Like many cities influenced by the new urbanism movement, Milwaukee is rediscovering itself, with a rebirth of its downtown core and a repositioning of its regional retail centers to reflect a national trend of organizing communities around open-air town centers.
About 1,900 residential units have been completed in the central business district and adjacent neighborhoods since 1997, and another 3,300 are under construction or planned, according to Roseann St. Aubin, communications director for Milwaukee's Department of City Development (DCD.) Meanwhile, property values have escalated 22.3 percent.
More roofs mean more retail. In the past five years, $164 million has been invested in residential and commercial properties in the city's Riverwalk area, a lively district with shops, eateries and residential properties, which runs through downtown's north side.
Additionally, the Mandel Group, a locally based developer, is entering Phase II of East Pointe Marketplace. This 58,000-square-foot retail project includes a 40,000-square-foot gourmet supermarket and 18,000 square feet of shop space. Construction also recently began on the Milwaukee Public Market, modeled after Seattle's public green market, in downtown's historic Third Ward neighborhood.
The talk of the town, however, is an adaptive-reuse project soon to be launched by local developers the Ferchill Group and Wispark LLC. The $300 million venture will convert the historic Pabst Brewery to Pabst City, a 1.2 million-square-foot mixed-use project that includes residential, office and retail spaces.
Scheduled to open in 2006 with 450,000 square feet of space dedicated to shops, restaurants and entertainment, Pabst City should be a lure to Milwaukee's growing tourist market. About 6 million people currently visit annually, says Jenny Basile, a retail/urban development expert at the city's DCD.
Enticing developers
Noting that the city is experiencing a renaissance in residential development, Mayor Tom Barrett says, “We want more economic activity within our city, and the way to do that is to have more retail development.” He says that the city is willing to lay the necessary foundation to get projects started and recently invested $20 million in downtown streetscapes and lighting to create a pedestrian-friendly environment. The city is also working with developers to ensure that adequate parking is available throughout downtown, says Barrett, “We have a TIF [tax incentive financing] tool for infrastructure improvements, to ensure projects get off the ground.”
These improvements include upgrading a stretch of Wisconsin Avenue along the central business district's 450,000-square-foot The Shoppes of Grand Avenue, which is undergoing a major renovation to accommodate new tenants and make the center more accessible to street pedestrians. An abandoned Marshall Field's department store has been converted to inline space for a Borders bookstore, TJ Maxx, Linens 'n Things and an Old Navy.
While the enclosed mall design remains intact, the new stores have street-front entrances and window displays to provide a pedestrian-oriented shopping experience, notes Joe Weirick, president of the mall's property management firm, Polacheck Property Management. Additionally, he says that an Applebee's and Boston Store, a department store owned by the Saks Department Store Group, opened in a new portion of the mall, which also has street-front access.
To promote retail development in downtown Milwaukee, Mayor Barrett attended International Council of Shopping Centers (ICSC) spring meeting in May. His big push at ICSC involved a 28-acre tract of vacant land within the Park East Redevelopment Corridor just north of downtown, which was created by demolishing an obsolete freeway spur. He points out that it's rare to find a vacant tract of land this large in the mid-dle of a densely populated urban center, especially one that is located in an ethnic neighborhood with strong demographics attractive to big box-type retailers.
Meanwhile, peripheral neighborhoods and suburban communities are embracing retail developments that create a town center environment and promote a sense of community.
Locally based developer Boulder Venture and Los Angeles-based Canyon-Johnson Urban fund recently finished converting an aging mall on 56 acres in west-central Milwaukee into an open-air lifestyle center, anchored by Wal-Mart, Pick 'n Save grocery, Foot Locker, Starbucks, Culver's and the first Lowe's Home Improvement in the state of Wisconsin.
What's unique about Midtown Center, says St. Aubin, is that it's designed on a city-street grid, with storefronts facing on a network of sidewalks, which gives it a village-like appearance.
The suburbs are taking on a more urban appearance too, with regional mall owners acquiescing to cities' desire for open-air retail built on the town-center concept, in order to enhance community life by offering residents a pedestrian-oriented shopping experience with a balance of shopping, dining and entertainment choices.
Yaromir Steiner, CEO of Columbus-based Steiner & Associates, notes that after 75 years of zoning — which segregated commercial services from residential — urban planners are “going back to the way things used to be. It's a total paradigm shift, where retail is integral to the urban fabric,” he says, contending that despite the region's harsh winter climate, the open-air concept will be just as successful in Wisconsin as it has always been in northern urban centers like New York and Chicago.
His firm, in partnership with property owner Corrigan Properties, is renovating and expanding the 500,000-square-foot Bayshore Mall to create a 1.1 million-square-foot town-center-style shopping and entertainment district. Located about six miles north of downtown Milwaukee in an affluent community, Bayshore's revitalization plan calls for combining the existing mall with an open-air addition that will serve as the centerpiece of a mixed-use development with residential and office components.
Energizing the Market?
General Growth Properties, Inc., is also adding 100,000 square feet to its 1.1-million-square-foot Mayfair shopping center, located about 6.5 miles northwest of downtown. The largest regional shopping center in the Milwaukee area, Mayfair is centrally located in an 86-acre office park with more than 1,400 employees. Expanded and renovated in 2001, Mayfair's latest expansion will provide outdoor patio restaurant seating along landscaped sidewalks and plazas, creating the type of casual dining atmosphere that fits well with the Cheesecake Factory, the center's latest addition to dining choices, which also include P.F. Chang's China Bistro and Maggiano's.
Additionally, Highland Park, Ill.-based Tucker Development Corp. has purchased the aging Northridge Mall, located about 16 miles north of downtown, and has started a $27 million project to redevelop the mall into a community shopping center. Scheduled to open this fall, the 320,000-square-foot Granville Station will be anchored by a Pick 'n Save grocery and a Menards home-improvement store.
With a population of about 1.6 million and six regional shopping centers in the greater Milwaukee area, there is some concern that the added retail space will oversaturate the marketplace and drive up vacancy rates. According to a report from Polacheck Co.-CB Richard Ellis, a real estate services company, the opposite may be true. The report suggests that the continuing retail development trend is likely to energize the market and lower overall vacancies, while providing retailers future growth opportunities in densely populated neighborhoods that are currently underserved.
The report points out that because of these opportunities, a number of retailers have announced plans for expansion, including Target,
Wal-Mart, Pick 'n Save, Menards, Home Depot, Kohl's, Petco, Linens 'n Things, Bed, Bath & Beyond, Ashley Furniture, Office Depot, AJ Wright, Gordman's, Michael's, Pier 1 Imports, Aldi and Trader Joe's.
Overall vacancy, however, rose from 8.8 percent in 2003 to 9.9 percent in 2004, which the Polacheck report attributes mostly to large store closings, including Steinmark, Kmart, Drug Emporium, Kohl's Food, Sentry Foods and Rainbow Foods.
Although considered a secondary market, Milwaukee's retail strength is grabbing the attention of investors from larger markets, according to Andrew Hochberg, managing principal for Chicago-based Next Realty LLC, which recently acquired a 46,210 square-foot shopping center in Greenfield, just south of downtown. “A spreading out is occurring,” he says, which is due to competition in larger markets that is driving capitalization rates down.
However, he suggests that as more players move into smaller markets like Milwaukee, the gap between cap rates will narrow. In fact, Hochberg notes that it is already happening: A few years ago there was a 200-basis-point spread between cap rates in Chicago and Milwaukee. Today, he says, it is 100 basis points.
DEMOGRAPHIC OVERVIEW
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Population: 596,974 (2000 U.S. Census Bureau) More than 1.6 million in greater metropolitan area.
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Median Family Income: $50,046 (2000 U.S. Census Bureau)
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Unemployment Rate: 5.3% (U.S. Department of Labor. July 2004)
Overall vacancy: 9.45 % (Polacheck Co.-CB Richard Ellis)
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Rent (net lease basis): Under 10,000 sq. ft., $16 to $18; Over 10,000 sq.ft., $11 to $13 (Polachek Co.-CB Richard Ellis)
At the May ICSC convention, Milwaukee's mayor, Tom Barrett, pushed a 28-acre tract of vacant land in the Park East Redevelopment Corridor, just north of downtown in the middle of a densely populated urban center, an ethnic neighborhood with strong demographics.