Peter Glaser,
CBRE
Milwaukee is in the midst of a new construction boom in the retail sector, with three major projects currently underway and a fourth that was delivered in 2014 for a total of more than 1.1 million square feet of new space in the market. The majority of this space is being delivered fully leased.
In many cases, these retailers are brand new tenants to the Milwaukee area.
In the second quarter, overall vacancy ticked up 10 basis points to 10.2 percent.
However, this was mainly due to store closures and consolidation in the Milwaukee market by retailers such as Office Depot, OfficeMax, Pick ’n Save, Sears and Kmart.
But don’t be rattled by the uptick in vacancies. In reality, the market is incredibly active with new tenants entering the region and several expanding.
Retailers recognize that there is ample room to compete for market share in Milwaukee and the surrounding area.
Many of these new retailers will come on line in large ground-up projects now underway. Here are some of the notable projects:
• In Menomonee Falls, a new Costco will open this fall and anchor a 300,000-square-foot development known as White Stone Station from Cobalt Partners LLC.
• The market’s first Von Maur department store and Sendik’s Food Market will anchor The Corners of Brookfield, a ground-up, 410,000-square-foot property in Brookfield.
• Also in Brookfield, a 112,000-square-foot property formerly known as Plaza 173 is being redeveloped into Calhoun Crossing, and will be anchored by one of the area’s first Fresh Thyme Farmers Market stores.
• In 2014, HSA Commercial Real Estate’s first phase of the 400,000-square-foot Mayfair Collection opened in Wauwatosa. The development introduced many retailers such as Dick’s Sporting Goods, Saks OFF 5th and Nordstrom Rack to Milwaukee.
The second Whole Foods grocery store in the Milwaukee area will open at this center sometime in 2016. Other major retailers in this development include TJ Maxx, DSW, ULTA and Homegoods.
• Dick’s will soon be opening up another location in Milwaukee at The Shoppes at the Corridor, the first phase of Irgens’ new 150,000-square-foot retail development at the southwest quadrant of Bluemound and Calhoun roads in Brookfield.
• Cobalt Partners is moving forward with a new retail development at the southwest corner of I-894 and S. 84th Street in the Southridge Mall trade area. This is a 42-acre mixed-use development that will feature approximately 200,000 square feet of mid-box retail space and multiple outlots.
• Several of the former Kmart properties are in various stages of redevelopment. For example, on Sunset Drive in Waukesha a developer is in the process of splitting the building to accommodate several different commercial uses including Xperience Fitness, a gym, and Dollar Tree, a retailer.
The Mayfair Collection in Wauwatosa, Wis., a development of HSA Commercial Real Estate, is a shopping center that is home to premium fashion brands such as Nordstrom Rack and Saks Fifth Avenue OFF 5TH.
Expansion is Contagious
Existing retailers are expanding as well, as pent-up demand has led retailers to become more confident in entering new submarkets in Milwaukee.
The grocery market is an excellent example of this activity.
Historically, only a few players have dominated the Milwaukee market. But that is changing dramatically.
National and regional grocery chains are making a significant push into the market.
The aforementioned Costco will go from two to five locations by the end of this year.
Meijer has opened its first four Milwaukee-area stores in Grafton, Kenosha, Oak Creek and Wauwatosa, and has purchased sites in several other locations. Most of these new stores will be ground-up construction projects.
Other recent new retailers to the Milwaukee market include multiple new locations for Ross Dress for Less and Hobby Lobby, Nordstrom and The Container Store at Mayfair Mall, J. Crew Mercantile at The Mayfair Collection and At Home, also in the Mayfair area.
Downtown Milwaukee continues to be popular with high-end retailers and boutiques, especially in the Third Ward area, where upscale furniture and housewares store West Elm recently opened joining Anthropologie and lululemon.
The second phase of the development now under construction will be anchored by a Whole Foods Market, which will open in early 2016. The first phase of the Mayfair Collection totaled 270,000 square feet. The second phase of the development — which will feature a mix of daily needs, design and home furnishings retail — will raise the total square footage of the upscale development to 400,000 square feet.
Upward Pressure on Rents
Fast food and fast casual restaurants are also aggressively expanding in the market. Active chains include Noodles & Company, MOD Pizza, Pie Five, Blaze Pizza, Corner Bakery, Jersey Mike’s, Firehouse Subs, Qdoba, Chipotle, Burger King and Chick Fil-A.
Competition for prime outlot sites among these users is driving rents upward for small tenant space, especially for end cap space.
Clearly, it’s a very robust time in the Milwaukee area for new retail construction and expansion. There is a lot of buzz in the region as seemingly new-to-market retailers are announced every month.
The progression is a natural one for many of these retailers as they have tapped out surrounding Midwest cities.
As Milwaukee has expanded to support a much larger consumer base, growing retail in the city is proving to be a logical move.
— By Peter Glaser, First Vice President, CBRE. This article originally appeared in the October 2015 issue of Heartland Real Estate Business.