In the Milwaukee office market, many investors are fleeing stocks and putting their money into real estate. “Our firm has recently sold over $100 million of multi-tenant office buildings and our investment group is seeing tremendous interest…we’re challenged to think of a seller who is not setting a new standard for price, cap rate and other measures,” says William Bonifas, executive vice president of The Polacheck Company.

The downtown market is undergoing a large infusion of public and private investment, and two new office towers are set to open this year. Irgens’ 875 East Wisconsin Avenue is currently 50 percent leased. With the demolition of part of the Park East Freeway on the north end of downtown, hundreds of millions of dollars of new development will be taking place.

On the west and north side, the suburban market has been slowly leasing remaining space in the roughly 2 million square feet of recent developments. Master Lock’s relocation and the Northwestern Mutual’s expansion into a large campus south of Milwaukee may indicate that the southern markets, previously overlooked by office developers, will continue to grow.

Downtown East

The current vacancy rate in the Downtown East submarket is 12 percent and there are approximately 500,000 square feet of tenants either moving or evaluating relocations. The buildings leasing up the quickest are the most recently completed or up-to-date, such as 875 East Wisconsin and Cathedral Place (both currently under construction and approximately 50 percent pre-leased), and 100 East.

A number of suburban firms are evaluating relocations to downtown. “We predict there will be a gradual expansion of downtown tenancy at the expense of the suburban market –– the reverse of a 30-year trend,” Bonifas says.

Downtown has become attractive to tenants for a number of reasons. There have been multi-million dollar improvements made to the downtown area, such as the $120 million Calatrava-designed Art Museum expansion. Thousands of new apartments, condominiums, clubs and restaurants are surrounding this market. As mentioned previously, the demolition of the Park East Freeway will create numerous development opportunities over the next few years.

Downtown West

West of the Milwaukee River, the downtown submarket includes the west side of the central business district (CBD) along with redevelopment districts such as The Tannery (south and slightly west of the CBD), The Third Ward and the newly developed Walkers Point to the south, and Schlitz Park to the north. The inclusion of these largely historic renovation projects skews the area’s vacancy rates to a high level as large factory buildings are earmarked for development.

The overall vacancy rate for this market is 25 percent. The recent opening of the ASQ Center in the former Marshall Field’s building has set a new standard for quality and rental rates, which should help the overall dynamics of this market. In addition, The Grand Avenue Mall is being renovated and the addition of a large Borders Books & Music at the intersection of Wisconsin Avenue and Plankinton Road should encourage prospective tenants.

Mayfair/Wauwatosa

The Mayfair/Wauwatosa market has a vacancy rate of 17 percent. This market, which also includes Opus’ Honey Creek and The Milwaukee County Research Park, has experienced some lagging vacancy during the past year. However, the Medical College of Wisconsin’s successful purchase of the Alterra headquarters quickly filled what could have been a large vacancy hole. The only property currently under development is Opus’ fourth building at Honeycreek. “We expect the occupancy rates to stabilize and perhaps increase over the next year,” Bonifas says.

Brookfield

Bishop’s Woods, Bluemound Road, Brookfield Lakes, Capitol Drive, Crossroads, Executive Drive and Stoneridge/Riverwood/Ridgeview comprise the Brookfield submarket. “While these areas are diverse in terms of location, price and aesthetics, most tenants are willing to look at all of these areas and request proposals from them,” Bonifas says. This area, which is west of the city of Milwaukee and located along Interstate 94, is the core of the suburban office market with approximately two-thirds of the absorption of suburban office space taking place here. The current vacancy rate is 19 percent.

West Allis

West Allis is located southwest of Milwaukee. The submarket is comprised of office buildings located on South 102nd Street, renovated industrial facilities along South 70th Street, and there are additional pockets of buildings scattered throughout the general area. The majority of activity is taking place in renovated facilities with no significant new development having occurred for years. The current vacancy rate is 25 percent. This area is well positioned off the freeway system and is accessible by bus transportation.

Woodland Prime/Northwest Side

“Due to the rapid growth of this submarket in previous years, we were concerned about the occupancy levels in buildings located in Park Place and Woodland Prime,” Bonifas says. However, the recent expansion of GEIT into the remaining space at Woodland Prime has filled the office park. With the successful leasing of Liberty’s new multi-story property at Park Place, this submarket is seeing improved occupancy levels. There is a vacancy in both direct and sublease space in the towers at Park Place, but these buildings now feature some of the largest blocks of contiguous office space available in the metro area. “We think this will eventually provide a competitive advantage,” Bonifas says. The current vacancy rate is 19 percent.

North Shore/Ozaukee County

This submarket contains 2 million square feet of office space and has a vacancy rate of 30 percent. This high percentage takes into account the vacant Eastlake Towers, a 180,000-square-foot renovation opening in the near future.

This market appeals to people who work and live in the North Shore and are willing to pay a premium for convenience.

Most Mequon area properties are built in the style of residential homes, although Irgens has been building a more modern, conventional office building in their East Mequon Corporate Center, located off Port Washington Road. Aggressive zoning and architectural constraints limit the size and scale of buildings built in the submarkets.

William Bonifas is executive vice president of The Polacheck Company.


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