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Industrial Companies Drive Boom in Milwaukee Office Growth

Komatsu Mining Corp. will occupy this $285 million development near Milwaukee’s CBD that will include 170,000 square feet of office as well as manufacturing space.

By Andrew Jensen Jr., Cushman & Wakefield | Boerke

Milwaukee was once known as a city of industries and beer, the hometown of Allen-Bradley (now Rockwell Automation), Briggs & Stratton, Harley-Davidson, Johnson Controls, Master Lock, Rexnord and, of course, the Miller, Pabst and Schlitz brewing juggernauts.

Today, Milwaukee’s economy is more diversified, and its industrial companies are quieter and not as flashy. But the area’s industrial firms are still central to its success and are now driving the area’s office market.

Andrew Jensen Jr., Cushman & Wakefield | Boerke

In and near Milwaukee’s central business district (CBD), major recent office deals, all involving industrial users, include:

● Milwaukee Tool, based in the suburb of Brookfield, will soon expand into Milwaukee with a $30 million redevelopment of a vacant five-story, 333,000-square-foot office building. Milwaukee Tool will employ up to 2,000 people there, the largest-ever influx of jobs to the CBD by a suburban-based firm. The City of Milwaukee is providing up to $20 million in financing for the project.

● Utilities and infrastructure contractor Michels Corp., based in the small Wisconsin town of Brownsville, chose a riverfront development site 60 miles away in Milwaukee for an office expansion after considering Chicago and New York City.

The $100 million project, a few miles from the CBD, will house several hundred employees in 60,000 square feet of a 200,000-square-foot new office building that also includes retail, apartments and a hotel.

● Komatsu Mining Corp. is moving from suburban West Milwaukee to a $285 million development on 57 vacant riverfront acres near Milwaukee’s CBD that will include 170,000 square feet of office as well as manufacturing space.

● Rexnord Corp. has moved its headquarters and 120 office workers from West Milwaukee into two CBD buildings totaling 150,000 square feet.

● Industrial equipment manufacturer Rite-Hite Holding Corp. is moving its headquarters from suburban Brown Deer to vacant riverfront Milwaukee land overlooking the CBD, moving 300 workers into a 150,000-square-foot office and a  100,000-square-foot tech center building.

In Milwaukee’s suburbs, top office activities include:

● International actuarial and consulting firm Milliman is the anchor tenant (125,000 square feet) for the 186,000-square-foot, multi-tenant Class A building in the Corridor in Brookfield.

● Hydrite Chemical will move its headquarters to a build-to-suit (50,000 square feet) in the Corridor in Brookfield.

● In 2019, Milwaukee Tool purchased more than 80 acres in Menomonee Falls for a corporate office and industrial campus.

● Defense contractor Leonardo DRS Inc. moved its Milwaukee operations in late 2020 to the suburb of Menomonee Falls, where its $56 million project includes the renovation of an existing 120,000-square-foot office building and construction of a 350,000-square-foot, high-tech facility.

Several factors are driving the current office growth among industrial companies in Milwaukee.

First, industrial companies are increasingly relocating office functions away from the factory floor. Today, companies are competing for young engineers, sales representatives, accountants and other recent college graduates who prefer to be in modern office environments, requiring new acquisition and development.

Second, these highly coveted workers tend to prefer urban environments close to restaurants, bars, cultural amenities and apartments and condos. Recent major office moves to Milwaukee were in part to attract workers not willing to work in suburbs or small towns.

Third, the City of Milwaukee government has been helping close financing gaps and otherwise supporting recent major office deals.

And finally, the industrial sector has been growing during the pandemic. Customers have shifted disposable income to buying manufactured products while quarantined instead of on travel and other experiences. As a result, the industrial market is as strong as it’s been in a decade.

Despite the encouraging trends, not all has been rosy in the Milwaukee-area office market. While Milwaukee hasn’t seen the major corporate downsizing and massive subleasing of other cities, it hasn’t been immune to the trend.

In the Milwaukee CBD, Johnson Controls recently put a 422,674-square-foot office building on the market for sale, and Manpower recently put 80,000 square feet on the market for sublease. Office shrinkage in the suburbs includes United Healthcare downsizing by 50,000 square feet and relocating to Honey Creek in Wauwatosa, leaving behind a 125,000-square-foot, single-tenant office building vacant.

Because of uncertainty and a paralyzed office market due to COVID-19, users with expiring leases have been renewing short term. As the pandemic fades, we are seeing a recovery in the suburbs, where smaller firms tend to be located and have more independence in bringing workforces back to the office.

In the CBD, office activity has started to pick up and will likely accelerate into the third and fourth quarters as its large corporations take more time to implement company-wide changes for employees across their national and international footprints.

Another trend that may pick up this year is movement of offices and divisions to Milwaukee from bigger cities like Chicago, 90 miles away. As recent growth shows, Milwaukee compares favorably to larger cities for office relocations and expansions. Office users and owners bullish on Milwaukee often cite its quality of life, shorter commute times and lower real estate costs compared with larger cities.

Andrew Jensen Jr. is a principal with Cushman & Wakefield | Boerke. This article originally appeared in the May 2021 issue of Heartland Real Estate Business magazine.

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