[April 15, 2026] Rising costs halt new projects as Milwaukee vacancy hits historic low (Milwaukee Business Journal)

On their face, the numbers should spell opportunity for the Milwaukee area's retail market, with vacancy rates across the metro hovering near historic lows as leasing activity holds steady and retailers jockey for limited space.

But much of that healthy competition has been propped up by a glaring lack of new retail supply, with inventory expected to grow by just 0.2% in 2026, according to Marcus & Millichap.

Making new retail development pencil out at rents tenants are willing to pay has become one of the market’s central challenges heading into 2026, said Conor Farrell, a broker at Founders 3 Real Estate.

Swelling construction costs and stubbornly high interest rates have become primary obstacles, creating what Farrell says is a "high barrier to entry." Outside of freestanding concepts like a drive-thru Starbucks, most new projects are out of the question.

In the metro Milwaukee area, for instance, nonresidential construction costs surged 10.74% in the fourth quarter of last year, outpacing the national average of 7.35%, according to Mortenson Construction (https://www.mortenson.com/content/dam/mortenson/global-assets/archive/files/campaigns/recurring/cost-index/2025-q4/construction-cost-index-milwaukee-q4-2025.pdf.coredownload.inline.pdf).

What little retail development remains in the pipeline is increasingly concentrated in a small slate of projects, brokers and retail experts said at a recent conference put on by the Commercial Association of Realtors Wisconsin trade group.

And their deals hinge on an increasingly rare combination of advantages — scale, marquee tenants and public-private support — that makes building viable.

Case in point: The Harvest at Pabst Farms.

Cobalt Partners' 210-acre mixed-use development, split between the city of Oconomowoc and the village of Summit, is set to offer nearly 500,000 square feet of retail. It is the largest project the Milwaukee-based firm has ever undertaken, according to Cobalt President Scott Yauck.

With Costco signed on as an anchor, the project is betting that a destination-style layout nested in a mixed-use development can fill what Yauck calls a retail "void" in the area.

To make the numbers work, Yauck is pursuing tax increment financing with the City of Oconomowoc, though officials have yet to make any formal commitments.

Yauck acknowledges that in today's market, a project like this would be nearly impossible to pull off at a smaller scale.

"Short of finding an area where there's enough demand to create critical mass, or really a compelling, unique situation where the municipality is on board and wants to help, it's really tough to build ground-up new retail that's not on some scale," Yauck said.

But Farrell says it's getting harder to find municipalities like Oconomowoc willing to "play ball" on multi-tenant retail development.

Partnerships like these "have become a lost art," he said.

For Yauck, Oconomowoc checks every box. The market sits along I-94 between Milwaukee and Madison at Highway 67, drawing from a Lake Country trade area that is growing rapidly.

The project has a ripple effect on the surrounding area, with Costco's presence at Pabst Farms making the surrounding acreage a safer bet for investors and prospective retailers looking to move in, noted Isaac Berg, vice president of the Retail Services Group at Colliers.

While Pabst Farms stands out, it is not the only area generating momentum.

In Franklin, a second Costco planned at the former Northwestern Mutual campus at 27th Street and Drexel Avenue has brokers eyeing a potential pocket of retail growth south of the city.

In Brown Deer, a new Target will anchor the redevelopment of a long-vacant shopping center at Brown Deer and Green Bay roads, with additional retail outlots planned for future tenants.

Nebraska-based Woodsonia Real Estate sold a 9.6-acre portion of the Marketplace Shopping Center to Target Corp. and is preparing the site before turning it over for construction.

Building permits for the 128,000-square-foot store were expected as early as last month, with above-ground construction not anticipated until fall and completion targeted for 2027.

To the south, Woodsonia has proposed a five-story mixed-use development on the 5.3-acre former First Citizens Bank office site at 4000 W. Brown Deer Road, calling for 195 residential units, an elevated pool, a two-story restaurant with a rooftop bar, and 21,000 square feet of additional commercial space.

Both the former First Citizens and a former U.S. Bank building at 4200 W. Brown Deer Road have since been razed to make way for the broader project.

"Brown Deer is one of a few retail markets really hitting its stride right now," Isaac Berg, vice president of the Retail Services Group at Colliers, said. "They listened to what consumers were demanding, and landing Target was a huge win."

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