Year in Review Wisconsin retail market overview Weston J Robertson Drivers of retail demand Employment HousingPopulation ShoppingDining OfficeIndustrial ApartmentSingle Family Retail ID: 677285
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2013Appraisal Institute Year in Review
Wisconsin retail market overview
Weston J. RobertsonSlide2
Drivers of retail demand
Employment
Housing/Population
Shopping/Dining
Office/Industrial Apartment/Single Family Retail
Markets Markets MarketSlide3
RECENT TRENDS
Year
Non-Farm Employment
% Increase
County Population
% Increase
September 2013
831,500
0.2%
950,4100.2%
September 2012829,600
1.1%948,3220.0%September 2011
820,600N/A948,369N/A
Year
Non-Farm Employment% IncreaseCountyPopulation
% IncreaseSeptember 2013359,7001.3%491,5550.5%
September 2012
355,100
0.7%
489,3310.3%September 2011352,700N/A488,073N/A
Milwaukee Metro Area
Madison Metro AreaSlide4
MOSTLY STAGNANT?
Metro Area
3
rd
Quarter 2013
3
rd
Quarter 2012Milwaukee6.7%
6.9%Madison6.4%6.6%
CoStar Market Survey
Overall Retail Vacancy Rate
Metro
Area3rd Quarter 20133rd Quarter 2012
Milwaukee$10.66$10.91Madison$11.79$11.80
Average Retail Rent RateSlide5
HOW ABOUT THE INVESTMENT MARKET?
Low
Avg.
High
Interest Rate5.0%5.5%6.0%Number of Periods25 yr25 yr25 yrLoan to Value75%75%
65%Investor Return10%
12%14%
Indicated Cap Rate7.76%
8.53%9.93%Band of Investment – Typical Multi-tenant Retail
Surveys
Source
Cap RatesMarcus and MillichapLow 8% to low 9%
Realty RatesAverage 9.82%Slide6
HOW ABOUT THE NET LEASE MARKET?
Property
TypeTenant
2013 Asking Cap
2012 Asking CapDrug StoreWalgreens5.75%6.40%CVS6.07%6.60%Bank Ground Lease
5.00%
5.85%
Auto Parts Stores
Advance Auto Parts7.25%7.90%
AutoZone6.50%7.05%
O’Reilly Auto Parts6.55%7.01%
Dollar Stores
Dollar General8.25%8.40%
Family Dollar8.28%8.45%Slide7
THE CONSTELLATION - MADISON
Opened August 2013$39 million cost
32,500 SF Commercial/Retail220 apartments
Google office, Star Bar, Cargo Café, Andersen Dental, and othersSlide8
VARSITY QUARTERS - MADISON
Scheduled Open Fall 2014Located near UW Campus
Project cost not disclosed162 bed – student housing
7,500
SF retailSlide9
309 W JOHNSON ST - MADISON
Scheduled Summer 2015600,000 SF
Over 250 apartments with over 300 bedroomsRetail on 1st and 2
nd
floorsSlide10
800 BLOCK OF E. WASHINGTON - MADISON
Proposed project$65 million cost
4.5 acresPhase 1
50,000 SF grocer
175-240 apartments350 parking stallsPhase 222 owner-occupied homes65,000 SF retail/office173 parking stallsSlide11
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/RetailSlide12
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 financingSlide13
WOODMAN’S GROCERY STORE – WAUKESHA
Opened July 2013
$7 million, $3.5 TIF financing
243,753 square feet
Approximately 40% liquor storeNORDSTROM MAYFAIR – WAUWATOSA
Opening Fall 2015
138,000 SF
Three stories
Addition to existing Mayfair MallSlide14
NEW MILWAUKEE RESTAURANTS
Black Sheep
216 S 2
nd
StreetSelf-Serve Wines, Tapas, Haute Dogs Bel Air Cantina - Wauwatosa6817 North Avenue, WauwatosaMargaritas, 25 Kinds of Tacos
Carson’s
1141 North Old World Third Street
Steaks, BBQSlide15
NEW MILWAUKEE RESTAURANTS
Anodyne Coffee Roasting
224 West Bruce Street
Sandwiches, Pastries, Free Trade Coffee
Wolf Peach1818 North Hubbard StreetEuropean Fine Dining
Pizza Man
2597 North Downer Avenue
Italian and Specialty PizzasSlide16
WHERE DO WE GO FROM HERE?
Concern over increasing interest ratesSource projects a 50 bp
interest rate increase
Low
Avg.HighInterest Rate5.5%6.0%6.5%Number of Periods25 yr25 yr
25 yrLoan
to Value75%75%
65%Investor Return
10%12%14%Indicated Cap Rate
8.03%8.80%10.17%Increase
(bp)2727
24
Continued low cap rates in the NNN marketSlow, gradual new development as space is absorbedMinimal, if any, increase in market rentsSlide17
2013Appraisal Institute Year in Review
Wisconsin retail market overview
Weston J. Robertson