The hot corridor

Uline Inc. executives had a wish list in 2009 when they were searching for a new location for the corporate headquarters.

It included a massive amount of shovel-ready land, utilities that were already in place and a pro-business climate.

Wisconsin was able to check all of the items off the list that Illinois couldn’t.

CenterPoint Properties showed Uline execs a 200-acre site just west of I-94 in Pleasant Prairie. Uline took the entire parcel.

Today, Uline has two 1 million-square-foot distribution facilities and two nearly identical 275,000-square-foot corporate office buildings on the site.

“Pleasant Prairie was great to work with,” said Phil Hunt, Uline’s executive vice president. “We were able to build a nice building and a beautiful campus and it’s always nice to work in a pro-business climate.”

For years, the interstate corridor between the Illinois state line and Milwaukee County had been a sleepy stretch, while downtown Milwaukee and the I-94 east-west corridor from Milwaukee through Waukesha County attracted the majority of the commercial real estate development activity in the region.

But over the past five years, momentum has grown along the I-94 north-south corridor. In addition to Uline, several other Illinois companies have moved north of the state line, bringing hundreds of jobs with them.

In addition, Amazon built a $250 million distribution center on 165 acres along I-94 in Kenosha.

Meanwhile, southern Milwaukee County has seen more recent development activity, including Drexel Town Square and the IKEA store in Oak Creek and The Rock Sport Complex in Franklin.

On top of all of that, Foxconn Technology Group now plans to build a $10 billion, 20 million-square-foot LCD panel manufacturing complex just east of I-94, between Braun Road and Highway KR in Racine County.

Add it all up and the I-94 corridor between Milwaukee and the Illinois state line is emerging as one of the most, if not the most, active commercial real estate submarkets in southeastern Wisconsin. As development in that corridor continues, the Milwaukee and Chicago areas are increasingly growing into one mega region, especially as development pressure from Chicago spills over the border into Wisconsin.

“Chicago is a global city that continues to grow,” said Jeff Hoffman, a partner with Cushman & Wakefield | The Boerke Co. “(But) what we are hearing is Chicago is an extremely difficult and uncertain environment. That has opened the window, if not the floodgate, for Wisconsin. There are a lot of Illinois-based companies looking for land, and it has certainly resonated that we have available land and stable communities.”

One of those companies, which has been a bit overshadowed because of the massive development that Foxconn is planning, is Haribo.

In March, Haribo of America Inc., the Rosemont, Illinois-based subsidiary of the German gummy bear maker, announced it would build its first U.S. manufacturing facility in Pleasant Prairie. The $242 million project will include a 500,000-square-foot facility in the Prairie Highlands Corporate Park, west of I-94 between Highways 165 and 50. Construction is expected to begin in 2018, with production starting in 2020. The company has said the plant will support 400 jobs.

Hoffman credited the work that the Wisconsin Economic Development Corp. has done to facilitate deals like Haribo coming to Wisconsin. The company could receive up to $21 million in state tax credits if it meets capital investment and job creation numbers by 2028.

“Haribo is a significant investment and a rather ‘Wisconsin is open for business’ story,” Hoffman said. “It’s more profound than right place, right time, great location, access to interstate. We have a great business environment year-over-year, and it is all of those factors combined.”

Wispark’s LakeView Corporate Park, located in Pleasant Prairie along Highway 165, about two miles east of the interstate, is credited with being the first project to change the landscape along the I-94 north-south corridor. The 2,400-acre master-planned, mixed-use development opened in July 1988.

The park was the first of its kind to locate close enough to the state line to offer Illinois-based companies a chance to relocate to Wisconsin, while still being close to the amenities they were used to in Chicago.

Even before Pleasant Prairie was incorporated as a village, Rust-Oleum committed to moving its production and research facility from Evanston, Illinois to 28 acres at LakeView. The company received a $1 million job training and research and development grant from then-Gov. Tommy Thompson for coming to Kenosha County.

By 1997, nine years after opening, 50 companies were located in the LakeView Corporate Park, absorbing almost 40 percent of the available land at the time, according to a 1997 report by the Washington, D.C.-based Urban Land Institute.

Of those first 50 companies, 29 moved from Illinois and six moved from other states.

“LakeView considers its primary market to be metropolitan Chicago, not Wisconsin,” the study said.

Nearly 30 years after its first development, LakeView Corporate Park has more than 1,265 acres developed and more than 8,000 employees working in it. And it continues to expand.

Communications Test Design Inc., a West Chester, Pennsylvania-based global engineering, repair and logistics company, is planning to lease more than 160,000 square feet of industrial space adjacent to LakeView Corporate Park from Majestic Realty Co.

By doing so, the company will bring up to 200 employees to Pleasant Prairie. This is one of a handful of new companies leasing space in speculative buildings developed at the park.

Majestic Realty Co. is also planning an industrial park in Kenosha at the former Dairyland Greyhound Park, which has been vacant since 2009. The California developer bought the 228-acre property, located at 5522 104th Ave., just east of I-94, in September for $14.5 million.

“We have several different site plans, but it is going to be a master-planned business park comprising of various different buildings for manufacturing, research and development and different facilities,” Taylor Talt, vice president at Majestic, said after the sale.

Phase one of the project will be a 500,000- to 750,000-square-foot building that could accommodate up to 500 jobs, Talt said. A specific tenant is not yet identified.

Zilber Property Group, which has about 30 industrial properties between Milwaukee and the state line, anticipates continued growth in the I-94 north-south corridor. Chad Navis, director of industrial investments with Zilber, said the corridor has historically been a growth area for the Chicago market, with the first stop being Kenosha County.

Zilber owns about 22 buildings in Kenosha County, including two that are currently under construction and will be completed this year. One is in LakeView Corporate Park and the other is in the Business Park of Kenosha.

“Over time, the area has gotten some critical mass and now it is a more known and accepted location,” Navis said. “It is now no longer ‘Way up in Wisconsin.’ Now it is an extension of the Chicago market, even though there is that pesky jurisdictional state line.”

Zilber is planning to expand its footprint in the city of Kenosha with four large speculative industrial buildings.

The company is planning to build a 250,000-square-foot building on the east side of I-94, at 52nd Street and 104th Avenue, adjacent to the former Dairyland Greyhound Park. The company also recently purchased 70 acres of land west of I-94 along Burlington Road (Highway 142) and is planning up to three spec buildings totaling almost 1 million square feet.

In southern Milwaukee County, Zilber owns a building in the Franklin Business Park and has a 162,000-square-foot spec building currently under construction. In Oak Creek, the company recently acquired two industrial buildings off of Ryan Road.

Zilber also recently started investing in Racine County, with the purchase of a 248,000-square-foot facility at 1445 International Drive that will be leased by Goodwill Industries. Zilber also acquired a 110,000-square-foot building off of Highway 20 last year.

“This is a long-in-the-tooth story,” Navis said. “For a while, this corridor has been gaining momentum and now this growth has accelerated. What is new is that in the last 10 years, the Milwaukee market has sought this area out as a relocation solution for companies that want to grow. I do not see any good reason why its growth will not continue and continue to accelerate.”

The Goodwill Industries building is located in the same business park, just south of Highway 20 in Mount Pleasant, where Racine-based InSinkErator plans to move its headquarters. The new $24 million, 85,000-square-foot facility is currently under construction.

Andy Bruce, principal for MLG Capital, said the I-94 north-south corridor’s success depends on the location. In Kenosha County, much of the growth has been from Illinois firms relocating to Wisconsin because of the strong business environment the state can offer, Bruce said.

But in Racine and Milwaukee counties, the growth has been the result of a combination of factors, he ssaid.

MLG Capital developed the 450-acre Renaissance Business Park, located east of I-94 on Highway 20 in Racine County, between 1995 and 2005. The park filled quickly, with mostly Racine-based companies.

“(The rising amount of development in the I-94 north-south corridor) is a credit to Wisconsin’s business environment and to local governments for being proactive and entrepreneurial,” Bruce said, adding that it will be fun to see the effect Foxconn has on Racine.

“What is fascinating about Foxconn is the square footage is almost twice the size of Lakeview (Corporate Park), which was built out over a 25-year time period,” Bruce said. “It’s not quite the density of jobs, but it’s not far off either.”

“Kenosha has always been considered a suburb of Chicago, more so than Milwaukee,” said S.R. Mills, president of Kenosha-based Bear Development. “Racine splits the difference (between the Milwaukee and Chicago areas).” 

Sam Badger, a senior vice president in CBRE’s Chicago advisory and transaction services group, said any company looking for land north of Chicago will take a look at southeastern Wisconsin.

“With the lower property taxes and the lower land prices, there is really an opportunity for a lower cost of occupancy,” Badger said. “Certainly incentives have played into the whole deal, but the incentives are more like gravy.”

Badger has brokered more than 1.5 million square feet of lease transactions and sold more than 525 acres of land in southeastern Wisconsin over the past two years.

He said another trend has been for companies located in northern Milwaukee County or north of Milwaukee to begin looking south as they expand, which had not happened in the past.

Bruce, Mills and Badger will be panelists at the BizTimes Commercial Real Estate and Development Conference on Nov. 17, sponsored by Bank Mutual and Husch Blackwell. The event will focus on the development activity that is occurring in the I-94 north-south corridor between Milwaukee and Illinois.

Mills said you don’t have to be too much of a visionary to look at the northern Chicago suburbs, including Gurnee, Libertyville and Lake Forest, and see that the development trend is continuing to push north.

“It is like that acronym for Boston, New York and D.C. – Bosnywash – it is happening here,” he said. “I think the growth will continue and in 20 years we will look very similar to what we see south of the border.”

An industrial real estate report by NAI MLG Commercial found there has been 11.2 million square feet of construction along the interstate corridor between Milwaukee and the Illinois state line from 2012 to 2017. There is another 3.4 million square feet currently under construction in that corridor, and from 2018 through 2020, another 7.6 million square feet of industrial construction is planned, which does not include the 20 million square feet of construction Foxconn is planning in Racine County.

“This stretch of interstate is highly desirable due to the fact there is an abundance of untouched land, significant infrastructure investment, the stable Wisconsin political environment and two major metropolitans,” the report found.

With commercial growth comes a need for more residential real estate, and retail follows rooftops, which is what has been happening between Milwaukee and the state line, perhaps most notably in Oak Creek.

In May 2016, Swedish retailer IKEA announced plans to build its first Wisconsin store on 30 acres of land owned by Northwestern Mutual Life Insurance Co. at Drexel Avenue and I-94 in Oak Creek. The 291,000-square-foot store will open next year, undoubtedly attracting several more retail developments nearby. Northwestern Mutual Life Insurance Co. is currently working on development plans for the 27 acres of land immediately south of the IKEA store along Drexel Avenue and has asked the city of Oak Creek to rezone the site to an interstate regional retail district.

Meanwhile, directly across I-94, Brookfield-based developer Somerstone LLC is working on assembling about 30 acres of land for a large commercial development that could include 100,000 square feet of retail space and five outlot parcels.

In Pleasant Prairie, where development has been rampant, vacant sites just north of the Pleasant Prairie Premium Outlets have been eyed by developers.

Highland Park, Illinois-based Varin Realty LLC, which has owned the DoubleTree by Hilton Pleasant Prairie (formerly a Radisson hotel) for 12 years, is planning to build a second hotel next to the outlet mall. The company will break ground this month on a four-story Fairfield Inn and Suites hotel planned southeast of I-94 and Highway 165.

Future plans also call for two retail or restaurant buildings to the south of the hotel.

Even Kesslers Diamonds wants to be a part of the growth in Kenosha County. Richard Kessler purchased 3.8 acres of land just north of the Premium Outlets in August, where he plans to build an eighth location for his jewelry store business.

The neglect that once characterized the north-south corridor is now gone and the freeway leading to Illinois is getting the attention once reserved for downtown Milwaukee and I-94 West.

James Barry III, president of The Barry Co., said a major problem in the past for attracting development in the corridor was the freeway needed to be expanded and modern interchanges needed to be installed, which has happened over the past decade.

And while Kenosha County has been the main example of success, Barry believes Racine County will follow at a rapid pace once Foxconn begins construction.

“All of this makes sense. You have the third largest city in the U.S. connecting to a top 40 city,” Barry said. “Amazon and Uline certainly gave the corridor a strong desirable destination, but now you see companies like Haribo and Seda in Mount Pleasant and that helps win Foxconn and put the corridor on the map. I anticipate growth for years to come.”