HEARTLAND SNAPSHOT, JUNE 2008

Green Bay/Appleton, Wisconsin

The cities of Green Bay and Appleton, Wisconsin, are located in the Fox River Valley, which follows the Fox River from Lake Winnebago and Appleton at the southern end to Lake Michigan and Green Bay at the northern end. The area encompasses eight counties and has a population of approximately 600,000. It is known as a strong and stable economic hub, which, when combined with the general financial conservatism of the area’s lenders, developers and businesses, insulates the market somewhat from the peaks and valleys that occur in other parts of the country.

The Green Bay/Fox River Valley retail market totals a robust 26 million square feet, and has remained strong, with only a slight slowdown over the past 12 to 24 months. But even with a healthy market, some of the larger, new developments and redevelopments that were being driven by national big box anchors have been postponed or even cancelled, as national retailers slow or halt their expansion efforts. Smaller local and regional tenants have picked up the slack in this absence.

Historically, Green Bay’s strongest retail submarket has been located in and around Bay Park Square Mall in Ashwaubenon. There are currently a number of redevelopment projects being considered in the area, specifically around the recently renovated Lambeau Field. Much of the new construction is being spurred by the village’s plans for a mixed-use district. The first phase of this three-phase redevelopment project is expected to cost more than $100 million.

Both halves of Brown County have remained active. On the north side in Suamico, Midwest Expansion recently completed a mixed-use power center anchored by Shopko. The southern half has seen activity in De Pere at West De Pere Business Park. This area has seen a number of new retail/office projects, and will also be impacted by the construction of a bridge over the Fox River, estimated to be complete by 2020.

The County Trunk GV and Highway 172 area, located in northeast Green Bay, is also expected to see substantial retail growth in the future with the construction of a new Wal-Mart, which will surely spur additional development in the area.

Green Bay’s central business district (CBD) has struggled to redefine itself following the closing of Port Plaza Mall. The city is currently working closely with developers to redevelop the mall into a mixed-use project, and has also announced plans for a city parking deck along the Fox River to complement Vetter Denk & Associates’ proposed mixed-use redevelopment of the former Younker’s site. These projects are expected to be the catalyst for the CBD’s growth and a sure sign the submarket is headed in the right direction.

The Fox River Valley retail market, encompassing Wisconsin’s Outagamie, Winnebago and Calumet counties, is faring slightly better than its neighbor to the north, with retail vacancies reported at 12 percent to Green Bay’s 14 percent. But a large portion of these vacancies in the Fox River Valley submarket comprise older, functionally obsolete facilities that are in need of renovation or redevelopment. The hub of retail development in the area is General Growth Properties’ Fox River Mall in Grand Chute, which at 1.2 million square feet is the largest shopping center in northeast Wisconsin and the second busiest retail destination in the state. The mall boasts a strong occupancy rate that spills over into the active retail submarket that has sprung up around it.

The Highway 441 corridor on the east side of Appleton has matured over the past 10 years thanks to two main commercial areas located at the College Avenue and Calumet Street interchanges. The majority of tenants here are national and regional in nature, including Festival Foods, Menards and Lowe’s Home Improvement at College Avenue, and Wal-Mart, Kohl’s, Pick N’ Save, Target, Best Buy and The Home Depot at Calumet Street. The area has been able to maintain low vacancy rates thanks to these big names.

While the east side of Appleton may be filling up, the Highway 41 corridor located on the north side of Appleton is poised for rapid growth in the future. This area has the highest demographics and disposable incomes in the Fox River Valley, and is viewed as the next probable location for a power center to serve this segment of the market.

The industrial market in the Green Bay/Fox River Valley area has also remained stable, albeit uneasy. Historically, there has been a strong focus in the paper industry, which has seen a “shaking out” over the past 10 years with consolidations, buyouts and closures. This has affected many ancillary users that rely on the paper industry, but the slowdown has been offset somewhat in the southern portion of the Fox Valley by the recent expansion of several large manufacturers, most notably Oshkosh Truck and Pierce Manufacturing. The market is also facing a lack of availability of large, quality manufacturing facilities, with much of the available industrial product in the market catering to users of less than 30,000 square feet.

The industrial market’s growth has been centered around municipal parks such as Green Bay’s Interstate 43 Business Center and Appleton’s Northeast Business Park, which have seen steady growth in the past 10 years. Other parks located along the Highway 41 corridor from Green Bay to Oshkosh have also seen steady activity in the past several years, despite the uneasiness of paper industry.

The office market in Green Bay and the Fox River Valley includes approximately 23 million square feet and supports a vacancy rate of approximately 13 percent. It has remained steady with very little speculative construction. With a few notable exceptions, there is a strong demand for regional suburban office locations rather than downtown business districts. A large portion of the vacancies right now are made up of older, functionally obsolete, Class B buildings. However, the office market has recently seen a number of Class A corporate office buildings become available as users continue to restructure.

The Highway 41/441 corridor on the north side of Appleton has also been one of the most active areas in the region for office development, with six new office projects representing a total investment of more than $40 million coming online. Additionally, the east side of Appleton has seen the development of a 130,000-square-foot building for Time Warner.

When one takes a look at new office developments such as the Time-Warner project and the new Plexus building in downtown Neenah, as well as job cuts by major local employers such as Kimberly-Clark and NewPage, it is easy to see a trend towards a more service-focused economy for the region in the coming years. Healthcare will also play a major role in the region’s economic well-being, as evidenced by Aurora’s continued growth in the I-43 Business Center and ThedaCare’s announced expansion plans in Neenah and Appleton.

In the end, northeast Wisconsin will continue to be an industrial-based economy whose health is predicated largely on the region’s ability to create and retain manufacturing jobs. The extent to which local, regional and state government agencies show leadership on these issues will play a large role in the direction of the northeast Wisconsin commercial real estate market in the coming years.

— Todd DeVillers is a senior vice president with the Appleton office of CB Richard Ellis.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.