WisBusiness: Some worried Overture opening could spur skyrocketing rents
By Brian E. Clark
MADISON – There are a few grumblings here and there, but most downtown merchants are hoping Saturday's grand opening of the $205 million Overture Center will lead to more business and improvements in their neighborhood.
"I think it should be good in the short term and, I hope, in the long run," said Agape Hammond, who runs the "Ideal for You" gift shop at 103 State St.
"People will come downtown to see what it's all about initially and it should attract customers overall, at least that's what we're counting on," she said.
The flip side, however, is that increasing property values and rising property taxes will almost certainly lead to higher rents for small shopkeepers – some of whom are struggling to get by.
"The neighborhood is already seeing increases," she said. "I'm negotiating to open another store, a gourmet candy shop on State Street and landlords want more than what they were charging.
"They say we'll make a lot more money, but we can't count it yet," she said.
Another merchant, who asked that his name not be used, said he expects his rent to be raised significantly.
"It's just how the system works," he said. "They see this as a way to get more money out of us. They say we'll make more because of the so-called 'Overture effect,' but I don’t know.
"If we go, the character of State Street will change and they may just end up with a bunch of franchises, like a suburban mall," he said glumly. "But maybe they don't care as long as they get more money."
Susan Schmitz, president of Downtown Madison Inc. said she has heard the talk about franchises and other changes coming to State Street.
"I know that some business owners are scared," she said. "I can understand because I used to own my own business.
"They wonder if rents will increase faster than they can get their profits to increase. I guess this will all have to work its way through," she said.
Schmitz is a big booster for the Overture Center and said she thinks it will not only draw more people from Wisconsin, but from neighboring states as well.
"I think they'll come," she said. "But then we've never had a building like the Overture before. It raises the ante and can't help but have a positive effect."
Schmitz said State Street is already undergoing a revival, which can now be seen in the revitalized 100 block.
"It was a push from Overture," she said. "Hopefully, landlords will upgrade their facades, install planters, even wash their windows more often. I think the downtown will become more beautiful."
Schmitz said the market will determine if property values are affected.
"Sometimes it does and sometimes it doesn't," she said. "If you are a property owner and your value goes up you, you could borrow against that and fix up your building. Some already are."
John Hayes, president of Goodman Jewelers in the 200 block of State Street, said his company wanted to spruce up its store in anticipation of the Overture opening. The Goodman family owns the building in which the jewelry store is located and several other downtown buildings.
"We wanted to be prepared for a fresh, new exciting downtown that is opening around us.
"But it’s more than just the Overture Center," he said. "There are a lot of condos being built. People want to be downtown all the time.
"The Overture was the impetus, but it was 1968 when we last remodeled so it was time," he said
Hayes said it is too soon to tell how much tenants' rents will rise. "But it is already having an effect on property taxes and landlords will figure that into their costs," he said.
"But for merchants it should be a non-issue because we'll have a lot more foot traffic. It will be up to each retailer to capitalize on that."
Dan Milsted, whose family owns about half of the properties on the south side of the 100 block of State Street, said he will do his best to hold the line on rents.
"I think the Overture Center will rejuvenate downtown, so I'm all for it," Milsted said. "And there already were improvements in the works because of the Greater State Street Association and the Business Improvement District. They have made a difference in the success of a lot of small businesses and funky shops."
But retailers also have lost business because of construction on Johnson Street and State Street, so he said he won't increase his rents any more than his costs go up.
"I'm not going to gouge my tenants because of the Overture Center, but I've got a 150-year-old building to keep up," he said. "I know other unscrupulous property owners, though, who will use the Overture to gouge their tenants.
"I don't intend to do that though," he said. "These folks need a break. I hope retailers here make more money from more traffic and folks who stick around later."
But Milsted said real estate speculators lured by the Overture Center may send property values up and increase taxes.
"Two years ago, my property taxes went up 58 percent, from $10,000 a year to $16,000," he said. "I had to pass it on and I raised rents $200 a month. I'm afraid the speculators might drive small businesses right off of State Street."
Milsted also said he has heard discussions and even seen plans for a park where the buildings on his block now stand. If razed, the fire escapes on Fairchild Street that Overture patron Jerry Frautschi dislikes so much would be gone, replaced by a view of the Capitol from the Overture Center.
"That façade could be cleaned up, but I hope this block doesn’t disappear," Milsted said. "But who knows what will happen in the years to come?"