Building blocks: Several large commercial real estate projects on tap

After years of slow commercial real estate development activity during and after the Great Recession, the sector has shown significant improvement in recent years and several major development projects are now being built in southeastern Wisconsin.

During the second half of 2014:

  • A large new hotel will open at Potawatomi Bingo Casino in Milwaukee.
  • Demolition work will be completed and construction work will begin for two large new office buildings in downtown Milwaukee, and work will begin or continue on several large mixed-use developments in the metro area.
  • Kenosha County continues to be a major hot spot attracting large commercial development projects.
  • Apartment development is robust throughout the Milwaukee area with numerous projects planned and under construction in the downtown area and in the suburbs.

Ken Kraemer, executive director of Building Advantage, an organization that represents union trades workers and contractors, said “we’re not even close” to the pre-Great Recession construction boom times, but construction activity in the region has picked up significantly this year.

833 East

“I have had a lot more positive conversations with developers, contractors, sub-contractors, labor leaders and even the workforce,” he said.

The Potawatomi Hotel

Unemployment for the area’s construction industry peaked at more than 30 percent during the Great Recession. Kraemer estimates the unemployment rate for the local construction industry is now down to about 15 percent. Some trades union locals are at full employment, he said. Several area construction workers who left the industry during the recession have come back, and contractor classes for apprenticeships have been packed with new recruits who want to work for the growing industry, he said.

The Corners

The uptick in major development projects could keep construction workers in the region busy for several years to come.

“I’m very excited about what’s going to happen,” Kraemer said. “I see five to seven years of good work coming up.”

Downtown Milwaukee

The most significant current commercial real estate development in the region is the $450 million, 32-story, 1.1-million-square-foot Northwestern Mutual Tower and Commons at Northwestern Mutual Life Insurance Co.’s corporate headquarters campus in downtown Milwaukee. During the first half of the year, demolition crews tore down a 16-story, 452,000-square-foot office building to make way for the new building. Construction of the new building will start by the end of this year and is expected to be complete in 2017.

The Northwestern Mutual project is the largest of several major developments near the lakefront in downtown Milwaukee. About a block to the south of Northwestern Mutual, the Irgens real estate development firm has begun demolition work at the site where it will build a 17-story office tower with 358,000 square feet of office space. Called 833 East, the building will be built at 833 E. Michigan St. Construction is expected to be complete in 2016.

Just west of the 833 East project, Milwaukee-based Jackson Street Management LLC plans to build a 200-room Westin hotel on a vacant lot just south of the U.S. Bank Center at 777 E. Wisconsin Ave. Westin Hotels & Resorts is an upscale hotel chain owned by Stamford, Conn.-based Starwood Hotels & Resorts Worldwide. It would be the first location in Wisconsin for the Westin brand. Construction could begin by the end of the year.

An even bigger hotel will open by the end of the year just outside of downtown Milwaukee, in the Menomonee Valley. The new 18-story, 381-room hotel will open at Potawatomi Bingo Casino.

Meanwhile, construction could begin by the end of the year on a 158-room Kimpton hotel that HKS Holdings LLC plans to develop northeast of Broadway and Chicago Street in the Historic Third Ward, near downtown.

On the north side of downtown, construction continues on the third phase of a $35 million to $40 million renovation project at Schlitz Park. The current phase includes renovations of the Executive Building and the Stockhouse Building in the complex, creation of a one-acre park and re-opening of Galena Street into the complex. Schlitz Park will add several new tenants this year including UMB Fund Services, HSA Bank and the Enthusiast Brands division of Reader’s Digest Association Inc.

Mixed-use and retail

Enclosed shopping malls and big-box store anchored strip malls are increasingly becoming old-fashioned relics. Major new retail developments tend to be mixed use projects that in addition to stores also incorporate restaurants, entertainment venues, housing and office space. Several major mixed use projects are in various stages of development in southeastern Wisconsin.

In the Town of Brookfied, Marcus Corp. recently began demolition work for its long planned The Corners project, a 460,000-square-foot development that will be anchored by a Von Maur department store and will include other stores, restaurants, a park and 158 apartments.

In Wauwatosa, the first phase of Chicago-based HSA Commercial’s Mayfair Collection project, northeast of U.S. Highway 45 and Burleigh Street, opened earlier this year and construction will begin soon on the second phase. The 270,000-square-foot first phase included Nordstrom Rack and Sak’s Fifth Avenue OFF 5th stores. The second phase will include a Whole Foods store, a hotel and six restaurants. Proposed future phases of the project include multi-family housing, office space and medical buildings.

In Oak Creek, construction has begun on a mixed-use development southwest of Howell and Drexel avenues, called Drexel Town Square, which will create a new downtown in that city. The project will include a 192,000-square-foot Meijer store, a 108-room Four Points by Sheraton Hotel, 500 to 600 apartments, a mixed-use Main Street, a town square park and a new City Hall and library.

In Menomonee Falls, Milwaukee-based real estate development firm Cobalt Partners recently announced that a Costco store will anchor a mixed-use development, called Whitestone Station, that it plans to build on a 65-acre former industrial site located west of the interchange of U.S. Highway 41/45 and Pilgrim Road in Menomonee Falls. Several other retailers and restaurants in the development will be announced at a later date. In addition to multiple retail buildings, Whitestone Station will include approximately 320 market-rate, high-end apartments to be developed by Milwaukee-based Fiduciary Real Estate Development. In late 2013, the Wisconsin Athletic Club and Froedtert Health opened a medicine and fitness facility nearby.

In Mequon, WiRED Properties and Shaffer Development are building Mequon Town Center, a $19 million mixed-use development northwest of Mequon Road and Cedarburg Road. The project will have 36,640 square feet of retail and commercial space, 28 luxury apartments and a new home for an American Legion Post. Tenants will include Colectivo Coffee, Café Hollander and Ruby Tap.

Kenosha County

One of the hottest areas in southeastern Wisconsin for commercial real estate development is Kenosha County, which continues to attract businesses from Illinois that are looking for a lower-cost area in which to expand.

Pleasant Prairie-based Uline announced recently that it plans to double the size of its corporate headquarters campus, located southwest of I-94 and Highway 165/Q. In 2010, the company moved from Waukegan, Ill. to a new 200,000-square-foot office building and a new 1 million-square-foot distribution center at the Pleasant Prairie site. Now the firm plans to build another 200,000-square-foot office building and another 1 million-square-foot distribution center at the campus. The company plans to add 500 jobs in the expansion. It currently has about 1,100 employees in Pleasant Prairie.

Racine-based InSinkErator recently announced plans to establish operations in a 160,000-square-foot building at 5612 95th Ave in the Business Park of Kenosha on the city’s west side. The building, previously occupied by an envelope manufacturing plant, has been vacant for about a year and a half.

Kenall Manufacturing Co. is building a new 354,000-square-foot corporate headquarters and manufacturing facility on a 34-acre site at 104th Avenue and 55th Street in Kenosha. The company will move there from Gurnee, Ill. With the move, the company will bring 400 employees to Kenosha and plans to hire another 200 in the next four to five years.

Also announced this spring, Ontario, Calif.-based Niagara Bottling LLC plans to build a $56 million, 377,000-square-foot facility in the LakeView Corporate Park at 11031 88th Ave. in Pleasant Prairie. The facility will package and distribute private label water for customers as well as the Niagara label. It is expected to open in early 2015.

Meanwhile, construction continues on the biggest economic development project in Kenosha County. New York-based private equity firm KTR Capital Partners is building a 1.1 million-square-foot distribution center and a 500,000-square-foot distribution center on a site northeast of I-94 and 38th Street in Kenosha for Seattle-based Amazon.com. Total Amazon employment in Kenosha could reach 1,575 at the two facilities. Amazon hopes to have both buildings completed by the end of this year.

Gov. Scott Walker still has not made a decision on another potential major development in Kenosha County: the Menominee tribe’s proposed $810 million Hard Rock Casino & Hotel development at the site of the former Dairyland Greyhound Park in Kenosha. The tribe says the facility would create 3,300 jobs. The casino would have 2,700 slot machines, 100 table games and 24 poker games in a 400,000-square-foot building. An entertainment venue and retail area also would be included. The second phase of the project would feature a hotel, spa and pool. It appears Walker will make his decision on the Kenosha casino after the November election, when he hopes to be re-elected.

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