A rendering of the Hub on Campus Madison, as portrayed facing southeast across State Street.
From Les Orosz's point of view, you'd be crazy to break ground on another student apartment project in Madison right now.
"Quite frankly, the Hub is adding 1,000 bedrooms downtown," says Orosz, a developer who built one of Madison's first high-end student apartment buildings, the Embassy, at 505 University Ave. "It would be pretty reckless right now for someone else to build another 12-story student tower."
In the past few years, Madison has seen a remarkable spike in apartment construction, much of it geared toward students. This fall, three projects marketed toward UW-Madison students opened for residents: City View, at 313 N. Frances St.; Park Place Luxury Apartments, 212 N. Bassett St.; and Varsity Quarters, 1423 Monroe St.
The Varsity Quarters project came down to the wire, as workers raced to finish construction in time. Julie Ledger, vice president and general manager of Opus Development Company, which built the project, says despite these delays, the building is getting renters.
"Our project has been leasing quite well, even considering not getting in the ground right away," she says. Ledger says the new buildings will ease the demand for student housing.
"It's certainly going to impact the market next year, significantly," Ledger says. "But we gauge and monitor our competition pretty closely, and all of the big buildings appear to be 100% or close."
Scott Faust, who developed City View and Park Place, says his projects are renting well, though perhaps not as fast as expected. "The newer buildings, I think because the rents are higher, are moving a little slower," he says. "But we're 90% leased at this time."
One project that is likely to have an even bigger effect on the student market is the Hub on Campus Madison, a 12-story luxury building on State Street that includes a pool and other amenities. It is expected that young professionals, as well as students, will live there.
"The Hub will get full, but it will release more and more of the student housing [to other markets]," Orosz says. "If [UW-Madison] enrollment holds steady, you should be done seeing more student housing."
Mayor Paul Soglin expects the boom in construction to continue. He notes that back in 2011, the city had an apartment vacancy rate of about 1.5%, which is extremely low. The vacancy rate is now around 2.5% to 3%, he says. An optimal vacancy rate would be about 5% to 6%, according to Soglin.
"Once we hit 4.5%, we could still absorb over 1,200 new units per year and be in equilibrium," he says.
'Rack and rail' parking
Orosz expects to see more apartment housing of other types, with the market for young professionals still strong.
He had hoped to break ground on a project in the 400 block of West Johnson Street by now, but has delayed it over complications with parking.
Although there is some overlap in the student and professional markets, Orosz defines student projects as ones that include units with three or four bedrooms.
"What defines student housing is a large number of beds," he says. "That and parking. Student housing doesn't need as much parking."
Because apartments for professionals require more parking, it drives up the cost of construction, Orosz says. "Madison being an isthmus and the water table being high, it's very difficult to build these buildings and get adequate parking," he says.
His proposal for West Johnson Street attempts to deal with this issue by using a robotic "rack and rail" system, where cars drive onto a bay and are then stored underground with a computerized mechanical system. This requires much less space than self-parking garages.
"The beauty is you don't need a drive aisle. You pretty much double the capacity for parking in the same area," Orosz says. "We would have only got 75 spots [with a traditional ramp], but we're getting 150 spaces."
The computer also has a memory that, over time, allows it to know which residents use their cars when, leading to faster retrieval times. The system will be one of the first in the Midwest, and Orosz expects they will become common here.
"It's valet parking, quite frankly," he says. "What it's going to do is make different sites, especially in Madison, feasible for development. It will alleviate some of the parking issues."
Orosz is also shrinking the size of his units slightly, in order to make them more affordable while still including the amenities. He hopes to have the unnamed development on West Johnson Street up in 2016.
Brad Binkowski, one of the owners of Urban Land Interests, agrees that the market for non-student housing remains strong. ULI has built luxury apartments, like Seven27 and Tobacco Lofts, in the Bassett neighborhood.
"For what we do, there's a really strong market. We were four months late on Seven27 because of a wet spring. We leased that building to 100% within four months of opening, and it's 100% still," Binkowski says of the project, which opened last year. "I see the market here growing and continuing to grow."
Still in great demand are apartments that the working poor can afford, especially downtown. Last week, Soglin proposed a $20 million program to build 750 to 1,000 affordable units over the next five years.
Ald. Mike Verveer praises the mayor's plan but expects affordable housing to remain scarce downtown. "A big reason for that is the high cost of land downtown," he says.
Despite the boom in luxury housing, older houses in traditional neighborhoods continue to appeal to students.
"Hundred-year-old houses that are something of an endangered species -- those have been very solid in renting," says Verveer. "The notion of being able to live in a house and have a porch is still attractive to a lot of students. Not every student is interested in living in a high rise."
Verveer and others hope would like to see some of the older housing stock renovated and converted back into single-family homes or owner-occupied duplexes.
The Common Council recently changed its "small cap tax incremental tax financing" program, increasing the amount of money homeowners can get for renovating older homes in the Mansion Hill, Greenbush and Vilas neighborhoods, says Ald. Ledell Zellers.
Now, people can get up to $100,000 forgivable loans from the city for renovating a three-unit house, provided the owner lives there. They can get up to $90,000 for a duplex and $80,000 for a single-unit home in these neighborhoods.
"There's a lot of people who would enter one of these beautiful old houses, love a lot about it, see the potential, but then just freeze and not know where to start," Zellers says. So the program was also changed to allow a developer to do the bulk of the renovation and resell it to someone who will live there.
Zellers, who has renovated a home in Mansion Hill, is hopeful it will encourage other families to do the same. But she's not expecting a flood of families pouring into her neighborhood.
Says Zellers: "The reality is, if we got three I'd be thrilled."