After years of work by city officials on planning, demolition and environmental remediation, and a $35 million public investment, the Century City development project in Milwaukee appears poised to finally attract new development and jobs.
“I’m very bullish on this,” said Michael Weiss, president of Fox Point-based General Capital Group, which plans to build a pair of 52,500-square-foot multi-tenant industrial buildings at Century City.
General Capital’s buildings will make a bold statement to the community about the viability of the Century City project, said Department of City Development Commissioner Richard “Rocky” Marcoux.
“(The first new building will be) the thing that makes it real for Century City,” he said. “It’s going to make a big statement to the thousands of people that pass by that site every day.”
Century City is a City of Milwaukee redevelopment project for the eastern portion of the former A.O. Smith and Tower Automotive site south of Capitol Drive at North 31st Street. The city acquired the 87-acre site, located east of the Soo Line railroad tracks, in 2009 and has been preparing it for development ever since.
The portion of the former A.O. Smith and Tower Automotive site to the west of the tracks includes a City of Milwaukee Department of Public Works facility and other properties that are privately owned.
Most of the former A.O. Smith/Tower buildings east of the tracks have been demolished by the city. One exception is the 133,000-square-foot facility occupied by train manufacturer Talgo Inc. The firm has ended manufacturing operations there and is in a legal dispute with the State of Wisconsin, which has refused to pay for trains that were ordered from Talgo when Jim Doyle was governor. The trains remain stored in the facility and Talgo continues to pay rent to the city.
Most of the rest of the Century City site has been cleared, cleaned up and is now ready for new building development. It cost $35 million in city, state and federal funds to prepare the site for new development.
The Century City project is an important initiative for the city to attract jobs to a low income area that desperately needs an economic boost. The question is: will private sector employers want to locate there?
Weiss and Marcoux say they have heard from businesses that are interested in being at Century City. Most of the tenants that have expressed interest are smaller firms, they say.
“One of these days a couple of big users are going to pop for Century City and that will really get things moving over there,” Weiss said. “In the meantime, I think there is significant interest from smaller users and there is no way to accommodate them. In that trade area there is almost no new, modern product. I think there’s pent up demand. Based on conversations I’ve had and phone calls I’ve received, I’m very pleased with the reaction (to the project) from the brokerage community and the market. We’ve had some pretty good conversations with a handful of users. I’m pretty satisfied with the interest to date.”
General Capital hopes to break ground this spring on the first Century City building, a 52,500-square-foot structure along Capitol Drive, just southwest of the intersection with North 31st Street. Construction of the second 52,500-square-foot building, which will be just south of the first, will begin once a significant amount of space is leased in the first building.
Weiss said no tenants have committed to the project yet, but interest is significant and he plans to break ground in spring even if leases have not been signed.
“We’re going to build it regardless,” Weiss said. “I don’t think it will turn out to be spec, but we’re moving forward.”
General Capital plans to buy 7 to 8 acres from the city for the two buildings. Sale negotiations are ongoing, Marcoux said.
The Century City site is attractive because of its easy access down Capitol Drive to I-43, the workforce in the neighborhood and availability of pubic transit, Weiss said.
“One of the big challenges any business owner has is finding a ready and nearby workforce,” he said.
It might be difficult to attract some tenants to the Century City site because of concerns about poverty and crime on the north side of Milwaukee. But Weiss and Marcoux said those concerns can be overcome.
“I think the crime thing is more perception than reality,” Weiss said.
“I think those concerns are overblown,” Marcoux said. “This is a very viable place to do manufacturing. The community respects that site because they know it’s a jobs generator.”
City officials and General Capital, or other developers, need to make sure the site has adequate policing and security and they need to be upfront with potential tenants about the area’s challenges, said James T. Barry III, president of Cassidy Turley Barry, a major industrial real estate brokerage in Milwaukee.
“It will be important to manage perceptions appropriately and let prospective tenants know a lot of the hype is probably not as drastic as the studies bear out,” Barry said.
The Century City project could be successful if it is offered as a low cost industrial space option, Barry said.
“If it’s priced correctly, making it a low-cost alternative, that’s going to be a very important element for attracting tenants,” he said.
“We will be very competitive (on price),” Weiss said. “We certainly won’t be high priced.”
Jeff Hoffman, an industrial real estate broker and vice president of Judson & Associates, said the city will probably have to offer incentives to get tenants to locate at Century City. General Capital is a good developer to get the project started, he said.
“General Capital is one of the best and most successful developers in the market,” Hoffman said. “They know how to make projects work. My gut is they have a tenant or two locked up, but not a signed lease yet.”
Many of the questions and skepticism about the Century City project is similar to issues raised when the city began work to redevelop part of the Menomonee Valley east of Miller Park, Marcoux said. During the last 10 years several firms have moved to new buildings in that area including: Derse, Ingeteam, Palermo Villa, Charter Wire, Taylor Dynamometer, J.F. Ahern, Badger Railing and Caleffi.
“The questions (about Century City) are the same questions that were asked about the Menomonee Valley in 2004,” Marcoux said.
The timing could be right for the city to have new product brought to market at Century City. The southeastern Wisconsin industrial real estate market has had 15 consecutive quarters of positive absorption, including 4.3 million square feet of absorption in 2013 and 17.5 million square feet of positive absorption since the second quarter of 2010. The industrial space vacancy rate in the region fell from 7.4 percent at the end of 2012 to 6.1 percent at the end of 2013, according to Xceligent. Some parts of the region have a shortage of industrial space available for tenants. The Century City site is located in a submarket with an industrial space vacancy rate of 11.9 percent, but most of the space in that area is older, as Weiss said.
At the same time, some manufacturers in the region are struggling to find available workers and a recent Public Policy Forum report says the region lacks an adequate public transit system to connect workers in the central city to job opportunities in the suburbs.
“I think it’s a good time to bring (new industrial buildings at Century City) to the market, particularly for tenants that need workers from that area,” Barry said. “I’m confident something can happen there.”
Century City is a critical project in the effort to strengthen the 30th Street Industrial Corridor, a major employment corridor in the middle of the city that includes DRS Technologies Inc., Astronautics Corporation of America, Master Lock, Harley-Davidson and MillerCoors. The city needs to attract more employers and more jobs to the area and officials are optimistic it can be done at Century City.
“It’s a place that we think has a very bright future,” Marcoux said.
“I think this is a good area (for multi-tenant industrial buildings),” Weiss said. “If you don’t want to be in (a suburban area like) Pewaukee, this is a great area.”
