Commerical Building Is Strong in Madison, Wisc.'s Suburbs

Aug. 11--If you're out in search of construction crews putting up a new row of stores or an office building, look no farther than Madison's suburbs.

There's just as much commercial building under way outside the city as there is within Madison now -- in fact, a little bit more.

"It's not surprising," said Michael Reisinger, vice president of brokerage services for commercial real estate firm CB Richard Ellis in Madison.

"Look at some of the business parks in Fitchburg or all the activity out in Middleton. Those areas are really not (seen as) too far out now," Reisinger said.

In Madison, $248 million worth of nonresidential construction got under way in the past 12 months. That's slightly less than the $261 million worth of projects that began during the previous 12-month period.

Throughout the rest of Dane County, though, $250 million worth of nonresidential projects broke ground during that period, slightly more than Madison's figure, State Journal research shows.

The totals are based on major projects valued at $500,000 or more in building permits issued between July 1, 2005, and June 30, 2006. They don't include retail areas within new housing developments -- such as the Trader Joe's grocery store that will be part of Monroe Commons -- or projects being built by the state or UW-Madison.

"The cost of construction certainly has gone up, but those are healthy numbers," Reisinger said. "I think things are extremely healthy."

In Madison, now that the five-year, $210 million Overture Center construction has wrapped up, the city's largest nonresidential project is the St. Mary's Hospital expansion, a plan that will stretch more than 10 years and cost $174 million. During the past 12 months, permits were approved for about $90 million worth of construction, including an addition to the hospital's power plant.

In the suburbs, medical records technology developer Epic Systems' $150 million campus in Verona continues to lead the pack. The latest portion of the project, which received a permit in the past year, is valued at $50 million.

Focus on Fitchburg

Fitchburg was Dane County's No. 1 spot -- outside Madison -- for commercial construction starts over the past 12 months, with $72 million worth of major projects.

For a city that's one-10th the size of Madison, Fitchburg alone had enough new offices and stores going up to equal more than one-fourth the value of Madison's nonresidential building starts during that time period.

Why is Fitchburg so hot?

"Location, location, location," said John T. Crook, Fitchburg's building inspector. "We are halfway in between (Madison's) East Side and West Side."

Crook also credits the favorable tax climate and aggressive business development office in the city of 22,000 along Madison's Southwest Side.

The result was a mix of projects, from the $13.4 million addition at Sub-Zero for manufacturing wine refrigeration units, to the $14 million Ellen and Peter Johnson HospiceCare Residence, to the $16.5 million Town Center building in the Fitchburg Center, which will house, primarily, an expansion of the area's biotech pioneer, Promega Corp.

"I think it's land availability," Reisinger said. "If you look at Madison and the ability to buy land -- to build either an office building or some type of service or flex building -- the availability of sites is not real high in Madison."

Middleton has also benefited from that, he said.

Commercial construction in Middleton totaled $50 million between July 2005 and June 2006. Several restaurants, a UW Health plastic surgery clinic, a $9.9 million Courtyard by Marriott hotel, expansion of technology company Standard Imaging, new facilities for Schoepp Motors and a $4.75 million Lexus dealership were just some of the projects that got under way.

Major building projects also broke ground on the UW-Madison campus, such as the $143.9 million Interdisciplinary Research Complex, the $120.9 million Microbial Sciences Building and the $190 million University Square development, which will feature apartments, offices, stores and underground parking.

Construction material prices steady after Katrina

A year ago, there were fears that rebuilding after the devastation left by Hurricanes Katrina and Rita would lead to shortages in construction materials and sky-high prices.

That didn't come to pass, said Tom Thayer, president and chief executive officer of Tri-North Builders in Madison. Initially, prices for some materials spiked, but they later leveled off, he said.

"The actual reconstruction is taking a lot longer than had been anticipated, so material usage is being spread out over a longer period of time," Thayer said. Part of the problem is: "They just can't get as much manpower to rebuild as fast as they'd like to."

Materials such as cement, iron ore and wood still cost more, though, mainly because of China's rapid industrial growth, Thayer said.

Nationwide, the number of jobs in the construction industry has been stable for the past five months, according to the U.S. Bureau of Labor Statistics.

While home building is down, commercial construction and specialty trades added nearly 16,000 employees in July, on a seasonally adjusted basis.

Hospitals, manufacturing, energy and travel industries are adding buildings "at a high rate that should sustain further growth in construction jobs," said Ken Simonson, chief economist for the Associated General Contractors of America.

--Judy Newman

Office construction takes a break

Cubicle construction is on a coffee break -- a long, triple-cappuccino of a break.

The number of commercial office buildings that took shape in Madison during the past 12 months dropped sharply from the previous year. Office starts totaled $57 million, less than half of the $122 million worth of projects initiated over the previous 12-month period.

"I think we are seeing a slowdown in speculative office construction, mostly due to a lot of big buildings being put up (the year before) and filling those up," said Chris Richards, research analyst with Oakbrook Commercial Real Estate in Madison.

Major retail construction starts also dipped in Madison during the past year to a total of $13 million from nearly $19 million the previous year.

Monona's retail construction was nearly as high as Madison's, and just from one project: A $12 million Wal-Mart.

Huge stores could boost suburban building totals again next year, with plans for a Target store along McKee Road in Fitchburg and a controversial proposal for a Wal-Mart supercenter in Stoughton.

Tom Thayer, president and chief executive officer of Tri-North Builders, said projections show retail construction will remain high next year.

"The construction industry is strong here and it's strong nationwide," he said. "I think 2007 will be equally strong."

-- Judy Newman