Consistency Remains Milwaukee’s Greatest Strength
- Dec 09, 2010
Milwaukee—A modest pricing correction of single-family homes has maintained renter demand in Milwaukee, according to the most recent report by Marcus & Millichap Real Estate Investment Services.
“In Milwaukee, and Wisconsin as a whole, the greatest strength is ultimately a consistency and a stability to the marketplace. It doesn’t swing wildly in either direction and that offers an opportunity for long-term investors to be comfortable knowing that what they’re getting today is what they’ll have for the entire length of their ownership,” says Matt Fitzgerald, vice president and regional manager-mid market offices, Madison, Wis.
Vacancy remains relatively unchanged, receding 20 bps this year, to 4.8 percent, but approximately 640 new units are slated for delivery this year, which is the largest inventory expansion this decade, according to the Marcus & Millichap report. However, it is expected to only increase vacancy in Class A apartments.
Monthly rents have increased metrowide about 1 percent, which, Fitzgerald points out, is “a significant improvement over 2009, where asking rents fell 4.5 percent and effective rents [fell] 5.3 percent.”
While concessions do still exist, they are “smaller, shorter and less prevalent than they were in 2009,” Fitzgerald tells MHN.
Mostly B and C class properties are currently available for sale, and Fitzgerald notes that there have been some bank-owned properties—though fewer than what’s available nationally. B and C Class assets are trading between 8.5 percent to 9 percent, but Fitzgerald points out that this is only about 25 bps to 50 bps lower than the worst of the market. “We never really got much higher than that,” he adds.
City East and the suburban Waukesha County remain the top-performing submarkets in the MSA. Cap rates for top-tier product in these markets are averaging in the mid- to high-7 percent range, according to the report.
In the last 12 months, the median price dropped 8 percent, to $49,575 per unit, following a 4 percent decrease in the prior year.
“Multifamily seems to be an asset class that everyone is very bullish on, and the apartment investors are certainly active and back in the market,” Fitzgerald tells MHN. “For the most part it’s private client, long-term investors who like the stability of Wisconsin. … They can, relative to other major metros, get a little more bang for the buck in terms of the number of units, but it tends to be regional with a few national private investors.”