As condominium development has boomed in downtown Milwaukee during recent years, many local business executives are scratching their heads, wondering how much more upscale development the downtown housing market can support.
However, Scott Fergus, president of Waukesha-based KeyBridge Development Group, says there are still not enough condominiums under construction and in the planning stages to adequately meet the downtown market demand for the next several years.
"The (condominium) market is very deep in Milwaukee," Fergus said.
As proof of his confidence, Fergus’ firm is planning to build a 10-story, 80-unit condominium building, called 601 lofts, at 601 E. Ogden Ave. in downtown Milwaukee, and a 185-unit condominium development, called First Place on the River, at the site of the former Terminal Storage Co. building at 106 Seeboth St., located just south of downtown in the Fifth Ward.
About 600 condominiums are sold each year in downtown Milwaukee, Fergus said.
"We do not forsee that (demand) stopping," he said.
To achieve an adequate supply-and-demand balance, there should be a three-year supply of housing units, or 1,800 units, that are available or soon to be available, Fergus said. However, based on currently announced plans, there are only about 1,300 to 1,400 condominiums that are under construction or are being planned for the downtown area, he said.
"There are not enough," Fergus said. "If you take even the raw numbers, you’re very short of a balanced market."
Baby boomers are the largest segment of buyers for downtown condominiums, including the KeyBridge projects, Fergus said. The largest generation in U.S. history, the massive baby boom population triggered substantial school construction when they were children and they ignited a suburban housing boom when they got married and started families. Now, as their children leave the nest, many baby boomers are moving to downtown areas so they can be close to restaurants, theaters
and other big
city entertainment amenities. That trend has triggered a downtown housing boom in Milwaukee and other cities.
"Follow the boomers," Fergus said. "Wherever they go, something interesting will happen."
The rest of the demand for downtown housing is coming from young professionals, Fergus said.
In the next few years, the greatest demand for downtown condominiums will be for units priced at $350,000 and less, Fergus said. To meet that demand, units in First Place on the River start at about $150,000, and units at 601 Lofts start at about $170,000.
"The challenge to the development community is for us to be able to develop projects that meet that market demand," he said. "It’s difficult to do because land prices in Milwaukee have risen."
Many of the downtown condominium developments in recent years have targeted higher-end buyers. Kilbourn Tower, the 33-story high-rise built at the southwest corner of Kilbourn and Prospect avenues, has 74 units priced from $750,000 to more than $2.65 million. The 35-story University Club Tower, under construction next door to Kilbourn Tower, will have 56 units priced between $1.1 million and $2.5 million.
To provide more affordable condominiums, and still make a profit, developers must build larger buildings with more units, Fergus said.
"The economics get better the larger a project is," he said. "But the larger the project, the higher the risk."
First Place on the River is just the type of large condominium building Fergus is talking about. It will be a 12-story building with 185 condominiums. Of those, 76 have already been sold.
"Milwaukee’s market can and will support large-scale condo projects," Fergus said.
For the First Place on the River project, KeyBridge will transform the four-story, 166,000-square-foot former Marine Terminal Storage Co. building, which was built in 1920 and had been used for cold storage, into a 12-story, 430,000-square-foot residential building.
Demolition work started in May to clear out the old building. In September, work will begin on the new structure that will be built around and above the original Marine Terminal building. The project is expected to be completed in February or March of 2007.
The project was designed by Milwaukee-based Eppstein Uhen Architects Inc., and Brookfield-based Hunzinger Construction Co. is the general contractor.
The top floor of the Marine Terminal building was not designed to bear a significant amount of weight. To support the portion of the building that will be built on top of it, a structural transition floor was added. Removing the roof could have damaged the support columns, Fergus said.
"We had to add a transition floor on top of the roof that is load-bearing and structurally sound," he said.
The Terminal Storage building was built in three different phases over the years, and the roof from one of the phases didn’t line up with the rest, said Chris Gallagher, a principal for Eppstein Uhen. That is another reason it needed to be replaced.
The rest of the original building is strong, Gallagher said.
While building a new structure on top of and around an old building posed some unique challenges, those challenges help make the design more interesting, Gallagher said.
"I think sometimes the best design comes from the challenges you otherwise wouldn’t have," he said.
The southern portion of the building will be 12 stories tall, and the northern portion will be nine stories tall. The varying heights of the building will make it look more interesting than a square or rectangular box-shaped structure, and it allows the top three floors of the 12-story portion of have better views of downtown.
The building has exceptional views, because the site is located on a bend in the Milwaukee River, which will enable residents to look down the river to the north and to the east, Gallagher said.
"The most dramatic views are down the river, not across the river," he said.
The building was also designed to minimize the impact that an active rail line, which runs right behind the west side of the building, will have on residents. The five-levels of parking face the rail line. The train noise will have minimal impact on residents because nobody on that side of the building will live below the sixth floor, Fergus said.
The First Place on the River property has 500 feet of Milwaukee River frontage. The building plans include a riverwalk and boat slips for residents. The building also may have some first-floor retail space, Fergus said.
First Place on the River is one of several new residential and retail projects to occur in the Fifth Ward in recent years as development from the Historic Third Ward has spilled over the Milwaukee River.
"Within the next five to eight years, that whole (Fifth Ward) area is going to be evolving to be probably the most exciting area of Milwaukee," Fergus said.
The other major KeyBridge project, 601 Lofts, will begin construction by the end of the month.
The 10-story building will be built on the former John Ernst Pub parking lot at the southeast corner of Ogden Avenue and Jackson Street. It will have 80 condominiums priced between $170,000 and $1.5 million, 5,000 square feet of retail space and 3,000 square feet of office space. The retail space and office space is fully leased, but Fergus declined to disclose the tenants.
The building was designed by Eppstein Uhen. New Berlin-based Beyer Construction is the general contractor for the project. The building is expected to be completed by September 2006.
The building will feature a modern design, including glassy towers at two corners of the structure.
"We thought we had an opportunity to make an architectural statement," Gallagher said.
So far, 38 of the building’s 80 condominiums have been sold, Fergus said.
The location of the building is attractive to buyers because residents will be able to easily walk to nearby grocery stores and other downtown amenities, he said.
"It is a location that you can park your car on Friday and never get back in your car until Monday," Fergus said. "You can walk to so many places in the city. It is just a wonderful downtown location."
July 22, 2005, Small Business Times, Milwaukee, WI
