On The Rebound
Madison’s residential and commercial real estate markets show improvement
In single-family home and condominium sales, mixed-use properties, commercial leasing, mortgage lending and new construction, things are looking good in the Madison area. In nearly every metric, the real estate market here is recovering nicely, due to growing consumer confidence, low lending rates, a significant drop in real estate inventory, and the stable economic conditions in Madison
as a whole.
Residential Real Estate
For Robert R. Weber, president of First Weber Group, all signs point to steady improvement in the real estate market in Madison. “We are recovering from the worst housing recession in over seventy years,” he says. “The Midwest—particularly in Madison—is coming back at a relatively modest pace.” According to Weber, other signs of recovery can be found in the commercial market, which is gaining strength and reports vacancy rates near fifteen percent, as well as in increased apartment construction.
With experience in residential, rural, recreational and business real estate transactions, Weber characterizes First Weber Group’s market area as statewide—“from southern Wisconsin to the northwoods and a large swath in between,” he says, “while our largest commitments encircle metropolitan Madison and Milwaukee.”
Weber says he has enjoyed his career in real estate. “My interest thirty years ago was the uniqueness of the product,” he reports. “My reason for staying in real estate has been the satisfaction of dealing with the people. The inherent responsibility, the emotion, and the excitement stemming from a real estate transaction are the driving forces for most practitioners in this business.”
Erik Sjowall, president of Bunbury & Associates Realtors, is the second generation of his family to lead the full-service real estate company, which was founded by his father in-law, Tom Bunbury, in 1985. More than seventy-five Realtors and nine staff members work from the company’s seven offices across south central Wisconsin, from Wisconsin Dells to Dodgeville and throughout Dane County. Bunbury & Associates services all price ranges, but specializes in high-end residential real estate.
Sjowall, who is also the executive director and vice president of the board of directors of the Wisconsin Realtors Association, is very excited about the current home-buying market. “It’s been very active,” he says, “up twenty-five percent over the previous year for single family homes and condominium sales. We expect 2014 to be very comparable to 2013, which was the third-best year on record, since 1991, for real estate. Even with the cold winter, sales continued to
Along with good lending rates, he attributes growing consumer confidence as a factor for the upturn. “In the housing market, sales are predicated on change—marriage, divorce, a death in the family, or new children in the family. The fact that consumers are not as worried about sudden unemployment is key. Also, there are fewer foreclosures right now, so there are fewer undervalued properties on the market, which helps maintain home values. The median sale price in our market continues to increase.”
Dan Kruse, president of Century 21 Affiliated in Madison, shares the optimism of many of his colleagues about the rebounding real estate market. “We have felt a significant recovery over the last fourteen months,” he reports. “In fact, in 2013 we saw a steady rise in number of units sold and median sales price in comparison to 2012.”
Century 21 specializes in residential real estate sales, but also offers commercial sales and leasing, residential rentals, new construction, land sales, bulk purchasing and REO transactions.
One major area of change Kruse sees within the real estate industry is the proliferation of information available
on the Internet. “Through technology it’s becoming easier for the layman to find real estate data, do his own research, and educate himself on products and services,” says Kruse. “As an industry, we need to make sure that the available information is accurate. In response, Century 21 is focusing on providing the best possible online content for the consumer. We also want to position our real estate professionals as an authoritative resource for questions during the buying or selling process.”
Justin Temple, president of Temple Builders, is currently seeing buyers who are interested in homes that have a smaller overall footprint but are outfitted with higher-quality finishes. As a company that has been offering comprehensive, personalized new home construction services in the Madison area for the past three decades, Temple says his firm primarily works with these buyer-individuals who are interested in truly custom homes.
Temple Builders also has a full-service interior design department that works with other area construction firms to implement their plans. He says Madison-area clients are particularly “hands-on” in both aspects of his company’s business offerings. “Buyers in this area are taking the time to educate themselves about the building process,” Temple says. “It’s definitely a collaboration.”
Looking ahead, Temple predicts technology will play a greater role in his business over the next few years. “Homes are being outfitted with all kinds of ‘smart’ devices, and becoming more automated,” he explains. “I think the popularity of those features is really going to skyrocket in the near future.”
Commercial Real Estate
Brian E. Hagen, vice president for commercial real estate with First Business Bank, is seeing a lot of new construction activity in multi-family homes, especially downtown. “Residential land development has increased over the last twelve months, due to increases in existing home sales and declining supply of lot inventory,” he says. “New home construction has also picked up some since last year; we are seeing strong demand in the Middleton and Waunakee markets especially. We are seeing more refinance activity in the commercial sector as owners are more concerned about rising long-term interest rates and looking for cash flow stability over the next five to ten years.”
First Business Bank works with a wide range of clients, covering all facets of commercial and residential real estate, with office, industrial/warehouse, retail, and apartments as the largest concentrations in their loan portfolio. The company also works with several residential land developers and homebuilders in Dane County.
Hagen credits Madison’s stable economy as a big factor in continuing success for commercial and residential real estate here. “The state government and University of Wisconsin are strong economic drivers in Madison, which in turn attract other businesses to the area,” he explains. “Madison and surrounding communities are a great place to work and live. That helps make commercial and residential real estate a fairly ‘safe’ investment, which you don’t necessarily see in other, similarly sized markets.”
Michael C. Morey, vice president of Oakbrook Corporation, loves working in the real estate industry in southern Wisconsin. “It’s a very dynamic, entrepreneurial profession and each project or assignment I work on presents a unique set of objectives,” he says. “Each day is different, and it makes coming to work enjoyable.”
Oakbrook Corporation is a full-service real estate advisory company offering property management, brokerage, investment sales, construction management and development services. The firm manages approximately 8,500 apartments in Wisconsin, Illinois and Iowa, along with more than two million square feet of commercial space. “We typically work with owners and users of office and industrial space,” says Morey. “We engage our clients in order to understand their business and assist them in customizing a solution to best fit their real estate needs.”
Looking ahead, Morey believes that Generation Y is going to have a major impact on all sectors of real estate, and will help drive one of the strongest trends for years to come. “Changes in technology will impact how buildings are designed and workers interact, resulting in smaller, more collaborative spaces. The trend towards urban relocation will continue as young people favor amenities over increased living space,” he says.
Eric Schwartz, president of Sara Investment Real Estate, presides over a diverse portfolio of retail, office, industrial and mixed-use properties throughout the Midwest. In all, the company has two hundred tenants in seventy buildings, in eighteen different cities across three states. The majority of the company’s business, though, is located in Wisconsin.
In addition to investing in new construction, Sara Investments often acquires properties that are undervalued or in need of repair (either financial or physical), rehabilitates them, and then reintroduces them to the neighborhood. Summing up his business philosophy, Schwartz says: “We’re very Midwestern. We love leaving a place better than we found it.”
Schwartz characterizes this as a “very dynamic time” for his business. “The market is picking up, people are out shopping, looking to buy projects, there’s a good amount of activity,” he reports. “It’s much different than it was two or three years ago.”
Surveying the different market sectors he serves, Schwartz says industrial companies are doing well in Wisconsin. “There’s lots of growth there, figuring out how to automate a lot of their processes,” he says. “Retailers are generally downsizing—with changes in that business model, they are being very careful with their long-term space plans. The office market is slowly improving. Companies are beginning to hire again, and then they need more space.”
Bradley L. Hutter began his professional career as an attorney, but got into real estate and development in the mid-1990s. By 1999 he was president of MIG Commercial, a commercial real estate development and private investment company that builds, renovates and leases Class A office buildings for business and commercial tenants. The company also provides management, real estate brokerage, consulting and referral services.
MIG Commercial specializes in redeveloping parts of a community that are struggling. “Instead of building in an open field, we try to change a city or neighborhood from within,” Hutter explains. “The company reinvests in these areas, refurbishing properties, building new, and then consolidating businesses in the redeveloped area. MIG helps create new anchors for the community. By branching out into new business opportunities like apartment development and leasing, as well as retail shops, the firm is helping to redefine neighborhoods.”
“It can be a very vibrant transformation,” he continues. “One of the things that MIG’s been able to do is successfully respond to the needs of neighborhood stakeholders and representatives from local governments who have dedicated their lives to seeing positive things happen in their districts. When everyone’s goals—commercial, social, and political—are all met in one project, that’s a win/win/win.”
Looking to the future, Hutter believes the business and real estate outlook in Madison is very positive. “As we come out of the recession, there are lots of opportunities for growth at MIG,” he says. “We have had a real increase in people calling about space, or about getting into larger spaces. We’re as busy as we’ve ever been.”
John Flad is president of Flad Development & Investment Corp. In that role and as a developer of commercial real estate projects in Madison and Milwaukee, Flad is carrying on a family tradition. His grandfather founded the nationally known, Madison-based design firm Flad Architects, which left its mark on many Madison neighborhoods before specializing in high-tech and medical buildings across the country.
In business since 1975, Flad Development’s portfolio specializes in retail centers and integrated mixed-use developments, such as Prairie Towne Center, The Homestead Shoppes, Cambridge Court, University Station, Essex Square, and many more in Madison and Brookfield. These projects generally feature retail outlets on the first floor, with residential units above. “There are fewer ‘mom and pop’ stores,” Flad says. “Today, niche retailers and specialty stores are succeeding—the more specialized the better. Businesses need to offer products and experiences that can’t be simply ordered on the Internet.”
Over the past four decades, Flad has adapted his company to new trends in retail, and directed projects that enhance the quality of life in the area. “The entitlement process in Madison is more demanding than many other places,” he notes. “There is more neighborhood participation, more interaction. Overall it’s a more collaborative and collegial process, working closely with communities. It’s extremely rewarding.”
Greg Hyer, interim director of University Research Park, notes that his niche in the real estate market is unique. Celebrating its thirtieth anniversary this year, the park is home to more than 126 companies that employ upwards of 3,500 people. The non-profit, internationally recognized research and technology epicenter has thirty-seven buildings with more than 1.8 million square feet of office and laboratory space, used by a broad range of companies—many of which are focused on biotechnology.
Created by University of Wisconsin-Madison, University Research Park was designed to grow science and technology businesses—in the state and across the region. “A lot of people wondered if that was possible,” Hyer says. But with plans in the works to break ground in 2015 on an additional research development that will be fifty percent larger than the current site, Hyer is justified in saying the project has been wildly successful. “It’s done great things for the university and helped develop a new economy in the Madison area,” he says.
Hyer notes that diversity has been key. “We offer space to a wide range of companies, of all sizes, which I think is important,” he explains. “University Research Park is there to help at beginning, as these businesses grow. We understand their more-complicated, specialized facility needs. We can help them make connections with campus resources for ongoing research and collaboration.”
Hyer hopes some of these start-ups will eventually evolve into big corporate headquarters. “We’re positioned for that kind of achievement because we are entrepreneurial, flexible, adaptable, and ultimately invested in their success,” he says.
Commercial And Residential Lending
Paul Schlumberger, vice president of business banking at River Valley Bank, says the bank works with a mix of clients in Dane County, very much by design. “We feel that developments that stimulate economic activity while remaining authentic to the community are critical,” he says. “Our vision statement really ties into that belief. River Valley Bank is a financial services partner leading growth in our communities.”
Over the past twenty-five years, Schlumberger has seen most of that growth downtown in Madison, with sizable mixed-used projects focused on the isthmus area. “Both the size and scope of these projects keep expanding,” he says. “We see more and more demand for high density housing projects driven by the UW student segment and the general public. The recent Constellation project on East Washington is a testament to the demand for modern housing rentals near the Square.”
In addition, Schlumberger’s connection to the area and its development is very personal: “I remember, as a kid, wearing my Mad-City T-shirt with an illustration of the capitol building on it. The capitol dome and the entire Madison skyline are still iconic—they define our sense of place,” he says. “While living in Minneapolis for fifteen years, I never once saw a kid with a T-shirt of their state capitol or the IDS tower. Madison is really a unique place.”
Julio Rios, associate vice president of mortgage lending at UW Credit Union, provides members with a variety of loan programs to meet homebuyers’ needs. The company offers construction loans, lot loans, FHA, VA and WHEDA loans, in addition to investment property loans and conventional mortgages. “Whether they are first-time home buyers, families trading up for more space, couples buying a vacation home, or looking to build their dream homes,” Rios says, “we help them choose loans that fit within their budget, always with their best interests in mind.”
Some of the current trends Rios is seeing in the residential real estate business are: shortage of housing inventory; an increase in pre-approvals; and more inquiries for construction loans.
“Basically,” he explains, “we have buyers who are pre-approved and looking for homes, but the inventory is limited.”
Rios remarks that one of the unique things about the residential real estate market in Madison is the ongoing popularity of some of the more storied neighborhoods in town. “We see people returning to the city and buying homes in the neighborhoods where they grew up,” he says.
Jason M. Weber, mortgage banking officer at Starion Financial, works primarily in residential lending—offering mortgages for new home and condominium purchases, refinancing existing mortgages, and financing investment properties of up to four units.
As part of a full-service bank, Weber says he’s seeing an uptick in applications for home mortgages, which are advancing thanks to the momentum and success of 2013. “We have been very busy refinancing homes over the past few years, helping our customers take advantage of historically low lending rates,” says Weber. “But in the last twelve months there have been many more outright purchases.” He added that the current market has been advantageous for first-time home buyers as well as many “move up” buyers. Helping consumers build the home of their dreams, the bank is also issuing more construction loans.
Starion Financial differentiates itself in the Madison market as a community bank that does all local underwriting and local processing of its loans. “We feel like we can support the communities of Dane County in a much more direct way, since all of our lending decisions are made right here,” Weber says.