Developers in Downtown Milwaukee Play With Hot Hand Due to Strong Demand
Ben Franklin, one of our nation’s Founding Fathers, famously said, “Well done is better than well said.” Milwaukee has a long history of ideas that are well said.
There is no shortage of opinions and sound ideas on how to attract companies to the city, how to improve the public transportation system and how to get more people to live in the city.
But these well-intentioned ideas, more often than not, don’t get implemented. Finally, after a decade of virtually no new development, things are happening.
In the August 2015 issue of this magazine, I wrote a column focusing on development in downtown Milwaukee titled “Proposed New Arena for Milwaukee Bucks Could Lead to a Development Run.” Indeed, that’s what is happening. After much debate, the arena is finally under construction. It will span 715,000 square feet and hold 17,500 people.
Just as impressive is the ancillary development surrounding the arena, including the Froedtert & the Medical College of Wisconsin Sports Science Center that will serve as the new practice and training facility for the Milwaukee Bucks as well as a health center.
The new Arena District will also be home to a “live block” comprised of four to five acres of both retail and community uses, and will include parking structures, apartments and ground-level retail opportunities.
While the development is being completed in stages, construction of the training facility is slated for completion by the beginning of the 2017-2018 season, with the arena slated to open for the 2018-2019 season.
Flight to quality
Approximately 800,000 square feet of office space has been added to the downtown Milwaukee skyline every decade since the 1960s, with spikes in the 1970s and 1980s.
With only two buildings — 875 East and Cathedral Place — constructed in the 2000s totaling a combined 440,000 square feet, Milwaukee was due for development.
Last year, 833 East, a 358,000-square-foot office building, and the first since 2004, opened its doors. Having achieved a rather impressive tenant roster that includes law firm Godfrey & Kahn SC, KPMG, PricewaterhouseCoopers LLP and Johnson Controls, the property is now over 75 percent occupied, with just over 70,000 square feet of contiguous space available.
Healthy vital signs
Overall, the Class A market continues to outperform Class B buildings, with the vacancy rate hovering at just over 9.5 percent for Class A and 14 percent for Class B, according to JLL Research. Over the past 36 months, 17 old and functionally obsolete office buildings totaling approximately 1 million square feet have been redeveloped as multifamily and hotel properties.
This trend has had a positive domino effect on the rest of the market, as owners of the remaining Class B and C office buildings have stepped up their game, making long-needed improvements and raising rates.
Developer Irgens recently announced plans for a new 360,000-square-foot, 25-story office tower that will be anchored by BMO Harris Bank and law firm Michael Best & Friedrich LLP, which will occupy 51 percent of the development. Construction is expected to begin this fall, with an estimated completion date of December 2019.
Marcus Corp. also unveiled plans early this year for Edison Place, a 20-story, mixed-use development that will include a 56,400-square-foot movie theater, 162,000 square feet of residential space, 113,800 square feet of office space and 297,000 square feet of parking. Construction is expected to commence this fall with an estimated completion date of fourth-quarter 2019.
Meanwhile, Hammes Co., which is currently located in Brookfield, a suburb of Milwaukee, is planning to build a five-story office building in downtown Milwaukee that will serve as the company’s new headquarters. Phase I of the project is expected to be completed in January 2018.
Migration to downtown
Hammes Co. is among the growing number of suburban office tenants that have committed to downtown over the past few years. To date, JLL has tracked over 185,000 square feet of office space downtown committed to by tenants previously operating in the suburbs.
Some of the more notable companies that have either committed to or have already relocated downtown include marketing firm Bader Rutter, which will occupy almost 70,000 square feet in the Laacke & Joys redevelopment along the river; Decision Resources Group, which occupies 25,000 square feet in a Class A building in the CBD; and Badger Liquor, which has signed a long-term lease for 25,000 square feet at Schlitz Park.
Other notable moves to downtown include real estate brokerage firm JLL, SafeNet Consulting, Microsoft and Monster Worldwide.
With only two blocks of space larger than 50,000 square feet currently available in the central business district and several large tenants with leases set to roll in the next several years, it is inevitable that construction will commence on one, maybe two additional office towers. That would mean new development this decade would outperform the historical average by several hundred thousand square feet.
Office isn’t the only sector that has experienced rapid and steady development over the past several years. Currently, there are 1,253 apartment units under construction in downtown Milwaukee, with another 2,123 planned or proposed, according to JLL Research. Many wonder if it’s too much, too soon.
To further support urbanization, construction is underway on Phase I of The Milwaukee Streetcar, which is slated to begin service in 2018 with the Lakefront Line extension launching service in 2019.
Even Vogue magazine has taken notice. In a November 2016 article — titled “5 Industrial Cities Making America’s Rust Belt Shine Again” — the author noted that “America’s Dairyland is playing host to an emerging culinary and microbrewery culture, rivaling even the largest of its city neighbors.”
Between the office and multifamily development, the streetcar, and of course a new NBA arena, we can move past “well said” and finally say “Well done Milwaukee, well done.”
-By Regina Levchets, CCIM, Broker, JLL. This article first appeared in the March 2017 issue of Heartland Real Estate Business magazine.