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Milwaukee Market
Infrastructure Activity
Giving Jolt to Metro Area
by Craig Barner
The construction market in Milwaukee is getting a lot of
juice.
The biggest jolt is coming from the $2.3 billion Oak Creek
Generating Station in south suburban Oak Creek. In addition,
work is humming on the $810 million reconstruction of the
Marquette Interchange connecting interstates 94 and 43 downtown.
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The good fortune of two mammoth projects under way simultaneously
is atypical in Brew City, said Mike Fabishak, CEO of the Associated
General Contractors of Greater Milwaukee.
"While it's wonderful in terms of employment, they're
not characteristic of our building season," he added.
"But in light of that, we're very strong right now."
The latest data from McGraw-Hill Construction, publisher of
Midwest Construction, confirm the lopsided effect that the
two projects are having on Wisconsin's largest city. Infrastructure
starts were up 376 percent in first-half 2006, to almost $1.2
billion, vs. the comparable period in 2005.
Water management is also driving a lot of infrastructure activity
in part because the Milwaukee Metropolitan Sewerage District
is pursing a number of projects. Sewerage and waste disposal
systems construction is up 275 percent, to $117 million; river
and harbor development work increased 44 percent, to $22 million;
and water supply systems rose 18 percent, to $17 million.
Indeed, the infrastructure category is so strong that it is
offsetting losses in other areas. Overall, Milwaukee experienced
a 63 percent increase in the first half, to $2.1 billion.
"The Milwaukee market has gained a lot of strength,"
said John Rodell, vice president in Milwaukee of Madison-based
J.H. Findorff & Son Inc. He cited a $200 million casino
project that the Potawatomi tribe has planned for the city
as another project likely to have a big impact.
Some Down Sectors
The major sectors that were down in the first half included
commercial (4 percent, to $380 million) and residential (15
percent, to $547 million).
The residential decline is partly attributable to rising interest
rates in 2004 and 2005 to rein in inflation, though the Federal
Reserve recently declined to raise rates again as the economy
moderates.
Construction of multiunit dwellings dropped 26 percent to $115
million, thereby going counter to nationwide trends because
of the craze for condominiums. The AGC's Fabishak said the start
of a large number of projects in 2005, such as the 36-story
University Club Tower downtown, which is projected to be the
second tallest building in the state, likely inflated starts
that year.
"There are other (multifamily) projects in planning,"
he added. "The question is whether they'll go considering
the softening that's going on in the overall economy."
An emerging trend is increasing development in residential and
other areas in the Kenosha-Racine area about 25 to 30 mi. south
of Milwaukee.
"People are seeing that they can build more economically
there than in Chicago or Milwaukee and get a view of Lake Michigan,"
Findorff's Rodell said.
Strong markets in Milwaukee include library and museums (up
5,000 percent, to $44 million), office and bank buildings (69
percent, to $64 million) and amusement buildings (30 percent,
to $11 million).
"Projects are revolving around baby boomers," Findorff's
Rodell said. "All of us are in our prime earning years
are looking for things that support our lifestyle."
The steady market is being reflected in contractor backlogs,
said John Hunzinger, president of the company in Brookfield,
a Milwaukee suburb, bearing his name. Hunzinger had the biggest
backlog ever at the start of 2006, though a drop in backlogs
is expected at the firm going into 2007.
"A contractor's business is so much like a roller-coaster
ride," he said. "We're coming off some big jobs we
burned through."
Because of the strong backlog situation, contractors are hiring.
Rodell said Findorff's office in Milwaukee has increased in
size about 25 percent over the last year.
Mirroring the rest of the country, contracting fees remain stagnant
or up just by the thinnest amount because of fierce competition
to land jobs.
"The margins are pretty skinny," Fabishak added.
SIDEBAR 1
Infrastructure construction is bolstering the Milwaukee building market.
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Milwaukee Starts
(through second quarter each year; in millions of dollars)
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YTD 2005
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YTD 2006
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% Ch. 06/05
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Commercial
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$394
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$380
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-4%
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Residential
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$644
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$547
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-15%
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Infrastructure
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$243
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$1,155
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+376%
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Total Construction
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$1,281
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$2,082
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+63%
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Source: McGraw-Hill Construction
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