Housing Sprouts in Downtown Milwaukee

By Michael Bayer
Assistant Editor, WAPANews

For nearly two decades, Downtown Milwaukee suffered from disinvestment as people and jobs moved to the suburbs. Since the late 1970s, however, capital has returned to the center, first in the form of office buildings and retail space, and more recently as apartments and condominiums.

According to the Department of City Development, 1,210 housing units are under construction or are being planned for downtown. Seventeen projects have been constructed or wait on the drawing boards.

Civic leaders and city planners are applauding these trends. Condominium owners and renters are bringing life to downtown, filling sidewalks on evenings and weekends, and supporting a mixture of retail businesses that serve the downtown market. Greater demand for housing translates into higher property values and additional tax revenue. Conversion of under-utilized industrial and office buildings into housing renews the built environment and contributes to the perception of Milwaukee as a good place to live.

Challenges are lurking within these trends, however. The cyclical nature of real estate makes it difficult to forecast future demand for housing and the relative financial attractiveness of housing projects. Shifts in demand in one segment of the housing market can affect demand elsewhere. New residents bring new demands for services -- grocery stores, gas stations, dry cleaners and hardware stores -- that aren't abundant downtown. A recent story in The New York Times, for instance, illustrated the plight of young professionals who moved into lofts on Wall Street only to learn that the nearest laundromat was several miles away.

The newest projects represent only the latest in a long history of downtown housing. Cudahy Towers has stood at the eastern end of Wells Street near Lake Michigan since the early part of the century. Many apartment buildings east of Van Buren and north of Mason Street were built during the 1920s. Four decades later, Juneau Village rose along Jackson Street, followed a few years later by Regency Tower on the corner of Kilbourn and Astor Street.

Today, Milwaukee's downtown housing market is benefiting from the same factors driving housing markets across the United States: low interest rates, strong consumer confidence, low unemployment and a rising stock market. Middle-income investors, flush with cash from stocks, can afford to buy high-priced condos in the city.

Particular factors also favor development downtown. Office space built during the 1960s, 1970s and 1980s increased the number of downtown office workers, many of whom prefer to live near their jobs. Demand for housing increased, especially for high-end new construction and renovated lofts that compare well with similarly priced units in the suburbs.

Many of these workers want to live near the shops, theaters and restaurants they see and visit during the day. Downtown residents only have to step outside their buildings to be within walking distance of Summerfest and the nightspots adjacent to Cathedral Square.

Downtown's rich history and variety of architectural styles suit the tastes of young professionals and empty nesters alike. Older buildings offer high ceilings, loft spaces and lake views that newer buildings can't offer. Newer developments such as Yankee Hill offer modern amenities. Not to be overlooked is the easy commute that downtown offers. Downtown residents can travel with few delays to Wauwatosa, Brookfield and the city of Waukesha, against the flow of morning and afternoon rush hour traffic.

"There is movement downtown because the city of Milwaukee offers a very good quality of life," developer Barry Mandel told the Milwaukee Journal Sentinel in May 1997.

Developers say they are marketing downtown units to young professionals and empty nesters. Jon Wellhoefer, executive vice president of the Milwaukee Redevelopment Corporation, even coined the term "bulge groups" to refer to two demographic cohorts -- childless professionals in their 20s and 30s and childless couples in their 50s and 60s -- that make up the majority of downtown renters and condominium owners.

In recent years, the bulge groups have been joined by an increasing number of families with children, Wellhoefer said, although anecdotal evidence suggests these numbers remain small. Professional couples with children may be turned off by the lack of adjacent green space for children to play in, as well as the poor reputation of the Milwaukee Public Schools. "When we get parents with children, the children tend to be younger -- of preschool age -- or else (the children) attend private school," Wellhoefer said.

Mark Gleischman, developer of the Bowman Apartments and Shops on North Milwaukee Street, believes the market is expanding. When he offered the Bowman's 10 apartments for rent, more than 100 people inquired, including "older people and younger people, though probably not too many people with children, because either they didn't like (the building) aesthetically or else the rent was not what they wished," he said. "We have younger people, older people, same sex couples, all sorts of different people living in the Bowman. Certainly we had interest from all segments of society."

Gleischman and his partner Mark Sumner purchased the properties at 715-723 North Milwaukee Street several years ago with the intention of tearing them down and constructing a new office building. The downtown office market collapsed soon thereafter, and the pair revised their plans. They finally decided to convert the Civil War-era buildings into housing after watching the success of other downtown projects.

Gleischman said the market for downtown housing "is fairly substantial relative to past experience" but remains "a relatively small niche."

"Part of that depends on what you mean by downtown housing," Gleischman said. "The demand along the Park East corridor is much more substantial than it is where we are. The demand is growing, but we'll never see 25,000 housing units downtown."

A 1997 market study by Towne Realty concluded that the market for mid-level apartments in renovated downtown buildings was "very narrow," company spokesman Michael Mervis told the Journal Sentinel. The company interviewed 23 potential downtown renters, asking them how much they would be willing to pay to live downtown. Respondents were also asked to identify the advantages and disadvantages of living downtown.

A majority of respondents said they wouldn't pay more than $800 in rent to live downtown. On average they were willing to pay $630 per month for a two-bedroom apartment with one and one-half to two bathrooms, heat included. This amount was less than the rent developers expected to charge for these units, Mervis said.

Respondents preferred units along the Milwaukee River or east of it, listing access to Lake Michigan, cultural activities, bus routes and attractions such as Summerfest and the Bradley Center as the advantages of living downtown. Disadvantages included a lack of parking; the high cost of parking and a perception that downtown lacks grocery stores and schools.

John Raettig of Leep Raettig Development believes a market for downtown housing has always existed, even during the down years of the 1970s and 80s. All it takes, he says, is a developer able to respond to demand.

"The market has changed a number of times," he said. "It's constantly evolving, so it's always a challenge to stay on top of it. One reason we have been successful is that we spend a lot of time on our projects. Every day, we're talking to the people who are the market."

Raettig credits Milwaukee's Department of City Development for "creating a euphoria" around downtown housing. "The city wants to see anything and everything done," he said. The city has been a catalyst for development, Raettig said, by creating the Riverwalk along the Milwaukee River and taking steps to reduce crime downtown. These efforts help to foster demand by making downtown a more attractive place to live.

Other demand-side initiatives the city has implemented include streetscape projects and efforts to lure retail and restaurants to downtown. Restaurants such as the Rock Bottom Brewery attract downtown residents as well as visitors and people from other parts of the city.

In recent years, the Common Council amended the zoning code to allow housing above the ground floor of downtown buildings. In addition, the code no longer requires that landlords provide parking for their tenants. These changes have made it easier for developers to create housing projects.

"We want to strongly encourage (downtown housing) through the zoning code," said Daniel McCarthy, the city's urban development coordinator. "We want to make sure the zoning code doesn't cause problems, particularly through a regulatory environment that acts as a detriment" to new projects. The city also tries to promote downtown housing by keeping the streets safe and property taxes low, he said.

McCarthy believes the current boom is not a passing fad, nor is it the result of the favorable housing market or specific city initiatives. "People want to live in this setting," he said. "There's a real relationship between restaurants, the arts and retail. As those things promote an urban lifestyle, they create a demand for more housing, which raises the demand for restaurants and strengthens the arts community."

Milwaukee clearly benefits from a strong downtown. At a time when the city's population is dropping, downtown is experiencing significant population growth. Redeveloping underutilized property increases the tax base.

Too much growth, however, can lead to problems. It is difficult to determine how many units can be created before supply outpaces demand to the point where it hurts the market. Observers say they only know that the market has not reached equilibrium.

"No one knows the depth of the marketplace," Wellhoefer said. "Can we build 1,500 units in a competitive marketplace? That's probably too much in a tight timeframe and would cause a lowering of the marketplace. Whether 500 units would depress rents and occupancies, I really don't know. All I know is that, with each new project, we appear to be broadening the market."

In the years ahead, Downtown Milwaukee faces a broader challenge. A battle for its soul.

Because downtown is so important to the city's vitality, it tends to attract people with a variety of agendas. A vibrant downtown must balance competing interests for housing, manufacturing and office uses, and resolve issues of transportation and tourism.

One vision focuses on housing and mixed uses, apartments above shops, sidewalk cafes and boutiques, the Riverwalk, young and old walking to jobs and restaurants. As the downtown population grows, landlords and employers will be joined by increasing numbers of residents who have their own aspirations for downtown. Value is added by people who desire an urban lifestyle and are willing to invest their money in downtown as a neighborhood.

Another vision is manifested in the new Midwest Express Center. Proponents of the convention center say visitors add value to downtown as they arrive with their wallets full of cash. Investment will be made in the form of hotels, upscale retail shops and tourist attractions. Theme restaurants such as Hard Rock Cafe and Rainforest Cafe may be added to expand the mix of restaurants and retail.

These visions of downtown are complementary to some degree. Residents and visitors bring life to downtown as they patronize businesses and increase foot traffic. Downtown requires both in order to flourish.

But housing developers have qualms about downtown Milwaukee as a tourist destination. John Raettig, for one, said several women who toured one of his buildings expressed concern that a Hooters Restaurant was opening nearby. Others, he said, were worried that a casino might open downtown. As downtown attracts more visitors, residents may believe the neighborhood character of the central city is being threatened.

McCarthy said these issues will be resolved in an upcoming Downtown Master Plan.

"For downtown to reach its potential over the long-term, it needs to be a good place to work, live and visit," he said. "Downtown needs all three land uses to be successful."