S U B M A R K E T

Waukesha County Submarket, Milwaukee MSA

R E P O R T
Fourth Quarter 2007

SUBMARKET MAP
67 164 41

SUBMARKET FACTS
Submarket Population 386,394 0.8% 149,476 1.3% $77,189 41.1 256,764 8.3% $17.02 Metro 1,519,871 0.3% 611,551 0.7% $56,066 37.5 941,832 9.6% $15.16

16

Avg. Annual Five-Year Chg.* Total Households


18

Waukesha Waukesha County County
59

94

18 59 894

Avg. Annual Five-Year HH Chg.* Median Household Income Median Age Employment

106

43 83

45

Vacancy Rate (3Q 07) Avg. Asking Rent (3Q 07)
* 2006-2011 Forecast

59

SUBMARKET VACANCY RANKING
Submarket
Waukesha County North Milwaukee/Ozaukee South Milwaukee County

SUBMARKET HIGHLIGHTS
3Q 07 Asking Rents
$17.02 $15.37 $13.17

3Q 07 Vacancy
8.3% 9.9% 12.6%

Robust rental demand, coupled with strong demographics, have provided owners in the Waukesha County submarket with region-high rents over the last several years. Occupancy levels within the county have steadily outperformed all other submarkets for the past five years; currently, occupancy is 91.7 percent, 130 basis points above the metro average. The region is forecast to record the sixth consecutive year of positive net absorption in 2007 as retailers continue to relocate to the area in order to capitalize on increased disposable income. As such, third quarter asking rents were over 12 percent higher than that of the metro’s, though over the last four years, owners have been hesitant to implement aggressive rent growth, opting to maintain strong occupancy levels. The Waukesha County submarket has a median household income nearly 38 percent above that of the metro, with earnings poised to expand by 9 percent over the next five years. Compared with the entire MSA, nearly 10 percent more residents in the Waukesha County submarket have earned a bachelor’s degree or higher. These demographics suggest a greater amount of disposable income than in surrounding areas, which translates to relatively higher levels of retail spending. Going forward, over 72 percent of the county’s inhabitants are projected to earn more than $50,000 annually, and 35 percent will earn over $100,000 per year, further supporting retail spending.

Michael L. Brown Research Associate

© Marcus & Millichap 2007 www.MarcusMillichap.com

Waukesha County Submarket, Milwaukee MSA

Retail Submarket Report ◆ Fourth Quarter 2007

Construction Trends
Square Feet Completed (thsouands)

CONSTRUCTION TRENDS

400

300

Multi-tenant retail construction is forecast to slow by approximately 6 percent in 2007, with 224,000 square feet projected to come online for a 5.1 percent increase in submarket inventory. There are currently four projects under construction, totaling 198,000 square feet. All four developments are due in the next six months, and three are located less than two miles from Interstate 94. Currently, developers have 176,000 square feet of retail space in the various stages of the planning pipeline. If all of the projects come to fruition, the submarket’s stock would increase by 3.8 percent.

200

100 0

03

04

05

06

07*

* Forecast Sources: Marcus & Millichap Research Services, Reis, TWR

RENT AND VACANCY TRENDS

Asking Rent and Vacancy Trends
Average Asking Rent per Square Foot

$18

Average Asking Rent Vacancy

10%

$17

8%

Over the last 12 months, multi-tenant vacancy has increased 190 basis points to 8.3 percent, due, in part, to the completion of the 150,000-square foot Village Square at 3100 Village Square Drive in Delafield. Construction activity is forecast to accelerate through the fourth quarter of 2007, but the market is expected to record positive absorption, resulting in a vacancy improvement of 30 basis points to 8 percent. During the past year, multi-tenant owners have opted to maintain solid occupancy levels rather than implement aggressive rent growth. Asking and effective rents have increased 1.2 percent and 1.0 percent, reaching $17.02 per square foot and $15.31 per square foot, respectively. Year-end asking and effective rents are both forecast to increase 2 percent to a respective $17.08 per square foot and $15.37 per square foot.

Vacancy Rate

$16

6%

$15

4%

$14

2%

03

04

05

06

07*

* 3Q 2007 Sources: Marcus & Millichap Research Services, PPR, Reis

Retail Sales Growth
Year-over-Year Percent Change

RETAIL SALES GROWTH

7% 6% 5% 4%

Milwaukee

United States

By year end, the Milwaukee MSA’s population is projected to expand by 0.3 percent, the metro’s largest uptick since 2000, when population growth was recorded at 0.4 percent. Retail spending in the metro is forecast to grow by 4 percent in 2007, helping to support retail tenant demand. Healthy fundamentals are projected to keep cap rates relatively stable, compared with other submarkets in the metro. Over the next six to eight months, cap rates are expected to trend slightly higher to the mid-7 percent range.

3%

03

04

05

06

07*

* Forecast Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

Michael L. Brown Research Associate

© Marcus & Millichap 2007 www.MarcusMillichap.com

Sources: Marcus & Millichap Research Services, BOC, CoStar Group Inc., RCA, Reis, SRC, TWR The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.

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