“If you build it, he will come.” The ghostly voice inspired Kevin Costner’s character to build a baseball field nearly 30 years ago in the movie “Field of Dreams.” Depending on who you ask, the same could be said of Milwaukee’s downtown condo market.
Developers – namely Mandel Group, believe the real estate boom for downtown condos ended with the Great Recession and will not be seen again. But Realtors who specialize in this area say the market merely lacks inventory.
“Build more condos and we can sell them,” says David Price, managing broker at Milwaukee Realty Inc.
Trying to figure out if it’s a boom or a bust is a numbers game, and depending on which numbers you look at, you come up with a different answer.
Mandel Group’s mid-year market report showed there were 247 condo sales in the five zip codes representing downtown during the first six months of the year, just one more sold than in the first six months of 2014. A total of 477 downtown condos priced at more than $100,000 sold in 2014, according to the firm.
Luxury condos – those with a price tag greater than $500,000 – are doing better than last year, according to Mandel Group’s report. Luxury condos comprised 14 percent of total condo sales in the first half of 2015, selling at an average price of $338 per square foot. During the same time period in 2014, luxury condos accounted for 9 percent of sales and sold for an average price of $313 per square foot, according to the firm.
Luxury or not, downtown condos largely appeal to baby boomers who now have the means, the freedom and the ability – because their single-family homes are finally selling – to move. For the next 15 years, 11,000 people per day will turn 65. For those looking to simplify, living downtown gives people a nightly opportunity to walk to dinner, festivals and the city’s various performing arts offerings.
“Multi-family building is the wave of the future,” said Chris Corley, a real estate broker with Corley Real Estate in Milwaukee. “I just wish someone would build something.”
In recent years, developers have been building apartments downtown, not condos.
Over the past 25 years, average downtown condo sales have been about 425 units annually, according to a multiple listing service (MLS). During the real estate boom of 2006, 834 units were sold in the five zip code downtown area. In 2010, 291 condos sold in those same five zip codes. Since 2010, that number has steady climbed back up every year, according to MLS.
“Condos that are in the best areas, priced accurately and staged have multiple offers on them as soon as they hit the market,” said Jean Stefaniak, a Realtor with The Stefaniak Group LLC in Milwaukee. “Stagnant is not a word I would use. Lack of inventory is what I would say.”
The wish list of a downtown condo shopper seems to be the same: Two-bedroom, two-bath, two parking spaces. Price ranges vary from $200,000 to about $550,000, said Price, who typically shows his clients condos north of Walker’s Point, south of Shorewood and east of the Milwaukee River. The problem is, as of late August, there were only about 211 available to show and the properties go fast, he said.
Price has been talking to apartment owners about converting their spaces into condos – but occupancy rates have never been better.
“Milwaukee is in a unique situation; you get a new condo on the market and there is an accepted offer within three weeks,” Price said. “Apartments are leased a month before. The draw to get people downtown has never been better.”
Sybil and Greg Bell couldn’t agree more. It took the couple 16 days to sell their 2,800-square-foot, four-bedroom Whitefish Bay home in April. They told their Realtor they wanted to live downtown, in the Third Ward or in the 53212 zip code. They ended up buying a two-bedroom condo on Commerce Street, overlooking the river. The property also has a balcony and a den.
The Bells walked through eight condos before choosing their home and at 1,733-square-feet, Sybil Bell said it is larger than she thought they could afford.
The move has given the Bells the lifestyle change they were looking for, now that their four children are out of the house. The couple takes a river walk morning and night, started riding their bicycles again, purchased a kayak and Sybil, director of philanthropy at Saint John’s On The Lake, even joined the Beerline Bookclub.
“We’re meeting people our age and enjoying this lifestyle change,” she said. “We absolutely could not be any happier.”
Corley believes an even truer picture of condo boom versus bust can be painted when the analysis is limited to sales of more than $150,000 in the 53202 zip code. Looking at those sales, $83 million worth of volume was sold from January 2014 through the fourth week in August 2014. During that same time period this year, $95.8 million worth of volume was sold, a 13.3 percent increase.
The average price on a downtown condo is up $3,100, or $10 per square foot, and the properties are selling an average of 10 days faster, Corley said.
As of Aug. 25, 163 condos were available in the 53202 zip code.
“That’s a 4.4 month supply and nothing is being built,” Corley said. “The city is ripe for (downtown condo) development right now. Unfortunately (Mandel Group president Barry) Mandel, who is a well-known person who people respect, says the market is stagnant and people will believe it. But he hasn’t built a condo in 10 years.”
Since the 25-year average for downtown Milwaukee condo sales is 425 annually, and developers were suddenly selling 834 units in the mid-2000s, then were suddenly hit with a year of selling less than 300 units in 2010, it’s not surprising that they’re a little shell-shocked and sticking with the less risky prospect of building apartment complexes.
Robert Monnat, chief operating officer of Mandel Group, said his firm is through the hard bottom of this cycle and has recouped lost value.
Still, Mandel Group is a long way from putting shovels in the ground for a new downtown condo development. Monnat said there are many factors that would need to change before his firm would transition from apartment development to new condo development, including shared risk, with buyers and lenders easing their restrictions on construction loans.
Mandel Group has estimated average sales prices would need to be $400 per square foot before it would consider dipping a toe in downtown condo development again.
In the meantime, baby boomers and others with a longing for downtown living still have options if they want to own rather than rent, but depending on how the numbers stack up, those options may be limited.
