the globe could be excused for feeling, if not uneasy, then perhaps less confident than they did in late 2021, when the lifting of most pandemic restrictions fueled an optimism in a return to office, retail, and entertainment establishments.
A Commercial Association of Realtors Wisconsin (CARW) survey bears that out, with 65.5% of members surveyed saying the current commercial real estate market is “flat,” compared to 28% who said that a year ago, and 15.5% said the market is “weak,” compared to only 3% a year ago. Only 19% of CARW members surveyed this year describe the market as “improving,” down from 69% a year ago.
Despite local commercial realtor’s concerns about the market, Chicago real estate investors and developers speaking at BizTimes Media’s annual Commercial Real Estate and Development Conference on Thursday say the Brew City is well positioned to weather whatever storms may be approaching.
For Thomas D’Arcy, senior managing director at Hines, which is developing a 31-story apartment tower along the river at 333 N. Water St. in the Third Ward, it’s the city’s livability and short commute times that have encouraged employers to invest in office projects, like Fiserv’s plans to move to downtown Milwaukee.
“I have worked on projects in most major Midwestern cities, and the great thing that Milwaukee has – that none of these other cities have – is it is physically connected to Chicago,” said D’arcy who works out of Houston-based Hines Chicago office, and lives on the city’s north shore.
That benefit has less to do with Chicago being a hub, but with Milwaukee’s ability to benefit from being in a “mega region,” he said, as well as its ability to stand in contrast to the City of Big Shoulders.
“Milwaukee has many, if not all of, the problems that Chicago has, but on a much smaller scale. It has all of the cultural aspects of a city like Chicago but is just much more livable. And I think Milwaukee will continue to be a benefactor of migration from Chicago,” D’Arcy said.
For Tony Lindsay, principal for asset management at North Wells Capital, LLC, part of Milwaukee’s draw has been city officials interested in working with developers and employers to re-envision places like the once downtrodden but now booming Westown neighborhood and provide a roadmap for growth. That’s part of the reason the company bought the former BonTon headquarters building in 2017, where Fiserv will relocate, he said.
“The reality is: We invested in that building because we liked the story of Westown,” Lindsay said. “We had no idea what was going to happen, but we knew that the idea of this public-private partnership was real – that you could call the city, and someone picks up the phone and talks to you. We had a lot of exciting things happen because of that public-private partnership.”
Office developments like the Fiserv deal and Milwaukee Tool’s new downtown office aren’t just encouraging office building developers, they’re great news for developers working on residential projects nearby, said D’Arcy.
“(Those office tenants) – from an apartment developer’s (perspective) – are just gold. Those are people who are going to be spending time downtown, and some of them will be living in our building.”