This article was originally published in Isthmus on February 18, 2005.
Nobody's lit up the fireworks yet or popped open the Veuve. But maybe someone should. The central city is booming in a way unimaginable only a decade or so ago. Construction cranes frame the skyline like a Sunbelt boom town. The nightlife -- bars, cabarets, music clubs, eateries -- hums with action even on wintry nights. But more than anything, the city's older neighborhoods are bustling.
In the past six years, more than 1,700 residential units have been built on the isthmus. Go a little further out, from Hilldale to Aberg Avenue, and the number climbs to more than 2,400 new homes and apartments.
Serious money has been invested. Real serious money. Some $400 million in downtown residential and commercial construction over the past six years, according to city records. Nearly $500 million in the greater isthmus.
And that doesn't count the several hundred million dollars the university has pumped into the ongoing reconfiguration of its 900-acre campus.
And the boom is still building steam.
Randy Alexander wants to put 400 condominiums at Capitol West on the old Meriter Hospital property, Gary Gorman proposes 300-plus condos on the Don Miller car lot on East Washington, while Todd McGrath envisions 400-plus apartments and condos at Union Corners where Kohl's and Rayovac once sat supreme.
Did I mention that the UW has almost $700 million in new construction in mind through 2011? "It's the complete rejuvenation of big chunks of the campus," notes Al Fish, UW-Madison's associate vice chancellor.
As you'll see on our map on the following pages, the central city is teeming with big projects and bigger dreams. "The character of the downtown is changing right before our eyes," says city planning chief Mark Olinger, whose department laid the groundwork for the revival in the 1980s and '90s with its planning and financial incentives. "It's nothing short of amazing."
So pop open a bottle of Clicquot's best, but don't get too buzzed. There are a few reasons for worry as well. But first let's look at the causes for the boom.
Developers and city officials alike cite the sustained period of low interest rates as a key reason for the central city's booming housing market. And, no doubt, securing a 30-year mortgage at under 6% makes buying easier. But those same rates are available for suburban McMansions, too.
Something else is at work, and that's the appeal of living in a pedestrian-friendly (and safe) environment that's close to work, restaurants, entertainment, bike trails, the university and the lakes. Not to mention the occasionally striking architecture.
Sheridan Glen, president of Capitol Neighborhoods Inc., was only slightly exaggerating last year when he wrote in the group's newsletter that the downtown "has street after street of cute 19th-century homes and flats, resolute mansions; new, darling, charismatic, fresh condos and lofts; [and] slick new apartment buildings coexisting next to gorgeous, appreciatively maintained older apartments, along with some very nice older single-family homes."
The setting has proved a magnet for the so-called creative class. JB Hopkins, 44, moved to Madison last year to work at AdHouse Creative after job stints in Minneapolis, Manhattan and Richmond. That he bought a condo in Todd McGrath's Fourth Ward Lofts close to his job is perhaps no surprise. But his partner, Jackie Schutty, director of public relations at Lands' End, thought it was a good idea, too, even though her daily commute to Dodgeville takes 45 minutes each way.
"Our Realtor took us out to suburbia," he says. "We felt disjointed, we felt disconnected. We wanted to be part of the city, to be integrated into its life. He turned us on to the Fourth Ward Lofts. The space itself spoke to us. We just started meeting people in the halls, in the lobby. We realized it would be a great, fast way to meet people. That's absolutely proven to be the case."
Pat Meehan, 59, represents another cohort that's moved downtown -- retirees. Both he and his wife, Wanda, are former Janesville educators. "The more we live here, the more we appreciate the services," says Meehan. Their bank, grocery, hardware store and car mechanic are all within a few blocks of their Bedford Court condo. The Overture and Kohl centers are within walking distance.
"It's wonderful," says Meehan. "It's like we're on vacation all the time. Now, if we could only plant palm trees along West Washington, it would be perfect."
Students are the other critical ingredient in the downtown's new housing mix. The ratty old two- and three-flats in Miffland and beyond that their parents partied in don't appeal to this more affluent breed of student.
They've poured into the new amenity-heavy student towers like La Ciel, the Aberdeen and others. Jeff Fishbach, a senior from Milwaukee, has lived in The Embassy since 2002. "I have a friend who lived in a house, and it was an absolute pit," he says. "The landlord never kept it up. But here, if you have a leak they fix it. It's just a nicer place overall."
The new towers have added more than 1,400 beds to the student housing market downtown in recent years, and, in the process, caused a shock wave in the rental housing business.
Consider it a speed bump in the central city's rapid evolution.
"There's a bust right now," says Fred Mohs, a downtown lawyer and real estate investor. "There are significant vacancies throughout Madison; 15% is a modest estimate."
You hear the same story with the downtown office market. It hasn't recovered from the shock of Alliant Energy leaving in 2002 for its new American Center headquarters. Alliant's exit tore a 223,000-square-foot hole in the office market.
For three years now, the downtown vacancy rate has hovered at about 14%, significantly higher than the tight single-digit figures of earlier years, according to the Siegel-Gallagher survey of office space. That's almost identical to the rental vacancy rate. But nobody is hitting the panic button for either.
The unshakable belief remains, as UW real estate prof Tim Riddiough puts it, that "the stars are almost perfectly aligned for a building boom to occur."
Sure, one of the condo projects could founder if it misjudges customer demand, insiders say, but the soft market for older property is as much an opportunity as a setback for downtown housing, they say. Can it be converted back to single-family housing? Can some of it be ripped down for bigger, denser, more contemporary housing?
Downtown office rental, meanwhile, is clearly a divided market between Class A, with its ramp parking and new mechanicals (vacancy rate: 7%), and the less desirable Class B space, which lacks those amenities (vacancy rate: 22%).
"The substantial vacancy rate in Class B doesn't mean there isn't demand for good-quality, well-conceived Class A space," says Tom Neujahr of Urban Land Interests. His firm has commenced the first major office construction since Alliant pulled out, a nine-story tower that will finish off its impressive Block 89 complex.
Other problems are duly noted. McGrath, the premier downtown condo developer, says the rising cost of raw materials is becoming troublesome. Riddiough warns that an uptick in interest rates could panic bankers from underwriting new projects. But developers are always facing worrisome what-ifs. It's part of their game.
The most serious question facing the central city is something more basic: jobs. Can new ones be created, old ones protected?
The far-sighted Isthmus 2020 plan, adopted in June 1998, set ambitious goals -- 4,500 new housing units and 14,000 new jobs -- over the next two decades. Seven years into the plan, the city is spectacularly on the way to exceeding the housing target, while jobs are seemingly bleeding away.
Alliant's relocation ripped out 875 jobs. The bursting of the dot-com bubble and the downsizing of Sonic Foundry ended any talk of "Silicon Isthmus." The once-popular notion that the isthmus could draw a big corporate headquarters isn't voiced anymore. And Gov. Jim Doyle has taken a scythe to the state workforce.
Michael Gay, a city business development specialist, forcefully argues that Madison needs to do more to keep business and industry in the central city or the job hemorrhage will continue. He cites the hundreds of jobs lost in recent years with the closing of Marquip, Kohl's, Rayovac, Morningstar Dairy and Mautz Paint.
More condos aren't the answer, he says. "Mixed-use residential with commercial on the first floor is not a major job generator."
Gay argues the city has to come to grips with the parking needs of business and the cost of land acquisition -- or those businesses will leave for the beckoning arms of the suburbs.
This, obviously, is a huge issue. There are developers and planners who argue just as strongly that the city should trust the market. Let the housing boom roll, and the jobs will follow. Gay fires back: "Is that what the market calls for? Or is it just easier to finance?" As we sip that celebratory glass of Veuve, it's something to think about.
Caitlin Cieslik-Miskimen contributed to this story.