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Thursday, March 20, 2014

Jennifer Sereno: New economy trends promise to shape Wisconsin's landscape this construction season

By Jennifer Sereno
Spring may be a time for melting snow and potholes in Wisconsin, but more prophetically, it's a time for tower cranes to sprout and new foundations to take root.

This spring, construction appears set to rebound in several sectors, buoyed in part by some New Economy trends.

Bernard Markstein, chief economist for Reed Construction Data, which develops forecasts based on building permit activity and new projects out for bid, anticipates total construction spending to rise by 5 to 6 percent nationwide after accounting for inflation in material and labor costs. He expects southern Wisconsin, including Madison and Milwaukee, to perform nearly on par with the national level while local experts offer up several area projects that exemplify important socioeconomic changes.

Matt Mikolajewski, manager of the Office of Business Resources with the city of Madison, says it's no secret that Epic of Verona is contributing to a boom in professional-caliber apartment projects in downtown Madison. His latest count shows about 3,200 apartments under construction or in the approval process – up dramatically from last year's already record pace of roughly 1,600.

"I don't believe as a city we've ever seen this amount of apartment growth, but Epic isn't all of it," Mikolajewski says. "It's also young professionals who are holding off on purchasing a home and want to stay in an apartment for a longer period of time."

Given some of the amenities on tap – from rooftop pools to dog washing stations – it's no surprise that a growing number of affluent young renters are opting out of the responsibility and long-term commitment associated with home ownership. Interestingly, though, it's also empty nesters fueling Madison's high-end apartment boom.

Mikolajewski points to some who have recently moved to the area as well as lifelong residents who are now ready to sell large family homes into the recovering market and downsize. The big loser in the trend? New condominium projects.

"There's very little in the way of new condominium construction at the moment," he notes. Plans for new single family homes also remain well below the area's historical average.

On the commercial end of the spectrum, Markstein of Reed Construction says he anticipates an uptick in health care construction as uncertainty over the Affordable Care Act diminishes. In the Madison area, growing demand for quality health care is already playing out with this weekend's ribbon cutting at the new $68 million Sauk Prairie Hospital in Prairie du Sac.

Following the 10 a.m. ribbon cutting on Saturday, March 22, the 36-bed facility will welcome visitors for an open house and tours from 10:30 a.m. to 5 p.m.

Visitors to the new hospital, on 115 acres near the intersection of Highways 12 and PF, will be sure to notice a second major medical project under construction next door. The multi-tenant clinic now under construction will total some 60,000 square feet with a projected cost in the range of $10 million to $12 million.

Alan Main, president of Development Solutions Group, says the project will be home to specialty clinics and patient services for Dean, UW Health, Home Health United and Advanced Pain Management. It also will house additional clinics and related providers for Sauk Prairie Hospital including a new women's health center, orthopedic team, cardiac rehabilitation center and sleep lab.

Markstein says hospitals and clinics increasingly recognize the need to deliver services where people live, in some cases expanding to suburban areas and in other cases opting for additional clinics offering targeted services in more central locations.

"If you build new, (there's no) better place than close to your patient population,'' Markstein notes. In many cases, retrofitting older health care facilities can become prohibitively expensive while new construction may help reduce operating costs, increase energy efficiency and provide an opportunity to upgrade equipment and patient care amenities.

Within Madison, the trend can be seen with a UW Health clinic planned for the Gorman and Co. Union Corner development on the East side and a Meriter physical therapy clinic planned on South Park Street, the city's Mikolajewski says.

"Overall on the commercial side, I think we're starting to see an uptick in terms of projects moving through the development process," Mikolajewski says. Generally, the construction outlook "looks good and we're seeing a lot of activity."

In short, spring is in the air. Can the cranes be far behind?

-- Sereno is a former business editor of the Wisconsin State Journal who has written about new economy trends for various publications. Send email to sereno.jennifer@gmail.com.


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