HEARTLAND SNAPSHOT, FEBRUARY 2011

Milwaukee Industrial Market

Two trends that we have seen in the Milwaukee industrial market have been shorter lease terms being asked for and a surprising lack of mid-sized tenants. We are seeing demand for small tenant spaces, under 10,000 square feet and larger tenants more than 75,000 square feet.

Milwaukee has typically had a strong demand for user spaces, which usually have been in the 40,000- to 60,000-square-foot range. Unlike Chicago, a large deal for Milwaukee is one more than 100,000 square feet and we may see a 300,000-square-foot tenant once every 2 to 3 years.

Italy-based Seda International has acquired a 325,000-square-foot industrial facility at Park 94 in Mount Pleasant, Wis.

We are starting to see demand for 300,000-square-foot spaces though. Earlier this year, C&H relocated to CenterPoint’s new 315,000-square-foot building in Lakeview Business Park and Cassidy Turley Barry just signed a distribution tenant to a lease for the 360,000 square feet at the Benderson building, which C&H vacated. The Benderson building is located at 5211 S. 3rd St. in Milwaukee, just off the interstate at Mitchell International Airport. Italy-based Seda International Packaging Group recently bought the 325,000-square-foot building at Park 94 in Mount Pleasant for its North American headquarters and manufacturing operations. Cassidy Turley Barry worked with Colliers International of Chicago in representing the property owner, HSA Commercial, in that sale and we represent HSA on a 124,000-square-foot building in the same park, which is half leased.

There have been a number of other leases signed in the fourth quarter of 2010, including Goodwill Industries for 156,000 square feet in Sturtevant, Wisconsin; Cordstrap for 80,000 square feet in Grandview Business Park; and Pitney Bowes for 130,000 square feet in Brown Deer Business Park.

The majority of this activity has been along Interstate 94 between Oak Creek and Kenosha and because of this we are now seeing a shortage of available spaces larger than 75,000 square feet in this corridor. This corridor has become more attractive because of its proximity to Northern Illinois, cheaper land prices and an excellent labor force. Increased activity in this area will help reduce the vacancy rate, end some of the bargain hunting for short-term deals and encourage long-term development in the area.

Due to the overall economy in the last few years, the Milwaukee market has not experienced much new development but we are now even hearing about some possible speculative buildings on the horizon to meet demand for larger tenants. A private investment group is developing the 123-acre Kenosha Enterprise Park at I-94 and Highway 142. Cassidy Turley Barry has just started to market the park and the owners are open to different opportunities. With the park being one of the only large sites available with municipal services it could be a campus headquarters, a large user sale, a build-to-suit joint venture or even a new industrial park.

From an investment perspective Milwaukee has remained a strong market, which has attracted REITs, local investors and corporate headquarters. Most recently, Towne Investments acquired an eight-building portfolio consisting of 280,000 square feet in the Business Park of Kenosha. As for user sale properties, Milwaukee did take slight dip, not nearly as bad as some parts of the country, but even that seems to be stabilizing.

— Kenneth Braden is a senior vice president with Cassidy Turley Barry in Milwaukee.

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