Regina Levchets, JLL
An article highlighting the fortunes of the Milwaukee Bucks that appeared July 6 on CBSSports.com couldn’t be more accurate. “There’s something powerful and sustainable growing in Milwaukee, rising out of the weeds of small-market irrelevance and into a team you’re going to want to watch next season,” wrote Matt Moore who covers the NBA.
Since New York hedge fund investors Wes Edens and Marc Lasry purchased the Bucks last year for $550 million, the team has been on the rise. Founded as an expansion team in 1968, the Bucks went from being the worst team in the league during the 2013-14 season to the sixth seed in the 2014-2015 playoffs.
The new owners, along with former owner Herb Kohl, have committed $250 million for the construction of a new $500 million arena as a replacement for the team’s current home, BMO Harris Bradley Center, which opened in 1988. But if the new arena is not built by the 2017 season, Milwaukee could be left without an NBA team.
Once complete, the entire development, which would sit on approximately 30 acres in the Park East corridor, could include up to 3 million square feet of office, entertainment, retail, residential and hotel development.
The Park East Corridor used to be the site of the Park East Freeway, a mile-long spur that was demolished in 1999 and replaced with a boulevard at grade level. The boulevard itself is one of the main entry points into downtown. However, the land adjacent to it has sat vacant since the freeway was demolished 16 years ago.
There was much debate over the proposed funding plan, but on July 15 the Wisconsin State Senate struck a bipartisan deal and approved financing for the arena by a wider-than-expected margin of 21-10. As of press time, backers of the bill still needed to get it through the State Assembly and Milwaukee Common Council, but they remained optimistic.
A Changing Landscape
While the new arena is arguably the most popular item on the agenda, it is certainly not the only major project in the works. There are several major developments near the lakefront.
Northwestern Mutual has broken ground on a 32-story, 1.1 million-square-foot office tower. The $450 million project is scheduled for completion in the fourth quarter of 2017. Just a block away, construction is underway on Irgens’ 18-story Class A office building at 833 E. Michigan St.
In June, a judge finally cleared the way for the construction of The Couture, a $122 million, 44-story apartment and retail high-rise after years of debate as to whether the site sits on land protected from private development. Included in the plan is a transit stop for the newly approved streetcar, a rooftop park, and a street-level public concourse.
Phase I of The Milwaukee Streetcar project will consist of a 2.5-mile long route that connects the Milwaukee Intermodal station (1.4 million annual users), the Third Ward (the fastest growing neighborhood in the city), East Town (the largest concentration of jobs in the state) and the lower east side (the highest density residential neighborhood in the state).
Possible extensions of the streetcar system could take it north to the University of Wisconsin-Milwaukee campus, west to Marquette University, south to the Rockwell Automation headquarters, and west to the arena district. A groundbreaking for the streetcar project is expected late this year, with full operation set by mid-2018.
In conjunction with the development boom along the lakefront, construction on the Lakefront Gateway project is expected to start later this year. The project includes rebuilding major streets and boulevards with improved sidewalks, extending Lincoln Memorial Drive south into the Third Ward, and replacing the Lake Interchange, which will ultimately open 2.6 acres of prime land overlooking Lake Michigan.
Johnson Controls, although non-committal, is exploring the construction of a new corporate headquarters on this parcel of land. The city recently recommended approval of a $250,000 grant to cover half the cost of a study, which would examine the feasibility of the site for a building.
Along with the new construction, there has been an increase in the redevelopment and repositioning of office buildings that are nearing the end of their usable life cycle. These buildings are being converted into hotel and multifamily properties. This trend has not only improved the overall vacancy rate in the market, but has also helped drive economic activity in the central business district.
Downtown’s Magnetic Pulse
Millennials are not only continuing to drive demand for housing, but they also are making work/life balance and access to nearby amenities a must when evaluating employers.
One of the first high-profile companies in the Milwaukee area to move from the suburbs to downtown over the past several years was accounting firm Baker Tilly. The firm moved 225 employees and leased 68,000 square feet in the U.S. Bank building, a Class A high-rise downtown, and many have followed suit.
An affiliate of Five Mile Capital Partners, based in Stamford, Conn., purchased the 411 East Wisconsin Building, a 30-story Class A office tower, for $74.3 million in June 2014.
Dental Associates purchased and rehabbed a 40,000-square-foot downtown office building into which it moved its corporate offices. Most recently, Plunkett Raysich, an architectural firm, moved 60 employees to the Fifth Ward, a vibrant and hip neighborhood just south of downtown. A number of other large, suburban tenants are exploring the market.
Outside investors intrigued
All of this activity has caught the eye of savvy investors from across the country. Over the past several years, out-of-state buyers have been behind some of the most notable purchases in the central business district, buying up both stabilized and distressed office and retail properties. Among some of the more notable transactions:
• An affiliate of Five Mile Capital Partners, based in Stamford, Conn., purchased the 411 East Wisconsin Building, a 30-story Class A office tower, for $74.3 million in June 2014. Chicago-based Riverview Realty Partners, also a subsidiary of Five Mile Capital, is managing the building.
• In March of this year, a Chicago investor paid $20.5 million for The Wisconsin Gas Building, a 20-story office tower located at 626 E. Wisconsin Ave.
• The Shops of Grand Avenue, a 294,000-square-foot mall downtown that has long struggled sold at auction in October 2014 for $16.5 million to a New York investor.
Bonus Situation
CBSSports.com was right: There is something powerful and sustainable growing in Milwaukee — and it’s not just the Bucks. The city is going through a metamorphosis, with the public and private sector coming together to reinvigorate our downtown and light up not only a new stadium, but also the entire city.
— By Regina Levchets, Associate Broker, JLL. This article first appeared in the August 2015 issue of Heartland Real Estate Business magazine.