The Park East corridor, which remains mostly vacant approximately seven years after the Park East freeway spur was torn down, could now become a painful and constant reminder to the city about a huge missed opportunity to create a more vibrant downtown.
Menomonee Falls-based Kohl’s Corp. seriously considered plans to build a new corporate headquarters in the Park East corridor. The complex would have brought 4,500 to 5,000 Kohl’s employees to downtown Milwaukee and it would have been built on all of the vacant land between McKinley Avenue and Juneau Avenue from the Aloft hotel to the former Pabst brewery site.
Almost all of that land is owned by Milwaukee County, except for the former Sydney Hih buildings, acquired recently by the city. In addition, the city was assembling two parcels north of McKinley Avenue to build parking structures for the Kohl’s headquarters.
If Kohl’s had built its corporate headquarters in the Park East corridor, it would have provided a boost to the downtown office market as some Kohl’s vendors would have wanted to be located nearby. The addition of the Kohl’s headquarters would have increased demand for downtown housing. The Kohl’s employees would have provided additional customers for downtown stores, restaurants and bars, which would have helped fill up downtown retail space. Downtown hotels would have benefitted from accommodating visitors to the Kohl’s headquarters.
“If Kohl’s comes downtown, everything changes,” said Mike Mervis, vice president of Milwaukee-based real estate development firm Zilber Ltd.
But after months of discussion with city officials, Kohl’s executives said they are no longer considering downtown Milwaukee as a potential site for its new corporate headquarters. The company has not given a reason for its rejection of downtown Milwaukee.
City of Milwaukee officials said they made an aggressive offer in an attempt to attract Kohl’s, including tax incremental financing of more than $100 million and a new markets tax credit package of about $170 million (the benefit of that to the company would have been worth about $25 million). Milwaukee County provided an incentive package worth about $20-25 million, including 10.5 acres of free land, $5 million for infrastructure improvements and 1,000 bus passes.
“I couldn’t be prouder of the effort we made,” Milwaukee Mayor Tom Barrett said. “We were willing to put everything on the table to make it happen.”
The city hired Cassidy Turley Barry president James T. Barry III to help acquire property north of McKinley Avenue to provide parking structure sites for the project. Barry praised the cooperation of city and county officials in their efforts on the Kohl’s proposal.
“In my opinion, the city and the county did the best they could to try to bring Kohl’s here,” Barry said.
“We put our best foot forward,” said Richard “Rocky” Marcoux, the commissioner of the Department of City Development and city’s point man for the Kohl’s proposal. “The one thing we won’t spend any time on is second-guessing. When you put everything on the table, there’s nothing to second-guess.”
City officials treated the Kohl’s project “like it was a once-a-lifetime opportunity,” Barry said.
Barrett and Marcoux said the city’s aggressive offer to Kohl’s shows that the city and county are willing and able to work together in an attempt to bring a major development and job-creation opportunity to the city. That collaboration should help the city take advantage of future opportunities, they said.
“We are capable and willing to do it if it’s the right deal,” Marcoux said.
But when will the city get another opportunity like this?
“These chances (like the Kohl’s deal) come along once every 20 years in Milwaukee,” said Joel Lee, president of Van Buren Management Inc.
Barry said the city should market the Park East site nationally in an attempt to lure a corporate headquarters. The size, location and accessibility of the site, plus the city’s willingness to do a major incentive package, are major advantages that make the Park East corridor attractive, he said. Barry said the city should market the site to Chicago-based companies that may want to move out of Illinois, which has massive state budget problems.
“The more we get our economic development house in order statewide and locally, there will be more opportunities like (Kohl’s),” Barry said.
Meanwhile, there are still numerous major issues hanging over the future of downtown. City officials have to get back to work addressing some of those issues, without the assistance of a huge downtown catalyst they were hoping to get from Kohl’s.
The downtown issues include:
The county-owned land in the Park East corridor remains vacant. The only project that is moving forward on the county’s Park East land is a parking structure for the Milwaukee School of Engineering (MSOE).
The need for a replacement for, or a major upgrade to, the Bradley Center to keep the NBA’s Milwaukee Bucks here for the long term.
The need to expand the Frontier Airlines Center. The convention center was supposed to be a three-phase project, but the third phase has never been built. A larger convention center would help attract more events to Milwaukee, and would create addition demand to fill hotel rooms.
Three hotels are under construction downtown, and a fourth is planned at Potawatomi Bingo Casino, but nothing is being done to increase the demand for downtown hotel rooms. Kohl’s would have created more hotel room demand. “Clearly, with this unprecedented increase in supply and no new demand on the horizon, we are headed for trouble,” said Greg Marcus, president and CEO of The Marcus Corp.
The Shops of Grand Avenue still has massive vacancy, and a high percentage of downtown storefront retail space, especially along Wisconsin Avenue, remains vacant. The future of the Boston Store at the mall is in doubt. The Shops of Grand Avenue likely needs a major repurposing with other uses. Some of the space is already being leased, at rock-bottom rates, to creative start-up firms. The solution to attracting more retailers downtown is getting more people downtown, Mervis said. “You need mass. You need people to drive retail,” he said.
Office space vacancy remains a major problem. The east side of downtown Milwaukee has a 14.7 percent office space vacancy rate and the west side (where the Kohl’s headquarters would have been located) has a 32.5 percent office space vacancy rate, according to Xceligent. The class B office market downtown is in even worse shape. The east side of downtown has a 24.9 percent class B office space vacancy rate and the west side of downtown has a 35.1 percent class B office space vacancy rate. Because of a lack of demand for office space, there has not been a new multi-tenant office building built downtown since 2003.
The vacant site at North 4th Street and Wisconsin Avenue. There are several vacant sites downtown but this one might be the most troubling. The site is across the street from the Frontier Airlines Center between the Hilton Milwaukee City Center hotel and Boston Store. Before the Great Recession, Charlotte, N.C.-based Ghazi Co. planned to build a mixed use development with a hotel, entertainment retail and residences, on the site, but the project never got off the ground.
Northwestern Mutual Life Insurance Co. plans to demolish a 16-story, 451,964-square-foot office building at its downtown Milwaukee campus. The company is doing an analysis to determine if it should build a replacement building downtown or at its Franklin campus. A decision is expected by the end of the year. About 1,100 employees work in the building that Northwestern Mutual plans to tear down. “If we lose that one after we lose Kohl’s, things will not be good,” Mervis said.
On the bright side, downtown’s biggest strength might be its growing housing market. Following a national trend of more people moving back to urban centers, downtown Milwaukee’s population grew significantly during the pre-Great Recession condo boom and is now experiencing a post-Great Recession boom in apartment development, although the apartment developments have usually required government assistance of some sort. Nevertheless, demand for downtown housing appears to be strong with apartment occupancy rates in the high 90s, according to residential development firm Mandel Group Inc. The downtown population has increased from about 6,000 15 years ago to about 18,000 today, Marcoux said.
“There was a time when people were afraid to live in downtown Milwaukee,” said Barry Mandel, president of Mandel Group. “Now it is a sought-after place to live. Downtown Milwaukee has established a proven housing market, which we can build upon, and build we must.”
If downtown Milwaukee can continue to increase its residential population a lot of its other problems, including vacant retail and office spaces, will be solved as businesses move in to serve and cater to the downtown population.
“We cannot have a strong city without a strong downtown,” said Alderman Nik Kovac.
