The southeastern Wisconsin industrial real estate market continues to post impressive levels of absorption, and the vacancy rate has now slipped below 6 percent.
The region’s industrial market absorbed 1.2 million square feet during the third quarter and has absorbed 3.35 million square feet so far this year, according to Xceligent data.
“There’s a lot of activity out there,” said Mark Gorski, an industrial real estate broker with Pewaukee-based Judson & Associates. “Plenty of deals are getting done.”
The region’s industrial space vacancy rate fell to 5.53 percent in the third quarter. It has been more than 11 years since the region’s industrial space vacancy rate has been that low.
“We are out of product,” said Adam Matson, an industrial space broker with Milwaukee-based NAI MLG Commercial. “Right now we have more demand than product to satisfy that demand.”
The region has had 17 consecutive quarters of positive absorption, according to the latest market report from Xceligent and the Commercial Association of Realtors Wisconsin.
The Milwaukee County market has absorbed 1.1 million square feet of industrial space so far this year. Racine County has absorbed 906,650 square feet and Kenosha County has absorbed 774,483 square feet.
Industrial space vacancy rates have fallen throughout the region. The biggest decreases during the past year have been in Kenosha County, down from 5.73 percent a year ago to 4.03 percent in the third quarter; Racine County, down from 5 percent a year ago to 3.77 percent in the third quarter; and Milwaukee County, which fell from 9.44 percent a year ago to 8.24 percent in the third quarter.
Waukesha County’s industrial space vacancy rate is down to 3.84 percent and Walworth County’s is down to 3.18 percent.
Despite the strong run the region’s industrial real estate market has been on in recent years, development has been sluggish, with little to no speculative development.
But now that appears to be changing, with a growing list of industrial projects in the works in the region, including: new industrial parks, speculative developments, build-to-suit, owner-occupied projects and expansion projects.
And more industrial building projects are finally moving from the drawing board to reality as several have broken ground recently.
“It’s good to see some of them actually breaking ground,” Gorski said.
Developers are trying to get buildings completed to take advantage of the low vacancy rates while they last. But don’t expect every proposed industrial building to get built, Matson said.
“Everyone is bullish right now,” he said. “It’s more or less a race. Whoever can get their buildings done first is going to be able to capture that share of the market.”
New industrial building projects:
- Amazon.com is nearing completion of a 1 million-square-foot distribution center and a 500,000-square-foot distribution center in Kenosha.
- Uline plans to build a 1 million-square-foot distribution center in Pleasant Prairie and a 1 million-square-foot distribution center in Kenosha. The company also will occupy a 521,052-square-foot warehouse that CenterPoint Properties is building in Pleasant Prairie.
- CenterPoint also is building a 412,000- square-foot speculative industrial building at its Pleasant Prairie project.
- Niagara Bottling is building a 377,000- square-foot plant in Pleasant Prairie.
- Kenall Manufacturing Co. is building a 354,000-square-foot facility in Kenosha, and will move its headquarters there from Gurnee, Ill.
- Ryan Companies Inc. plans to build a two-building, 230,000-square-foot speculative industrial development in Oak Creek. The firm also plans to build a 158,292-square-foot speculative industrial development in Menomonee Falls.
- Zilber Property Group is building a 176,000-square-foot speculative industrial building in Pleasant Prairie.
- Liberty Property Trust is building a 171,144-square-foot speculative industrial building in Oak Creek.
- Lincolnshire, Ill.-based Venture One Real Estate is building a 164,007-square-foot plant for Stella & Chewy’s in Oak Creek. It is the first building under construction in the 220-acre OakView Business Park, which is being developed by Wispark LLC.
- Sharp Packaging Systems LLC plans to build a new 151,970-square-foot headquarters facility in Sussex.
- Wangard Partners Inc. will build a 72,000-square-foot industrial building and a 50,000-square-foot industrial building at the former Yellow Freight trucking site in West Allis. Ferguson Enterprises will occupy the larger building. The smaller building will be built on speculation.
- Interstate Partners is building a 100,000-square-foot industrial building for EmbedTek in Pewaukee.
- Oberlin Filter plans to build a 92,340- square-foot facility in Waukesha.
- Weimer Bearing & Transmission plans to build a 68,390-square-foot industrial building in Germantown to replace its existing headquarters in Menomonee Falls.
- Solaris is building a 68,000-square-foot industrial building in the Menomonee Valley in Milwaukee.
- General Capital Group will build a 53,160-square-foot speculative industrial building at Capitol Drive and North 31st Street in the Century City Business Park in Milwaukee. General Capital plans to build a second building at Century City, about the same size as the first building, once a significant amount of space is leased in the first building.
- HellermannTyton is building a 102,000-square-foot addition to its 92,000-square-foot facility at 6701-11 W. Good Hope Road in Milwaukee.
- Midland Plastics plans to build a 40,000-square-foot addition of its 75,500-square-foot facility in New Berlin.
- Good Foods Group plans to build a 39,166-square-foot addition to its 56,333-square-foot building in Pleasant Prairie.
New industrial park plans:
- Bridge Development Partners LLC plans to develop a 400-acre business park at I-94 and Highway 142 in Kenosha. The company sold about half the site to Uline, which plans to build a 1 million-square-foot distribution center and 60,000-square-foot office building there and will have room for future development of another 2 million square feet of warehouse space. Bridge will provide infrastructure and will be involved in the Uline development and will also develop the other half of the site it is assembling.
- Venture One Real Estate LLC plans to develop a business park on a 248-acre site in Pleasant Prairie.
- MLG Capital plans to develop the 120-acre Willow Creek Business Park in Germantown.
- Ashley Capital plans to develop an 87-acre business park northwest of Highway 11 and County Highway H in Mount Pleasant. The project could have up to 1.2 million square feet of industrial buildings.
- Rizzo Development Group plans to develop an industrial park on a 26-acre site at 21200 Gumina Road in Brookfield owned by Spectrum Development LLC. When fully developed, the industrial park could have up to 320,000 square feet of buildings.
Several of the largest industrial projects in the region are occurring in Kenosha County, which is primarily driven by the Chicago region and is considered a separate market from the Milwaukee area. More industrial real estate development is expected in the Kenosha area.
“Expect (the I-94 Kenosha County) corridor to continue with its torrid pace,” said Jeff Hoffman, a partner at The Boerke Company, in his third quarter market report. “This will continue to remain a big deal market with most occupiers searching for 100,000 square feet and up.”
Several Illinois firms that want to build large distribution centers have built in Kenosha County because they are unable to find available sites in northern Illinois, said Bridge Development principal Tony Pricco.
“There are no large, ready-for-development sites in Lake County (Illinois) anymore,” he said.
Other firms, including one seeking 200,000 square feet and another seeking 600,000 square feet of warehouse space are considering Wisconsin sites, Pricco said.
No doubt the region’s industrial market has been boosted by the growing strength of the region’s manufacturing sector. The Marquette-ISM Report on Manufacturing for southeastern Wisconsin and northern Illinois showed a seasonally adjusted Purchasing Managers Index of 63.2 in September, up from 59.6 in August. Any number above 50 indicates growth. The PMI for the region’s manufacturing sector has been above 50 for seven of the past nine months.
“The Milwaukee market appears to have followed the national economy and has emerged from a frozen start to the year with consistent and stable growth,” Hoffman said in his quarterly report. “I am anticipating a strong surge in investment through 2015 as the real estate cycle has transitioned into growth phase.”