The downtown Milwaukee condo market remains stagnant, except for condos selling above $500,000, according to a mid-year market report from Milwaukee-based multi-family housing development firm Mandel Group Inc.
For the first six months of the year there were 247 condo sales above $100,000 in the five zip code downtown area, according to Mandel Group. That compares to 246 sales for downtown condos above $100,000 for the first half of 2014. For all of 2014 there were 477 downtown condo sales above $100,000, according to the firm.
The downtown Milwaukee condo market boomed prior to the Great Recession. But when the housing market bubble burst the downtown Milwaukee condo market collapsed. There has been very little condo development downtown since then, while at the same time there has been a surge in apartment development downtown in recent years.
“We’re continually asked, ‘When will we see new condos built downtown?’ So we continue to look for signs of recovery,” said Robert Monnat, chief operating officer of Mandel Group. “We’re certainly through the hard bottom of this cycle and are recouping lost value, but we’re a long way from justifying new construction.”
The luxury condo market is faring better than the overall downtown condo market, according to the Mandel report. Luxury condos, priced over $500,000, had average sales prices of $861,340, or $338 per square foot, for the first half of 2015 and comprised 14 percent of total condo sales, up from 9 percent in the first half of 2014. Luxury condos sales downtown were at $313 per square foot during the peak of the market.
Mandel Group says it doesn’t foresee a near-term transition of the market from apartment development to new condo development.
“Too many factors are outside their respective ranges of risk or feasibility to suggest any large numbers of new condos anytime soon,” Monnat said. “Many aspects of the transaction structure would need to move in order to create the right recipe for new downtown condo development in meaningful numbers.”
Those factors include sales prices, buyers sharing more of the risk of the transaction, and banks willing to make construction loans, he said. Mandel Group estimates that average sales prices would need to exceed $400 per square foot to justify new condo development downtown.
“Even as a sales price above $400 per square foot, you may not be able to achieve the quality levels you would have expected eight or nine years ago,” Monnat said.
Mandel Group will continue to focus on its luxury apartment developments. It is building several downtown and in the suburbs.
“We have more than enough opportunity before us solely focusing on apartments,” Monnat said. “Demographics, consumer preference, an evolving jobs market and appetite for investment real estate combine to create an efficient model for meeting near-term housing demand, in particular in the downtown environs.”
