2013APPRAISAL INSTITUTE
YEAR IN REVIEW
WISCONSIN RETAIL MARKET OVERVIEW
WESTON J. ROBERTSON
DRIVERS OF RETAIL DEMAND
Employment Housing/Population Shopping/Dining
Office/Industrial Apartment/Single Family RetailMarkets Markets Market
RECENT TRENDS
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
Year Non-Farm Employment
% Increase CountyPopulation
% 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
Milwaukee Metro Area
Madison Metro Area
MOSTLY STAGNANT?
Metro Area 3rd Quarter 2013 3rd Quarter 2012
Milwaukee 6.7% 6.9%
Madison 6.4% 6.6%
CoStar Market Survey
Overall Retail Vacancy Rate
Metro Area 3rd Quarter 2013 3rd Quarter 2012
Milwaukee $10.66 $10.91
Madison $11.79 $11.80
Average Retail Rent Rate
HOW ABOUT THE INVESTMENT MARKET?
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%
Band of Investment – Typical Multi-tenant Retail
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%
Bank Ground Lease 5.00% 5.85%
Auto Parts Stores Advance Auto Parts 7.25% 7.90%
AutoZone 6.50% 7.05%
O’Reilly Auto Parts 6.55% 7.01%
Dollar Stores Dollar General 8.25% 8.40%
Family Dollar 8.28% 8.45%
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 Sheep216 S 2nd Street
Self-Serve Wines, Tapas, Haute Dogs
Bel Air Cantina - Wauwatosa6817 North Avenue, Wauwatosa
Margaritas, 25 Kinds of Tacos
Carson’s1141 North Old World Third Street
Steaks, BBQ
NEW MILWAUKEE RESTAURANTS
Anodyne Coffee Roasting224 West Bruce Street
Sandwiches, Pastries, Free Trade Coffee
Wolf Peach1818 North Hubbard Street
European Fine Dining
Pizza Man2597 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
2013APPRAISAL INSTITUTE
YEAR IN REVIEW
WISCONSIN RETAIL MARKET OVERVIEW
WESTON J. ROBERTSON