2013
APPRAISAL INSTITUTE
YEAR IN REVIEW
WISCONSIN RETAIL MARKET
OVERVIEW
WESTON J. ROBERTSON
DRIVERS OF RETAIL DEMAND
Employment
Office/Industrial
Markets
Housing/Population
Apartment/Single Family
Markets
Shopping/Dining
Retail
Market
RECENT TRENDS
Milwaukee Metro Area
Year
Non-Farm
Employment
% Increase
County
Population
% Increase
September 2013
831,500
0.2%
950,410
0.2%
September 2012
829,600
1.1%
948,322
0.0%
September 2011
820,600
N/A
948,369
N/A
Madison Metro Area
Year
Non-Farm
Employment
% Increase
County
Population
% Increase
September 2013
359,700
1.3%
491,555
0.5%
September 2012
355,100
0.7%
489,331
0.3%
September 2011
352,700
N/A
488,073
N/A
MOSTLY STAGNANT?
Overall Retail Vacancy Rate
Metro Area
3rd Quarter 2013 3rd Quarter 2012
Milwaukee
6.7%
6.9%
Madison
6.4%
6.6%
CoStar Market Survey
Average Retail Rent Rate
Metro Area
3rd Quarter 2013
3rd Quarter 2012
Milwaukee
$10.66
$10.91
Madison
$11.79
$11.80
HOW ABOUT THE INVESTMENT MARKET?
Band of Investment – Typical Multi-tenant Retail
Low
Avg.
High
Interest Rate
5.0%
5.5%
6.0%
Number of Periods
25 yr
25 yr
25 yr
Loan to Value
75%
75%
65%
Investor Return
10%
12%
14%
Indicated Cap Rate
7.76%
8.53%
9.93%
Surveys
Source
Cap Rates
Marcus and Millichap
Low 8% to low 9%
Realty Rates
Average 9.82%
HOW ABOUT THE NET LEASE MARKET?
Property Type
Tenant
2013 Asking
Cap
2012 Asking
Cap
Drug Store
Walgreens
5.75%
6.40%
CVS
6.07%
6.60%
5.00%
5.85%
Advance Auto Parts
7.25%
7.90%
AutoZone
6.50%
7.05%
O’Reilly Auto Parts
6.55%
7.01%
Dollar General
8.25%
8.40%
Family Dollar
8.28%
8.45%
Bank Ground Lease
Auto Parts Stores
Dollar Stores
THE CONSTELLATION - MADISON
• Opened August 2013
• $39 million cost
• 32,500 SF
Commercial/Retail
• 220 apartments
• Google office, Star Bar,
Cargo Café, Andersen
Dental, and others
VARSITY QUARTERS - MADISON
•
•
•
•
•
Scheduled Open Fall 2014
Located near UW Campus
Project cost not disclosed
162 bed – student housing
7,500 SF retail
309 W JOHNSON ST - MADISON
• Scheduled Summer 2015
• 600,000 SF
• Over 250 apartments with
over 300 bedrooms
• Retail on 1st and 2nd floors
800 BLOCK OF E. WASHINGTON - MADISON
•
•
•
•
Proposed project
$65 million cost
4.5 acres
Phase 1
• 50,000 SF grocer
• 175-240 apartments
• 350 parking stalls
• Phase 2
• 22 owner-occupied homes
• 65,000 SF retail/office
• 173 parking stalls
THE MAYFAIR COLLECTION - WAUWATOSA
• Dick’s, Nordstrom Rack,
Sak’s off 5th, ULTA, Old Navy
• Phase I - 266,000 SF
• $49 million cost
• Expected opening Spring
2014
• Future phases to include
Restaurants, a Hotel, and
Mixed Use Office/Retail
DREXEL TOWN SQUARE – OAK CREEK
• Mixed use development
• 600+ apartments
• City hall, public library,
farmer’s market
• Meijer anchored, 191,000
SF grocery store
• $175 million
• $20 million TIF financing
WOODMAN’S GROCERY STORE – WAUKESHA
•
•
•
•
Opened July 2013
$7 million, $3.5 TIF financing
243,753 square feet
Approximately 40% liquor store
NORDSTROM MAYFAIR – WAUWATOSA
•
•
•
•
Opening Fall 2015
138,000 SF
Three stories
Addition to existing
Mayfair Mall
NEW MILWAUKEE RESTAURANTS
Black Sheep
216 S 2nd Street
Self-Serve Wines, Tapas, Haute Dogs
Bel Air Cantina - Wauwatosa
6817 North Avenue, Wauwatosa
Margaritas, 25 Kinds of Tacos
Carson’s
1141 North Old World Third Street
Steaks, BBQ
NEW MILWAUKEE RESTAURANTS
Anodyne Coffee Roasting
224 West Bruce Street
Sandwiches, Pastries, Free Trade
Coffee
Wolf Peach
1818 North Hubbard Street
European Fine Dining
Pizza Man
2597 North Downer Avenue
Italian and Specialty Pizzas
WHERE DO WE GO FROM HERE?
• Concern over increasing interest rates
• Source projects a 50 bp interest rate increase
Low
Avg.
High
Interest Rate
5.5%
6.0%
6.5%
Number of Periods
25 yr
25 yr
25 yr
Loan to Value
75%
75%
65%
Investor Return
10%
12%
14%
Indicated Cap Rate
8.03%
8.80%
10.17%
Increase (bp)
27
27
24
• Continued low cap rates in the NNN market
• Slow, gradual new development as space is absorbed
• Minimal, if any, increase in market rents
2013
APPRAISAL INSTITUTE
YEAR IN REVIEW
WISCONSIN RETAIL MARKET
OVERVIEW
WESTON J. ROBERTSON