HEARTLAND SNAPSHOT, JUNE 2007

Green Bay, Wisconsin

For a second-tier market of just 100,000 residents, Green Bay’s steady fundamentals continue to position it as a solid member of the Wisconsin commercial real estate scene. New development is metered but consistent, occupancy is high and investors continue to buy, particularly among properties that are well-occupied with long-term leases.

In the retail sector, both new and established submarkets are steadily ushering in new space and new opportunity. Especially in the growing northwest and east metro areas, retail is clearly following rooftops. In the northwest, Green Bay-based developer Midwest Expansion has responded to demand in the Howard/Suamico submarket with the Urban Edge. The shopping center is anchored by a new 80,000-square-foot ShopKo, and includes a Pro-Bowl bowling alley and the Suamico Ale House, and has an adjacent site available for future development.

To the east, the new four-lane Huron Road will connect Interstate 43 to highways 54 and 57, and is expected to usher in between 1,000 and 1,200 new single-family homes in the next 5 years. A new Wal-Mart Supercenter will serve as the anchor of this retail area at Huron Road and West Mason Street. To meet current and future demand, Bellevue also has welcomed a new Super Target and Copps grocery, and a new Walgreens is under construction. New stores from Wal-Mart and Lowe’s Home Improvement Warehouse also are being speculatively proposed for the area.

Yet with all of this new development, the center of retail in Green Bay remains Ashwaubenon and the Bay Park Square regional mall, where large national tenants jockey to position themselves. Mall anchor tenants include Elder-Beerman and Younkers, as well as Kohl’s and ShopKo, both of whose Green Bay stores are the top producing locations in the nation.

Adjacent to the mall, Atlanta-based AIG Baker Development has opened the 180,000-square-foot Village at Park Bay, which is anchored by JC Penney and DSW, and includes Chico’s and Kirkland’s. On the south end of the mall, developer NiFong Realty has completed a new center consisting of Best Buy, PetSmart and Bed, Bath & Beyond. The firm also recently built a new 50,000-square-foot building for Dick’s Sporting and Clothing Goods, relocating the retailer from the west side of the mall and allowing Circuit City to move in to Dick’s old space from West Mason Street later this year.

With an overall retail vacancy rate of approximately 10 percent — and with rents that range from $16 to $20 per square foot for prominent triple-net space to $12 to $14 per square foot triple-net in other areas — the most successful centers tend to include national tenants, such as Starbucks and FedEx, and target the area’s modest average household income of $60,000.

In Green Bay’s industrial sector, new leases and construction projects are bringing in rents ranging from $3.50 to $5.50 per square foot triple-net and keeping vacancy at approximately 10 percent. Most industrial activity occurs in the U.S. Highway 41 corridor between Lineville and Scheuring roads, where logistics are good for rail deliveries and highway access serves both employees and distribution efforts.

In the past 3 years, locally based Green Bay Converting has amassed approximately 250,000 square feet of industrial space, most recently adding a new 200,000-square-foot lease on South Ridge Road and purchasing 6 acres of adjacent land, with plans to expand that site. Green Bay Packaging has made a significant move, purchasing 200,000 square feet of manufacturing/distribution space in West DePere. Also, New York’s Port City Bakery recently built a 100,000-square-foot facility in Howard Industrial Park.

Among the most active industrial developers in Green Bay, GDC Companies continues to steadily add new space with a hold-versus-sell strategy. The company recently built a new 200,000-square-foot facility in West DePere, and purchased a 175,000-square-foot building on South Broadway Street and a 150,000-square-foot property on Packerland Drive, with plans to add another 100,000 square feet to that facility.

In the office sector, Green Bay remains well sustained, with a foundation of insurance and paper-related companies. This helps maintain the average office vacancy rate in the 15 percent range and keeps rents at $12 to $16 per square foot triple-net. New developments include Commercial Horizons’ new mid-rise office project in downtown Green Bay, which is now home to the corporate offices of Nicolet National Bank and Aon Insurance. The same developer also recently completed a 40,000-square-foot building on the south side of metro Green Bay for insurance company Metropolitan Life. Jacobs Engineering, as of January, expanded into its second Green Bay facility, a 30,000-square-foot, Class A office building on Springhurst Drive in Ashwaubenon, Wisconsin.

In the multifamily sector, the city continues to recover from the interest-only, single-family boom of the early 2000s, which pulled renters from multifamily tenant rolls but, due to rising rates, is now causing many to return. This has helped lower Green Bay’s overall multifamily vacancy rates into the 8 percent range, and has rents averaging $450 to $550 per month for a one-bedroom unit and $600 to $700 per month for a two-bedroom unit. Of all the commercial sectors, multifamily may be one of Green Bay’s quiet giants in terms of future growth. As is true for the retail market, investors should watch for opportunity in the eastern submarkets, which likely will see new multifamily development sooner rather than later.

Across Green Bay, buyers also will no doubt continue to seek out and buy office and industrial space with national tenants and longer-term leases. This may be particularly true among investors from markets with low cap rates — like the West Coast — that are attracted to the high cap rates and reasonable pricing. Along with these attractive fundamentals, investors also gain entry to a very balanced market in which success is built on consistent economies and development that, because of Green Bay’s smaller size, must continue to be intelligently pursued.

— Glen E. Berhow, an investment property specialist for all sectors, is a senior advisor and managing director of Sperry Van Ness’ Green Bay office.


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