Excess available space leads to flat or declining lease rates

by admin

Southeastern Wisconsin, which consists of a seven-county region, is experiencing slight growth in the industrial markets. We have seen positive absorption throughout the area with rumblings of future deals on the very near horizon. The region is experiencing flat to declining leasing rates due to hungry landlords and excess available space. Day-to-day activity is busy, but many of the current tenants that are touring are typically attempting to procure a better deal in their current location. Tenants in the market are still in a wait-and-see mode.

The southeastern region of Wisconsin has seen very little new development. Wispark LLC purchased a 185,000-square-foot building in Racine County for CalStar Products, a green brick manufacturer that will manufacture bricks and pavers from fly ash obtained from the nearby We Energies Oak Creek power plant. Wispark is also planning a new 170-acre business park in the southern Milwaukee county community of Oak Creek. The business park is shovel-ready and part of a TIF district. “There is not a lot of new development going on in Southeastern Wisconsin, but I would say there is uptick in the market,” says Todd Rizzo, vice president of Milwaukee-based Wispark LLC. CenterPoint Properties has landed a build-to-suit project for Crothall Laundry Services. This new building will be a state-of-the-art green facility. In Waukesha County, WillowTree Development is starting a 135,000-square-foot addition for its existing tenant, BuySeasons, in the WestRidge Industrial Park. Towne Investments is in the late stages of completing renovation and new construction of office and production facilities for Actuant Corporation at its new Menomonee Falls headquarters.

The majority of industrial activity is focused within the Interstate 94 corridor from Kenosha to Milwaukee. Racine County has become the hotbed for deals in our region. Goodwill Industries has signed a lease for 150,000 square feet in Racine. Also in Racine it is un-officially reported that three significant leases will be signed totaling approximately 350,000 square feet. It is also understood that one of the larger industrial buildings in Racine County will be purchased by a foreign company for manufacturing. With all this activity in Racine County industrial space may become sparse.

During the past 3 quarters Southeastern Wisconsin has experienced a good mix of prospects from certain industries. Solar, green manufacturing and transportation firms seem to be leading the charge. Talgo’s 133,600-square-foot lease in Central Milwaukee is a prime example of the transportation sector activity. Export, food, healthcare and bio-tech are other groups that have leased space or shown interest.

The third-party logistics companies have also been active. All States Trucking just lease 40,000 square feet in Racine, an unnamed logistics group is out touring for 50,000 to 70,000 square feet in Racine. Other notable deals in the region include Goodwill Industries’ 156,000 square feet at 1630 Enterprise Drive in the Renaissance Business Park in Racine County and C& H Distributors’ lease of 316,801 square feet at 8123 116th Street in Lake View Corporate Park in Kenosha County. First generation industrial space is still holding strong with an asking rate of $4.50 to $5.00 per square foot, while second and third generation space is $3.50 to $4.00 per square foot.

The Racine location, along with the assistance of its helpful economic development group, is the hottest pocket in our region. Kenosha still is reaping the benefits of attracting additional interest from the Illinois markets.

— Travis Tiede and Paul McBride are brokers with RFP Commercial in Milwaukee.

You may also like