Downtown finds itself on the upswing
By JASON GERTZEN and TOM DAYKIN
jgertzen@journalsentinel.com
Last Updated: Sept. 20, 2003
Alicia Urban is a big believer in downtown Milwaukee. She just found it a challenging place to run her business.
"There are so many beautiful buildings down there, and we have seen a lot of growth downtown," said Urban, owner of a furniture and design store called Elements East. "There are new condos and developments going downtown. Unfortunately, the environment wasn't great for retail."
Urban closed her shop on Milwaukee St. last fall and opened an expanded place in Whitefish Bay, hoping to leave behind parking hassles and the struggle for steady customer traffic. Heidi Gilmore-Hlavachek, a fashion designer who had a neighboring storefront, closed in the spring.
While downtown might not be the easiest place to buy a couch or a dress, many other signs point to the area's resurgence.
New condos are filling quickly. The arrival of 1,250 employees with the opening of Roundy's and Bank One offices points to a healthy office leasing market. A bevy of new restaurants and bars - about two dozen have opened since summer 2002, and six more are under construction - is adding to downtown's allure as an entertainment hub.
Downtown's retail fortunes and the area's vibrancy are critically important to Milwaukee and the metro area's communities.
Even though he works in a suburban office 19 miles away, Waukesha County Executive Daniel M. Finley sees the future of his community tightly tethered to downtown Milwaukee's success.
"Downtown Milwaukee has to be healthy for the region to be healthy," Finley said. "The reality is that downtown Milwaukee is still the heart of the region."
Downtown is vital, even though it no longer is the region's primary business center - and hasn't been for years. The suburbs claim 54% of the Milwaukee-area office market, according to Polacheck Co., a commercial real estate brokerage.
Suburban office parks lured tenants away from downtown decades ago with cheaper rents and expanses of asphalt for parking.
In recent years, however, downtown has held its own.
Jobs with earning power
Downtown's private sector job base matched the 9.9% growth seen in the four-county metro area from 1994 to 2001, according to U.S. Census Bureau figures. Downtown beat the suburbs in the growth rate for new businesses, with a 7.3% gain, topping the metro area's 3.6% increase.
The quality of downtown's jobs illustrates how the full impact is not measured solely by the number of jobs and businesses.
The average annual wage of $52,206 for downtown jobs topped the $35,164 average annual wage for the four-county metro area by 48%, according to 2001 census figures.
Ensuring that downtown is attractive to fast-growing firms that provide high-quality jobs is a key part of the strategy for boosting the earning power of the region, said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.
The future would be bleak if $60,000-a-year plant floor jobs in the battered manufacturing sector are replaced with $28,000-a-year customer service jobs, Sheehy said.
"It focuses and forces us to look at the type and quality of jobs we are creating in the region, and the quality-of-life assets that are going to support that," he said.
The nation's young professionals and top talent, a group that Carnegie Mellon University professor Richard Florida has dubbed the "creative class," are migrating to regions providing the full package of promising career opportunities and fulfilling lifestyles, Florida said.
Downtown amenities such as arts venues, restaurants and clubs, lakefront and riverwalk paths, and shopping are key as Milwaukee competes for the best businesses and workers the region needs to thrive.
Housing market ablaze
The downtown housing market is sizzling, a sign that the area's amenities are strong attractions.
Condos are selling for an average of $6,000 higher than list price, and developers keep building more. Last year, 132 condos sold in downtown and adjacent neighborhoods such as Brewers Hill and Walker's Point at an average price of $147,172, according to the Multiple Listing Service. So far this year, 302 condos have sold for an average of $278,606.
As of the end of 2002, downtown's housing stock consisted of more than 7,700 apartments, condos and other houses. At least 550 more now under construction will be completed in the next year or two.
The demand for apartments has softened, as historically low mortgage rates transformed renters into buyers. "A lot of people are stretching to buy that condominium," said developer Barry Mandel, president of Mandel Group Inc.
Pricey condos offering panoramic views of Lake Michigan have been doing a brisk business, though questions are emerging about whether this portion of the market is nearing saturation.
A new 18-story tower, 1522 On the Lake, at 1522 N. Prospect Ave., has sold 96 of 99 units.
Kilbourn Tower, a 33-story condo high-rise being built at Kilbourn and Prospect avenues, recently sold a 7,802-square-foot penthouse unit for $2.85 million, according to developer Fiduciary Real Estate Development Inc. The project has so far sold about half of its 74 planned units, including four of the six penthouses.
With preliminary city approval for the proposed 32-story University Club Tower, Mandel intends to build just south of Kilbourn Tower. The units would have an average $1.5 million selling price.
The market for condos priced over $250,000 is becoming overbuilt, said David End, a real estate agent at Coldwell Banker, which is marketing 1522 On the Lake. End doubts there is demand enough to support both Kilbourn Tower and University Club Tower.
Mandel is confident that University Club Tower will obtain financing by selling enough units before construction. But he also said developers need to be careful about building more units than the market can absorb.
"I think some developers are going to be hurt," Mandel said.
A place to play
As downtown has heightened its profile as a place to live, it also has become a more attractive place to play. The restaurant, nightclub and tavern scene is buzzing.
"People like the concept of living near where they work and having things to do after work," said Michael Mervis, president of advertising firm Mervis, Bratz & Koziol and a longtime downtown observer.
Marta Bianchini stood on Milwaukee St. three years ago and decided she wanted a part in its emerging revival.
"It was like a diamond in the rough," Bianchini said. "You had these beautiful old buildings with beautiful old architecture."
Bianchini and her husband, Marc, just this week opened Cubanitas. The Cuban restaurant at 728 N. Milwaukee St. is part of the street's evolution to a nighttime hot spot from what once was the city's high-end fashion destination.
Cubanitas is one of eight new restaurants, clubs and coffee shops that have opened since 2001 on one block of Milwaukee St., between Wisconsin Ave. and Mason St. Most are operating in long-vacant space that was once home to clothing, shoe and other retailers.
The Bianchinis, who also own the Italian restaurant Osteria del Mondo on E. Juneau Ave., view the new restaurants and clubs as allies rather than competitors.
"We are strong believers that business brings business," Marta Bianchini said.
This same strategy might revive the area's flagging retail market.
Retail in tatters
Urban, who ran the Milwaukee St. furnishings store before leaving for the suburbs, and Gilmore-Hlavachek, who had an office and fashion design shop next door, both had hoped for reinforcements.
"A shoe store. A women's retail store," said Gilmore-Hlavachek. "We really need a cluster of stores down there. That didn't happen."
The weakness in downtown's retail market is reflected in a survey conducted by Grubb & Ellis/Boerke Co., a commercial real estate brokerage. It calculated downtown's retail real estate vacancy rate as of June 30 at 16.1%, compared with an overall retail vacancy rate in the Milwaukee area of 8.3%.
Some of those vacant storefronts can be found on Wisconsin Ave., downtown's main commercial strip.
Other vacancies are in The Shops of Grand Avenue. The troubled downtown mall is attempting a turnaround, led by Linens 'N Things and clothing store T.J. Maxx, which open this fall.
"Retail is the big question," said Mervis, the advertising firm president.
A new initiative of the Greater Milwaukee Committee aims to persuade higher-end fashion retailers to open outlets downtown. Creating a shopping cluster could keep Milwaukeeans from always heading to Chicago on shopping excursions, said Julia Taylor, president of the civic group.
"The vibrancy is good downtown," Taylor said. "This is a very good time to start a retail initiative."
Gaps to fill
Following up on a research project called "Live Work Play" the firm started more than a year ago, Kahler Slater Architects Inc. found that even the area's most passionate fans see frustrating gaps.
Entertainment, festivals, new restaurants and the overall "cool factor" drew praise from the downtown workers and residents responding to a Kahler Slater e-mail query earlier this year.
Yet they also want to see improvements in parking, transportation, close-by convenience stores, an office supply store, fashion retailers, more "lower-end" dining or take-out restaurants, and medical offices.
With the influx of downtown-area residents, a home furnishings district seems like a perfect fit, said Pat Algiers, a senior designer with Kahler Slater.
The risk involved with starting new soup and sandwich shops, other modest restaurants and new retail stores should seem much more manageable with the rising influx of residents and workers.
"The downtown area has a captive audience every day," Algiers said.
Some of this development is starting.
The Historic Third Ward has seen the recent arrival of a few higher-end retailers, such as the Grand Gourmet cookware shop, which expanded last year from Brookfield, and Pewaukee's Colleen Horner, which in April opened its kitchen and bathroom fixtures gallery.
More risk-takers needed
As Eric Resch surveys the downtown landscape, a single question is at the push and pull of his hopes for the area's continued resurgence and his businessman's focus on the bottom line: Have enough new workers and residents arrived to justify opening a new coffeehouse?
"We have to be early enough that we beat our competition, but not too early so that we go out of business," said Resch, president and owner of Stone Creek Coffee.
He senses an increasing vitality downtown but wants to see the development trends continue before he invests in a new space among the mushrooming cluster of condos and downtown offices.
Resch clearly is committed to downtown. His company opened a store at Water St. and Wisconsin Ave. in 1996, and it converted a 115-year-old building on N. 5th St. into offices and a coffee-bean-roasting business. He also has opened a coffee kiosk in the Grand Avenue mall.
More entrepreneurs must take similar risks and show leadership to trigger a break-out in retail development, he said. "You do need to wake some people up," Resch said. "We need to have some high-profile projects so people see what's happening."
Word could come soon on two projects promising just the high-profile attention Resch envisions.
The former Pabst brewery is targeted for redevelopment into PabstCity, a mixed-use development that will include a large, entertainment-oriented retail component.
So far, a House of Blues restaurant-nightclub and a Hofbrauhaus microbrewery and restaurant have expressed interest. There's also a possibility that the proposed Harley-Davidson museum, which dropped plans to locate in the former Schlitz brew house, might instead pick PabstCity.
Downtown also could land up to 1,500 additional workers if GE Medical Systems picks the area for its information technologies unit. Seeking to move workers from Menomonee Falls and other suburbs, the Waukesha company is considering downtown and other metro-area sites.
A downtown location would give GE Medical an advantage in recruiting young employees, said Robert Flood, a real estate broker with RFP Commercial Inc.
"If I'm a 20-something IT engineer, I want to look at the services and amenities of downtown instead of going out to a cornfield," Flood said.
From the Sept. 21, 2003 editions of the Milwaukee Journal Sentinel