Executives for Baker Tilly Virchow Krause LLP would like to move the company’s Milwaukee office from the city’s west side to downtown Milwaukee, says Kevin Heppner, regional managing partner in Wisconsin for the firm.
But in order for a new office building to get built in downtown Milwaukee two or more major office tenants will need to gravitate toward a particular project, Heppner said.
“Two anchors need to line up,” he said.
Baker Tilly could be one of those anchors. However, the company’s executives still have not ruled out keeping the office in the Honey Creek Corporate Center at 115 S. 84th St., on Milwaukee’s west side, Heppner said.
Baker Tilly’s lease at the Honey Creek Corporate Center expires in December of 2012. The company’s executives have considered re-locating the office and would prefer to move it to downtown Milwaukee to increase the company’s connections and contacts with the city’s business community.
“I think if we had our preference we would be downtown,” Heppner said. “We feel like being downtown in Milwaukee is the thing for us.”
Baker Tilly is looking for about 70,000 square feet of office space for its Milwaukee office and has 210 to 225 employees in that office, Heppner said.
The class A office space vacancy rate in downtown Milwaukee is fairly low, at about 10 to 13 percent according to various estimates. Few existing class A buildings in downtown Milwaukee have a single block of space available that could accommodate Baker Tilly.
Several developers have proposed new office buildings for downtown Milwaukee. Tenants that are considering relocating to a new downtown Milwaukee office building, besides Baker Tilly, include Von Briesen & Roper (seeking 75,000 square feet), Godfrey & Kahn (seeking 90,000 square feet of space) and CH2M HILL.
Baker Tilly executives have had conversations with all of the developers working on downtown office projects. Not much has happened yet, Heppner said.
“As time progresses the discussions probably will intensify,” he said.
Baker Tilly wants to be located in the heart of the central business district, ideally with the company’s name on the building that would be visible from the freeway, Heppner said.
Ideally, Baker Tilly executives want to be in a building located within a 4-block radius of the Pfister hotel at 424 E. Wisconsin Ave., Heppner said. That location in the middle of the central business district would maximize the benefits of being downtown for Baker Tilly by placing it within walking distance of several major downtown businesses and increasing chance meetings and networking opportunities with key business leaders in the area, he said.
Office building projects that are in various stages of development within that four block radius include:
A project by Brookfield-based Hammes Co. just south of the U.S. Bank Center.
A project by Wauwatosa-based Irgens Development Partners LLC next to the Milwaukee Athletic Club building at 758 N. Broadway.
The Washington Square development that Van Buren Management Inc. (Joel Lee) has proposed near the Pfister hotel.
A 6-story office building that Milwaukee-based Next Generation Real Estate Inc. (Robert and Michael Levine and other investors) plans to build, replacing several 100-year-old buildings southeast of Wisconsin Avenue and Broadway.
An eight-story, 155,000-square-foot office building that Wauwatosa-based Wangard Properties plans to build on top of a parking garage just south of the eight-story 875 East Wisconsin office building at 875 E. Wisconsin Ave.
Another proposed downtown office development appears to be a long shot to land Baker Tilly, because the site is located well outside of the central business district, where the company’s executives want to be. Rainier Properties LLC (which includes developers Bruce Westling and Gary Grunau) wants to build a 15-story office building with 280,000 square feet of office space and a Marcus Theatres movie theater complex northwest of Water Street and Knapp Street and along the Milwaukee River in the Park East corridor.
“We haven’t looked at that one too hard,” Heppner said.
Capital markets are extremely tight for developers seeking financing for commercial real estate projects. Developers need to pre-lease a large amount of space to get financing for a building. For example, Westling said he needs more than 75 percent of his project’s office space pre-leased to get financing for the project.
Considering the requirements of the capital markets, a developer will probably need to obtain two anchor tenants to get financing for a new office building, Heppner said. The office tenants that are in the market need to get onboard with a particular office project to make it successful, he said. Baker Tilly has had discussions with all of the players in the downtown office market, including potential anchor tenants, he said.
“People will either talk and get together or they won’t and nothing will get built and (tenants) will end up staying put,” Heppner said.
Baker Tilly may end up staying put. The company has an attractive lease rate at Honey Creek Corporate Center, which is owned by Minneapolis-based The Geneva Organization.
“We have a good landlord and good pricing,” Heppner said. “We haven’t ruled out staying.”
Baker Tilly needs to make a decision about its future office space plans within the next year.
“If we are going to get into a new building, we have about a year to figure it out,” Heppner said.
Von Briesen & Roper plans to make a decision on its future office space plans by the fall.