Vacancy in Milwaukee Ticks Up Slightly with Expanding Development
- May 31, 2012
The city of Milwaukee is set to see the largest increase in apartment inventory since 2000, with 700 units expected to come online by year’s end. This new development will send vacancy up slightly, from 3.7 percent to 4 percent, while employment is expected to increase 1.5 percent.
Marcus & Millichap reports that the bulk of the new development will take place in the city’s eastern submarket, with nearly 300 units currently being finished. This is more than the 239 units that came online in the city overall in 2011, signaling that Milwaukee multifamily is catching onto industry momentum being seen across the country. A great number of the new inventory will be Class A and upper-tier properties.
Additionally, nearly 5,000 jobs were added in the market in the first quarter of 2012, and employers are expected to add 12,000 overall by year’s end. Growth in the private sector is neutralizing the deleterious effects of cuts in government spending, with the retail sector posting the largest gains of 4,000 new positions.
The median price for a single-family home decreased slightly to $184,800, and median household income increased by 3 percent to $52,600. This level of income is $8,900 more than the amount needed to qualify for a median-priced home using traditional financing, which could translate into more residents seeking homeownership in the coming years.
Asking rents climbed 1.9 percent from 2011 to 2012, from $833 per month to $842, as did effective rents—from $803 to $808. In their Q2 2012 market report, Marcus & Millichap reveals that the rise in rents has led to concessions to residents by some property managers, with 13 days of free rents as an example. Rents for Class A apartments rose 2.2 percent to a pre-recession level of $1,057 per month.
Local investment in the Milwaukee metro area will lag this year, as the number of 1031-exchange opportunities is low and keeping sellers on the sidelines. However, Marcus & Millichap notes that, because area banks have begun matching the lending standards of Fannie Mae and Freddie Mac, there is sizeable demand coming from out-of-state investors looking for new opportunities and easy financing.