Green Bay, Wisconsin
The Packer City is Ripe for Portfolio Expansion…If an Investor is Creative
By Carole VanSickle Ellis
During the Great Depression, Green Bay, Wisconsin, avoided the worst of the economic downturn thanks to the prevalence of toilet paper companies in the city. In fact, with the introduction of splinter-free toilet paper in the early 1930s, the city’s recession-resistance was all but guaranteed.
Today, the “Toilet Paper City” is known more popularly as “Packer City” for its wildly popular football team, the Green Bay Packers, considered among the last of the “small-town teams” and valuable thanks to the winningest record in NFL history (13 league championship wins and four Super Bowl victories) and an exceptionally loyal fan base that has sold out every regular and playoff home game since 1960 regardless of team performance.
This record is, of course, marred by the 2020 COVID-19 pandemic, during which Packers fans were forced to stay home and watch their team play in an empty stadium out of concern for public safety. The Packers bring in roughly $15 million in economic impact per playoff home game and have an outsized impact on the regional economy and the local real estate market.
Green Bay is a relatively small market, described by its own chamber of commerce as being “much more than two cities, nine villages, and 13 towns.”
The city is the third-largest in the state of Wisconsin, however, and tends to outperform the rest of the state in terms of employment and income. In fact, for 2022, Best Places reported Green Bay’s future job growth rate would likely exceed that of Chicago, Illinois, by nearly 10 percentage points and would edge out national growth as well.
Although Green Bay’s median income is about $15,000 less, annually, than the national median and is $6,000 below that of Chicago, the town benefits from a relatively low cost of living (82.3 on a scale of 100) and the massive influx of football-driven spending during the NFL season.
That influx represents huge opportunity for real estate investors on all scales, from individual short-term rental owners to investors with larger portfolios.
For example, one local retiree rents her property near Lambeau Field out on weekends when the Packers play at home. One weekend during the playoffs earns her around $5,500, and regular-season game rates can be hundreds or thousands of dollars for a weekend. That rental income represents most of her retirement budget, said her son, noting that this is the only thing his mother has “lined up” other than social security. So far, it has been enough, and she, like local businesses and the Green Bay government, is determined to keep Packers fans happy – and coming back for years to come.
“Our hope and our goal are to ensure that visitors have a very, very positive experience while they are here, and then they want to come back,” said Nick Meisner, vice president of marketing and communications for hospitality group Discover Green Bay. The result of this concerted effort is a strong, stable market that is both resilient and relatively affordable.
More than Just a Football Town
While the Green Bay Packers certainly are the “headliners” when it comes to a discussion of Green Bay real estate, they are not the only game in town when it comes to investment opportunities. Jeff Cichocki, a Green Bay real estate investor who also runs a hard-money investing fund, emphasized that while the Packers certainly boast an outsized economic impact, Green Bay offers much more than just football. People come to Green Bay and stay for years as well as just for the weekend, he said.
“Single-family homes have been flying off the shelves and the amount of cash flooding into the market for investment properties has impacted the Green Bay market in unique ways,” Cichocki said, observing that long-term rentals are a viable option in the area although short-term rentals tend to garner more attention due to the sky-high rates associated with Packers games.
“Investors in a position to pay cash for properties will pick up the good deals,” he added, “but we also are seeing investors trying to acquire [over-valued] deals that do not pencil out.” This is due in large part to the very limited residential inventory in the area at present. Cichocki, a private lender himself, also said many buyers are finding themselves unable to finance homes using traditional bank loans because home values are rising so quickly and they are being beaten to the punch by other buyers willing to make purchases without contingencies or for cash.
According to Redfin, Green Bay home prices rose by more than 13% at the end of Q1 2022, and average homes are selling about 5% over list price in just about a month’s time.
Investors should beware of the temptation to jump at any deal just because it is available since sellers are optimistically pricing properties at present. This type of “fever” can be dangerous, especially in volatile markets where many factors are in play at once. “There is a lot of shakeup in the U.S. economy right now,” Cichocki said. “Markets are moving fast in lots of directions at once with the biggest challenges in the middle. That is why we are still seeing a lot of speculative pricing from sellers looking to see if anyone bites.”
Green Bay’s local economy is more diversified than many investors realize thanks to the prevalence of manufacturing jobs in the city and a municipal emphasis on attracting and supporting a startup community. At the end of 2021, county executive Troy Streckenbach announced a variety of workforce investment packages and building projects, including a $15 million STEP Innovation Center and another $5.6 million for an “innovation park” named for Fox River Papermaking and Green Bay Packaging. He reported that GDP baseline projections for Green Bay were “optimistic.”
The presence of the Port of Green Bay, a multimodal distribution center connecting marine freight with highway and railroad transport has also contributed to the ongoing growth of the Green Bay economy and resilience of the local jobs market. As the westernmost port on Lake Michigan, the Port of Green Bay is a crucial transition point for overnight deliveries and is in a near constant state of expansion and redevelopment thanks to the port’s own determination to generate economic activity and conserve natural resources.
“The goal of the port is to generate more economic activity [and] create more jobs,” said Dean Haen, Brown County’s port and resource recovery department director. Currently the port system is hoping to optimize use of existing waterways to reduce shipping costs while increasing the shipping capacity.
“A ship can move 150 rail cars’ or 1,700 trucks’ worth of material,” said Haen. “When you put those types of materials on the water, that is a better quality of life and living.” Local policymakers hope increasing waterway use could lead to “higher and better uses” for attractive locations near the riverfront and in the Green Bay metro areas.
Investors should monitor the planning and implementation of these projects closely since there could be substantial opportunity to acquire valuable properties or participate in development.
Building Up a Base for the Future
As is the case in most areas of the country, one of the biggest issues in Green Bay real estate is the relative lack of real estate available. In 2020, properties that had previously been valued between $150,000 and $200,000 sold for as much as 65% over asking price. By the end of 2021, the same properties were frequently selling for around $300,000. At that time, local real estate agent Dan Ludwig described the situation as one in which “the sellers are in total control.” He added that equity was probably “the highest it has been in 15 years.”
At time of publication, however, there appears to be a slow deceleration appearing on the horizon for the Green Bay market. There is very little inventory across the board, which has pushed prices even higher. As recently as March of this year, sellers were reporting as many as 60 showings in a day in some areas of Green Bay, and an increasing number of homeowners say they will not list their current house until they have purchased their next home. With competition so steep, this keeps inventory even tighter, which, in turn, drives up prices for homeowners and renters.
For investors hoping to enter the market, however, this white-hot environment could indicate a change is on the horizon. Analysts expect things to begin to level off even if they do not turn downward. At present, investors who own rental properties in the area are seeing strong returns on those investments, but many are having difficulty acquiring more properties. The forecasted deceleration could be the change they are waiting for.
The Green Bay area also has a documented shortage of affordable single-family housing, particularly at the sub-$100,000 and the $300,000 range. According to a recent city-commissioned analysis of Brown County (where Green Bay is located), the housing market will continue to “struggle to meet demand” across price and style spectrums. Cheryl Renier-Wigg, interim development director for Green Bay, said city planners are working to address the need for more than 7,000 new apartments and an additional 9,000 new single-family homes by 2040.
The city said it will lay out a strategy involving the use of incentives for development in order to “promote the desired construction.” Kurt Paulsen, a professor of urban planning at the University of Wisconsin-Madison, recently warned that the emerging population of first-time Millennial homebuyers will move elsewhere if more housing does not become available soon.
“It is a perfect storm for housing right now [because] prior to COVID…we were not building enough homes, and we were not building enough rentals,” Paulsen explained. “Prices were already up…and then you layer COVID on top of it [and] it is a perfect storm.” He noted that supply-chain issues are impeding many developers’ progress because “you can’t get garage doors, appliances, or carpeting, and the price of lumber is five or six times what it used to be prior to COVID.”
Paulsen estimates that the state of Wisconsin as a whole is creating only about one-third of the amount of housing needed for the state, with fast-growing job centers like the greater Green Bay area coming up even shorter. He concluded,
“If you want to keep your workforce, you have to house your workforce,” warning that young professionals and first-time homebuyers in their early- and mid-30s will “move to another state” if they cannot access affordable housing appropriate for their households.
For real estate investors, this indicates a clear opportunity in markets like Green Bay that are bucking the long-time Rust Belt trend of losing value over the long term. Providing attractive, long-term rental homes or offering creative strategies for renters to become homeowners via rent-to-own or other creative financing methods could be a good way to get a toehold in this still-growing market despite serious competition for properties. With analysts like Paulsen predicting the inventory “crunch” will not let up for between three and five years, creativity will be key for real estate investors interested in growing their portfolios in this unusual market.
Sidebar
Short Term Rentals Offer Huge Rewards, Potential Headaches
The 2020 COVID-19 pandemic crushed the Green Bay Packers and the team’s fans in a way that no competing team ever could. Canceling games and then playing in empty stadiums to fight the spread of the virus, the $2.63-billion franchise posted its first fiscal loss in two decades and posted a $38.8 million loss for the fiscal year. The local economy suffered even greater losses as a result of the team’s troubles, with ancillary businesses reporting 70.7% declines in local revenues as a result of fan absence.
By 2022, Packers-related revenues were soaring once more as eager cheeseheads swarmed back to Packerland first for regular-season games and then for playoff games. Short-term rental owners rejoiced along with other local businesses, and many were hoping to finally see pre-pandemic investments in Airbnb properties pay off as fans returned to party and cheer on the team.
In 2017, Green Bay was considered one of the top investment locations for short-term rentals, offering an average monthly income of $2,200 and Cap rates higher than 10%. During the pandemic, however, even the efforts of the Green Bay Packers themselves to turn their stadium into a year-round tourist destination failed to staunch the bleeding as pandemic-era restrictions and general fears related to COVID gutted the local tourist industry resulting in billions of dollars lost along with tens of thousands of jobs.
By 2022, the sector was in full recovery, with Airbnb properties renting for more than $1,200 a night. However, proposed regulations that would limit short-term rentals to six-night minimum stays have some investors concerned, although historically Green Bay has worked hard to make Packers fans’ stays in the area as easy as possible. Local residents say the issue is more than just traffic and inconvenience on game days, which is why they are asking local policymakers to inspect short-term rental properties for health and safety reasons.
“This is way bigger than Packers season,” said one community president. “It is every weekend; it’s constant, and it’s getting bigger and bigger.” Some of the villages that make up the greater Green Bay area are also attempting to restrict the number of rentals permitted in their boundaries or keep rentals within a certain distance of Lambeau field. Investors should monitor local news and the dialogue surrounding short-term rental regulation before investing in these assets.
