Irgens’ recent purchase of a one-acre site at 833 E. Michigan St. in downtown Milwaukee, and the firm’s recent announcement that is has secured $71 million in financing for the 17-story office tower that it plans to build there, indicate that the project should be under construction soon.
Irgens said it plans to begin construction on the $105 million project, called 833 East, in April. It will take about 20 months to construct the building, so it could be complete in late 2015 or early 2016.
Tenants in the 358,000-square-foot building will include Godfrey & Kahn S.C., which will move there from its current location in the BMO Harris building at 780 N. Water St.; Colliers International|Wisconsin; and Inland Companies, which will move there from a 14,000-square-foot space that they occupy at the former Pabst brewery complex; and Irgens’ own offices, which are currently located in Wauwatosa.
“We still need to achieve a little more leasing before our lending group will let us start construction,” said Mark Irgens, chief executive officer/president and manager of Irgens.
The lending group for the project includes The PrivateBank and Associated Bank, which will each provide $24 million in financing, and Bank Mutual and Anchor Bank, which will each provide $11.5 million.
“We do not need any additional financing to start construction,” Irgens spokesman Eric Nelson said.
Godfrey & Kahn will occupy about 100,000 square feet of space in the top four floors of the building.
Colliers and Inland Companies will occupy the entire fifth floor of the building, occupying about 26,000 square feet of space.
At a recent Greater Milwaukee Committee event, Irgens said that tenants have committed to lease 156,000 square feet of space in the building and the firm is talking to four prospects that could lease a total of 50,000 square feet of space.
The building will be built on a one-acre site currently occupied by a parking structure built in 1951. An affiliate of Irgens recently bought the property from U.S. Bank for $5.4 million.
“This is a step in the development process of 833 East,” Irgens said of the site purchase.
As part of its sale of the property to Irgens, U.S. Bank included deed restrictions that limit any building constructed on the site to 18 stories tall with no more than 485 parking spaces. The site is located just southeast of the 42-story U.S. Bank Center at 777 E. Wisconsin Ave.
Irgens bought the northern portion of the parking structure from U.S. Bank. The southern portion, along Clybourn Street, will be retained by U.S. Bank. The lower portion of that structure is used for loading purposes for the U.S. Bank Center. The bank also wants to retain control of the site for future expansion of its adjacent parking structure.
The 833 East building has been designed by Milwaukee-based architectural firm Kahler Slater. Irgens is hoping to get an environmentally-friendly LEED designation for the design of the building. The general contractor for the project is Milwaukee-based CG Schmidt.
The architecture of the 833 East building includes a point supported glass wall exterior with columnless corners on the inside to enhance views. Building features will include: a four-story lobby, a restaurant on Michigan Street, a fitness center, a multimedia conference center able to accommodate up to 120 people, and terraces providing views of Lake Michigan. The building will have 444 on-site parking spaces. It will also provide a connection to the U.S. Bank Center galleria and the proposed 44-story Couture apartment, hotel and retail building, which would be built just to the east.
Although it will only be 17 stories tall the 833 East building will feature 26,000-square-foot floor plates, larger than many other narrower downtown buildings. For example, the Milwaukee Center building at 111 E. Kilbourn Ave. is 26-stories tall, but its 378,717-square-foot size is similar to the shorter but wider 358,000-square-foot 833 East building. Larger floor plates appeal to office space tenants that want to reduce time spent moving from one floor to another.
The 833 East building will bring new supply to the downtown Milwaukee office market, but commercial real estate brokers say the market should be able to absorb the additional space. The downtown east submarket has a 9.6 percent class A office space vacancy rate, according to Xceligent. And Milwaukee-based commercial real estate brokerage NAI MLG Commercial pegs the downtown east class A office market vacancy rate at 3.3 percent, because it only considers five buildings to be of class A caliber in that submarket. Xceligent counts 10 buildings as class A in the downtown east submarket.
“The A-plus market (in the downtown east area) is 100 percent leased, practically,” said CBRE executive vice president Bill Bonifas.
“It’s as tight as the (downtown class A office) market has ever been in my career,” said Ned Purtell, a partner with RFP Commercial who has been a commercial real estate broker in the Milwaukee area for more than 20 years. “There hasn’t been any new product (built downtown) in years.”
There has not been a new multi-tenant office building built in downtown Milwaukee since 2003 when the 875 E. Wisconsin Ave. building and the Cathedral Place building, at 555 E. Wells St., were built. A new building currently under construction at the former Pabst brewery on the west side of downtown will have 42,000 square feet of office space.
The downtown office market is ready for a new class A building and the market will have a few years to absorb the additional supply, Bonifas said.
“It’s going to take a few years to build and then it will have a three-year lease-up,” he said. “Its impact on the market will be gradual.”