In 2017, downtown Milwaukee was unrecognizable from its former self — a year that brought additional outside investment, both public and private development and a rethinking of how we utilize office space. Developers broke a decade-long dry spell in 2016, and now nearly 500,000 square feet of office space is under construction downtown.
It’s a story of persistence, as an overhaul of available office product has occurred over the past few years. Now, a vast majority of outdated Class B and C office product has been removed from downtown, bolstering rent growth and enticing the outside investment that Milwaukee deeply needed.
David Pudlosky, JLL
Outside investors
Prior to the close of 2017, one of downtown Milwaukee’s largest office buildings and the third largest multi-tenant office complex in the state, 310 West Wisconsin Avenue, sold to an investment group based in New York.
Just as Millbrook Real Estate Co. and Fulcrum Asset Advisors finished renovating, rebranding and reopening the Two-Fifty office building — a downtown tower that struggled for years — Milwaukee’s second largest office tower, 411 East Wisconsin, sold to Middleton Partners. The repositioned property sold for $50 million more than it fetched just three years prior.
Both projects are a testament to the fact that Milwaukee can now offer investment-grade assets, especially with the recent change in how we view office space. Talent acquisition and retention is a main priority for area firms, as companies aim to leverage cool yet productive office space as a recruiting tool. Common spaces, flexible work stations and building amenities are now high on most firms’ real estate priority list, with concerns centered more about the work experience than how much the real estate will cost.
Kyle Koller, JLL
Where is the most activity?
When it comes to downtown development, the office, hotel and multifamily sectors are booming. The proof is in the pudding. Developers delivered the Westin Hotel and Homewood Suites in 2017, and the pipeline is ripe with ambitious developments such as a hotel tower on top of the Scottish Rite Masonic Center and two competing proposals for a site across from the Wisconsin Center — each looking at bringing up to 500 additional rooms.
Available lots in the northern part of town and the Third Ward continue to be filled by multifamily developments, providing the necessary housing for both millennial workers and empty nesters who prefer living downtown rather than the suburbs.
Both 735 W. Wisconsin and 633 W. Wisconsin, older office product west of the river, were sold to developers looking at potential multifamily conversions, but 633 W. Wisconsin will remain as office space.
But the story revolves around the shift in office demand that has the priciest space in the city looking like a good option for firms that have only been able to renew their leases due to lack of alternative space.
Hammes Co. is building its 79,000-square-foot office headquarters that will include 43,000 square feet of available space; Milwaukee Brewing Co. is bringing 60,000 square feet of speculative space to the west side of downtown; and BMO Harris Bank will anchor Irgens’ new 360,000-square-foot office tower with law firm Michael Best & Freidrich.
Milwaukee radar screen
While the excitement locally has Milwaukee developers and firms strategizing their real estate goals, high-profile projects have helped keep Milwaukee relevant on a national level. Northwestern Mutual’s new 1.1 million-square-foot office tower and neighboring residential tower grabbed headlines as the company solidified its investment and belief in Milwaukee’s local economy and workforce.
Development along the Racine/Kenosha corridor also shed light on Milwaukee, especially with Foxconn’s announcement of its North American plant that will revolutionize the industrial scene in Southeast Wisconsin. And as interior work begins on the new Milwaukee Bucks arena for its summer 2018 debut, our once quiet market begins to push its way into the national spotlight.
Fine arts and real estate
Whether it’s the clamor over current real estate trends or the abundant redevelopment opportunities, the fine arts have also been making their mark on commercial real estate in Milwaukee. The Milwaukee Symphony Orchestra purchased a building west of the river with plans to renovate and expand its new hall while the Milwaukee Ballet acquired land for a new 52,000-square-foot facility in the Third Ward.
The Milwaukee Public Museum is in the market for a new facility, perhaps closer to the lake, which is seeing its own changes as Discovery World is in the midst of a 20,000-square-foot expansion and renovation and the Milwaukee Art Museum has acquired O’Donnell Park. Over the course of the next couple of years the lakefront could look very different, as aesthetic changes come to O’Donnell Park and the Couture apartment tower rises over Lake Michigan.
— By David Pudlosky, Vice President, and Kyle Koller, Senior Research Analyst, JLL. This article first appeared in the February 2018 issue of Heartland Real Estate Business magazine.