Rendering of proposed development in Wausau's Riverlife area. Image courtesy: SC Swiderski/City of Wausau
CONLEY COMMENTARY (WSAU) Years ago, I spent a night in one of the luxury penthouse suites at the Jefferson Street Inn. It was three rooms that overlooked the 400 block. If you wanted too, you could rent it by the month or buy it was a condominium.
And, yet, as nice as it was, I wouldn’t want to live there. Sure, being able to watch the summer concerts on the square from your balcony would have been nice. But consider what a pain in the neck grocery shopping would be. Your car is parked in the ramp across the street. Unloading involves an elevator, then the skywalk, then an elevator to your home. That would get tiresome really fast. I suspect I’m happier in my much-more-modest stand-alone house where I park in my own garage. And my housing costs are much more reasonable.
Wausau is making a bet that there are lots of people who want to live in luxury rental properties near downtown. I don’t see it. Yet that’s the lynchpin for the Foundry on Third project, which we are promised will break ground in May, or the Riverlife project, which the developer pulled the plug on last week. If you’re uncertain you call fill all the units, these projects don’t make sense. And the landlords are nervous about finding all the renters they’ll need to make the projects pay.
Remember, being a real estate developer is highly speculative. But most of your costs are one-time, upfront expenses. Things like labor, steel and lumber are paid for once. Interest rates from the bank are ongoing costs, especially if you can’t fill all the units. That’s the big question mark.
What went wrong: the Biden economy. Interest rates remain high to put a brake on the inflation we saw two years ago. We’re told they’re not coming down any time soon. Construction materials are still expensive compared to pre-pandemic prices. Labor costs are through the roof. Supply chains are still fragile, and construction delays leave the developer paying interest on a project that isn’t generating revenue yet.
Remember when you hear the political spin that Bidenomics is working – only we’re too dumb to see it. Well, the developers, who take big risks and put up big money, have seen enough. At least they have in Wausau.
Chris Conley
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