In 2005, vacancy rates for industrial space in the Milwaukee area declined and retail space vacancy rates held steady, according to The Polacheck Co.’s 2006 Real Estate market review and forecast report. The overall industrial space vacancy rate for the six county southeastern Wisconsin area is at 6.52 percent, down from 6.96 percent a year ago, according to the report.
The Milwaukee area industrial real estate market had a net absorption of almost 900,000 square feet of space in 2005, according to the Polacheck report.
"This is another positive benchmark, which should continue to support the rejuvenation of the speculative development market," the report states. "Demand for industrial sites from developers in and around the metro area has been as strong as we have seen since the boom of the late 1990s."
In addition, the I-94 corridor from Lake County, Ill. to General Mitchell International Airport in Milwaukee continues to gain momentum as a distribution and trucking pipeline and continues to lure interest from industrial space developers, according to the report.
The industrial space vacancy rate in Waukesha county vacancy fell 28 percent from 9.65 percent in 2004 to 6.26 percent in 2005, according to the report. In Milwaukee County, the industrial space vacancy rate increased slightly from 7.14 percent in 2004 to 7.44 percent in 2005. Racine County has a 3.43 percent vacancy rate, Kenosha County has a 5.03 percent vacancy rate, Ozaukee County has a 8.35 percent vacancy rate and Washington County has a 5.57 percent vacancy rate.
Asking rates for class A warehouse space are currently at $4.50 to $4.75 per square foot. Rates for Class B space ranges from $2.50 to $3.75 per square foot, according to the report.
Polacheck predicts that industrial space lease rates will remain stable and vacancy rates will continue to fall in 2006.
The Polacheck Co. report pegs the southeastern Wisconsin office space vacancy rate at 12 percent.
The Polacheck report says the downtown vacancy rate is at 12 percent. The office vacancy rate is 13 percent in Wauwatosa and West Allis, 11 percent in Brookfield, seven percent in Waukesha, 14 percent on the northwest side and 9 percent on the north shore and in Ozaukee County, according to the report.
Two downtown buildings, the Milwaukee Center at 111 E. Kilbourn Ave. and 1000 N. Water St. each have about 100,000 square feet of available space, according to the report.
Also, downtown Milwaukee will see an increase in its vacant downtown office space in 2006 when Blue Cross Blue Shield moves to the Summit Place office complex in West Allis. The move will create 235,000 square feet of vacant space on the west side of downtown.
Nevertheless, the success of new office buildings downtown, including Cathedral Place and 875 East Wisconsin, both of which are fully leased, has spurred some developers to propose new downtown office buildings that could lure tenants form older buildings. The developers are trying to attract an anchor tenant to get their projects off the ground. Robert W. Baird is considering a new location for its 300,000-square-foot corporate headquarters or for its 100,000-square-foot operations center. The company is currently located in the U.S. Bank Center at 777 E. Wisconsin Ave.
"Other undisclosed (companies) are testing waters (for new office space)," the Polacheck report states.
Demand for office space in the Third Ward and in Walker’s Point is also picking up, accoding to the Polacheck report.
"The Third Ward is flourishing as nearly all of the industrial buildings have been converted to loft apartments, condominiums and office space," the report states. "Walker’s Point mirrors the market conditions of the Third Ward as it was perhaps 10 years ago. While a number of buildings are fully renovated, others are still being planned. Many projects are fully leased. However, with so many developments under way, 350,000 square feet of the approximately 1.7 million square feet are currently vacant. This reflects a vacancy rate of 20 percent that will, obviously, take a few years to fill."
Retail space vacancy rates for southeastern Wisconsin increased only slightly in 2005 from 7.0 percent in 2004 to 7.9 percent, according to the report.
Regional Malls in the Milwaukee area have low vacancy rates, according to the report. The six regional malls in the Milwaukee area – Brookfield Square, Mayfair, Southridge, Bayshore, Regency and The Shops of Grand Avenue – have a combined vacancy rate of just 1.8 percent, according to the report. Next year Columbus, Ohio-based Steiner + Associates Inc. will complete its $300 million expansion and conversion of Bayshore Mall into the Bayshore Town Center, adding 500,000 square feet of retail space, which will expand Bayshore’s total retail space to 1.2 million square feet, making it comparable in size to Mayfair, Brookfield Square and Southridge malls.
Community centers, shopping centers that are smaller than regional malls but have multiple anchors, had a vacancy rate of 7.1 percent in 2005, compared with 7.5 percent in 2004.
Neighborhood centers, shopping centers with only one anchor, had a vacancy rate of 12.2 percent in 2005, up from 8.8 percent in 2004. The higher vacancy rate indicates that retailers prefer the community centers with multiple anchors instead of the neighborhood centers with just one anchor, the report said.
Strip centers had a vacancy rate of 9.9 percent in 2005, compared to 10.2 percent in 2004. Coffee shops such as Starbucks and restaurant chains such as Qdoba Mexican Grill are driving new construction for strip centers, according to the report.
Trader Joe’s and The Fresh Market have an interest in entering the Milwaukee market, according to the Polacheck report. Trader Joe’s is a Monrovia, Calif.-based specialty grocery store chain with 215 stores. It has been rumored to be a possible tenant at Bayshore Town Center. Greensboro, N.C.-based The Fresh Market is an upscale grocery store chain with 50 stores in 12 states.
Retailers that are currently active seeking new locations in the Milwaukee area market, according to the Polacheck report, include Barnes & Noble, Best Buy, Linens-N-Things, Bed Bath & Beyond, Michaels, Jo-Ann Etc., Petco, Petsmart, Office Depot, Office Max, AJ Wright, TJ Maxx, Marshall’s, Cost Plus World Market and Babies ‘R’ Us.
Furniture stores such as Steinhafels, Colders, Value City, Ashley and La-Z-Boy are also pursuing new locations, according to the report.
Walgreens also continues to reposition and aggressively add new stores in the market, according to the report.
Small retailers, occupying 10,000 square feet or less, pursuing new locations in the market include: Anna’s Linens, Famous Footwear, ULTA, Dollar Tree, Family Dollar, Dollar General, Auto Zone, Advance Auto, Gamestop and Radio Shack.
Service retailers such as the UPS Store, Cost Cutters, Supercuts, Great Clips and H&R Block are typically leasing space in grocery store-anchored shopping centers, according to the report.
Small Business Times, December 16, 2005, Milwaukee, WI
