Madison, WI CRE Market Outlook and Forecast Recap

Last week members of Lighthouse CRE attended the 2014 Southern Wisconsin Commercial Real Estate Summit keynoted by Eric Hovde.

Here are some key takeaways from the summit.  This event focused on southern Wisconsin and was mainly focused on activity in Madison, Milwaukee and cities between Chicago and Milwaukee.

Retail:  Retail is going strong with many nationals seeking outlot opportunities in front of regional malls and other large format retail anchors.  In Madison, we are seeing groups like Chik fil A, Bonefish, and others make this move near west town mall.  The NNN single tenant retail investment category appears to be very hot with investors from the coasts seeking opportunities throughout the Midwest to find their desired yields.  Ten plus terms are obviously most desired, but every piece of real estate should be looked at on its own qualifications.  If it is well positioned it may be just fine to have less term remaining.

Apartments: ARE ON FIRE in Madison.  Not literally of course, but if you were to drive through Madison right now you would be amazed at the number of cranes in the air.  Almost as many as Epic. LOL. (Epic Booming).  Our keynote speaker Eric Hovde (Hovde Properties) mentioned he has always taught his teams to zig when others zag and to zag when others zig.  He feels that way about apartments in Madison for precisely the reason that if “everyone else is doing it, then stop doing it yourself.”  The thousands and thousands of new units coming on line in Madison will definitely have an impact.  If your apartments are not well positioned and have a unique value proposition, you may want to watch out.  We tried to tell you so a few months ago, “Is apartment construction the next bubble?”

Student Housing:  Is absolutely rocking right now.  The Hub on Campus is setting the new standard for student luxury in Madison, WI.  This behemoth student housing property will be open for the Fall 2015 school year at UW Madison.  I mean, don’t you think all kids will study harder if they have in suite jacuzzies, a roof top endless pool over looking Lake Mendota, and all of the other luxuries you can’t even imagine?  Uh, huh.  It’s going to hurt when these kids graduate and instantly downgrade their living accommodations.  But hey, maybe I’m just jealous this didn’t exist when I went to school there.

Key Takeaways:  The overall feeling was definitely good.  Things seem to be looking up.  Just remember that all real estate is cyclical.  Don’t expect something good to last forever because it won’t.  Focus on your property’s fundamentals and work with experts that will offer you insights and guidance.