Project: 320 Lofts, Milwaukee Developer: KeyBridge Development Group, Waukesha Construction Cost: $6 million Estimated Completion: Summer 2006 Rendering courtesy of Keybridge Development Group

The condo craze

Development trend shows no signs of slowing

By Paul Snyder

Jennifer Black faced an easy decision when choosing a place to call home with her new husband.

“We’re looking at this as a temporary house,” she said of the couple’s residence at Kerry Place Condominiums in Pewaukee. “The way we saw it, we could look to rent, or we could put down an extra $400 and have our own place.

“It puts us in a position where if one of us lost our job, we would still have the condo, which might not be the case in an apartment. This also allows us to afford something else sooner.”

Black certainly isn’t the only recent college graduate deciding to buy a condo for a first home. But for people just entering the work force, a condo is the wrong decision, said Mark Eppli, a professor of finance and the Robert B. Bell Sr. chairman in real estate at Marquette University.

Project: First Place on the River, Milwaukee Developer: KeyBridge Development Group, Waukesha Construction cost: $70 million Estimated completion: Summer 2007 Rendering courtesy of Keybridge Development Group

“It immediately constrains your ability to move,” he said, explaining how college graduates’ personal lives are often steered by their professional lives. If they put the money down on purchasing a condo, they could either get stuck there or stuck paying high transaction prices if another job opportunity presents itself elsewhere.

Yet low interest rates are making condominium prices competitive with apartment rentals, so younger people just striking out on their own are joining older generations in the pursuit of condo ownership.

Competitive prices in the condominium market are creating a construction boom in the obvious places, like Milwaukee’s downtown area. But the waves of development don’t stop at Milwaukee’s borders.

From Wauwatosa to Delafield, Menomonee Falls to Mequon, Cudahy to West Allis and right down into Racine and Kenosha, condominiums are popping up all over. They’re in the plans of developers, architects and contractors throughout the region.

Scott Fergus, president of KeyBridge Development Group, Waukesha, said it’s about time.

Project: Range Line Crossing, Brown Deer Developer: The Mandel Group Inc., Milwaukee Estimated Completion: Summer 2007 Rendering courtesy of Eppstein Uhen Architects inc.

“Milwaukee is undergoing a tremendous renaissance right now, and after 20 years of being viewed in a negative light, people are returning to the city and wanting to be near the life of it,” he said.

Fergus said condos are an important part of Milwaukee’s revitalization. With the price of land in the city skyrocketing, condominiums not only provide a cost-efficient option to traditional homes, but they are attractive to city planners and developers because they provide efficient land use and attract retailers.

And that mentality is catching on in the city’s surrounding areas. Steven Schaer, manager of the Planning and Zoning Division in West Allis, said condominium developments are shedding new light on the city.

While a few condos started popping up in West Allis in the 1980s, he said, the end of the 1990s sparked new growth. During that time, the city witnessed a major project that added 42 high-end condominium units. Two years later, 20 more units were added.

Project: 601 Lofts, Milwaukee Developer: KeyBridge Development Group, Waukesha Construction Cost: $30 million Estimated Completion: Fall 2006 Rendering courtesy of Keybridge Development Group

The city also is seeing development of a $60 million project that will add new retail space, commercial space and condominiums to the downtown district.

Schaer said all the additions are beneficial.

“West Allis has had some image issues,” he said. “This is something that we think will boost the city’s profile and take us out of the ashes.”

Marquette’s Eppli said enthusiasm over new units promotes rapid growth because developers can move through approval processes quickly and continue adding units.

That’s not necessarily a bad thing as long as developers don’t overbuild the market.

“We have a pretty big continued demand for condos,” he said. “But it’s still a relatively small piece of home ownership.

“People complain about the rising costs of owning a home, and if you look at a price line from the 1970s through today, yes, it’s increased. But if you adjust the line for inflation, you start to see a pretty straight line.”

Figuring in the increased amount of square footage of a single-family home (in the 1970s, the average was 1,535 square feet, while today it’s 2,160 square feet), the average house has not kept up with rising prices in society, Eppli said. In fact, today’s prices are lower, which he said keeps the supply and demand of new single-family homes balanced.

He said the same concept of balance carries over into condo development. No one can accurately estimate an overdevelopment problem in the condominium market because it’s such a new trend and has no real history to look to or develop upon, Eppli said. But there’s no reason to think the condo trend will outreach demand.

“We have a bunch of frugal folks here in Wisconsin,” he said. “We don’t want to pay for things we don’t have to. The question always seems to be: Can we afford it, or are we out of line? And the answer, right now, is that we can afford it.”

Fergus agreed that the cost-consciousness of the region will counter any concerns of saturation in the condominium market.

“The Midwest is very conservative in terms of building and development,” he said. “The presale side of the business really puts a check on overbuilding, and is kind of the first line of defense against it. If a building’s not presold, it doesn’t get built.”

But West Allis’ Schaer said the surge in development, like everything, won’t last forever.

“It’s the million-dollar question,” he said. “I don’t know personally, and I don’t think anybody can look at a calendar and mark when the boom will end. But at some point, it has to stop.

“It’s a cycle that’s based on the economic situation of the time. What is the best value for your dollar? And right now, it’s just the condos’ time.”