Irgens says downtown tower will benefit city

Last updated on September 25th, 2022 at 02:06 pm

Irgens, one of the most prominent commercial real estate development firms in the Milwaukee area, is trying to convince city officials to provide a subsidy for its proposed 17-story, $105 million, 357,000-square-foot office tower that it wants to build at 833 E. Michigan St. in downtown Milwaukee.

Many taxpayers complain when developers seek subsidies, often in the form of tax incremental financing (TIF), for development projects. Those taxpayers often ask: Why can’t the developers build the building without a subsidy?

Developers like Irgens say that new office buildings in downtown Milwaukee need subsidies because of higher land costs, higher costs to build high rise buildings and the cost to provide structured parking, all added costs that competing developments in the suburbs do not have to bear. The cost to build a new class A suburban office building is 55 to 60 percent of the cost to build a new class A downtown office building, according to Irgens.

The Common Council has demonstrated a willingness to provide subsides for developments that they believe provide a major benefit to the city, particularly job creation. Aldermen recently approved a $54 million TIF subsidy for a 33-story office building that Northwestern Mutual Life Insurance Co. plans to build at its headquarters downtown. The firm plans to add 1,900 jobs there by 2030.

Irgens chief executive officer, president and manager Mark Irgens said his firm has submitted a TIF application with the Department of City Development for the 833 East Michigan project.

“We are having ongoing discussion with the DCD,” he said.

Irgens declined to disclose details about the TIF request. But Ald. Robert Bauman, who represents the downtown area, said the firm is seeking about $12 million in TIF for the project.

Bauman, Ald. Michael Murphy and Ald. Jim Bohl are expressing concern about the TIF request for the Irgens project because most of the tenants committed to the building are already located in the downtown area. The building will be anchored by the Godfrey & Kahn law firm. Two other firms, one located downtown and the other on the periphery of downtown, have signed letters of intent to move to the building, Irgens said. The only tenant committed to the project that would be new to the city is Irgens itself, which plans to move its office from Wauwatosa to the building.

Total pre-committed space for the building is approximately 155,000 square feet.

“We’re pre-leasing the building to 50 percent to get financing,” Irgens said. “There are four or five different financial organizations we are talking to.”

But Aldermen want to see a significant amount of jobs created, or other benefits provided to the city, to provide a large TIF for a development. So far some of them are not convinced that Irgens’ project provides enough of a benefit.

“($12 million) is a lot of money that’s going to create (not enough) new jobs downtown,” Bauman said. “What is the value that is being brought to the city?”

“If you are just moving chess pieces around the board you are not adding much value,” Murphy said.

The site for the Irgens project is a prime location near the lakefront and the city should wait for a major project there with a large number of jobs before agreeing to provide a subsidy, Murphy said.

“I don’t think the city of Milwaukee should sell itself short,” he said.

Irgens itself will bring 71 employees from Wauwatosa to the building. The building will have a staff of 28 employees.

Other tenants moving to the building need more space and plan to add more jobs after they relocate, Irgens said. The two unnamed firms committed to the project plan to add a total of 40 jobs, he said. The building will also provide space that Godfrey & Kahn needs to expand. The building could also provide space for firms currently located in the U.S. Bank Center, which is nearly full, to expand, Irgens said.

Construction of the building will create 177 jobs, Irgens estimates, and the firm has selected Milwaukee-based CG Schmidt as its general contractor and Milwaukee-based Kahler Slater as the architect for the project.

Bauman said he would support a city subsidy for an architecturally significant building, but he said the 17-story building proposed by Irgens, does not meet that standard, calling the design “very pedestrian.”

“If someone wants to do something that is a landmark status, we will contribute,” Bauman said. “But if you just want to build a regular office box, do it yourself. Architectural design is very important.”

Irgens defended the design of the building and said his firm cannot build a taller building on the site because of height restrictions set by U.S. Bank. The site is located only 140 feet from the 42-story U.S. Bank Center, is owned by the bank and is currently occupied by the bank’s annex parking structure. Irgens also built the 8-story 875 East Wisconsin Ave. building, which was also subject to U.S. Bank Center height restrictions.

The glassy 833 East Michigan building will have several significant architectural features, Irgens said, including a four-story lobby that he said “will activate Michigan Street,” a restaurant on Michigan Street, three terraces (including one on the rooftop) providing views of the lake and the iconic Milwaukee Art Museum, columnless corners that will enhance the views from inside the building and a point supported glass wall that “looks like the glass is almost floating,” Irgens said.

“I think we’ve done a nice job here,” he said.

The building will also provide a connection to the U.S. Bank Center galleria and the proposed 44-story The Couture building at the Milwaukee County Downtown Transit Center site.

Although it is only planned for 17 stories tall, the 357,000-square-foot 833 East Michigan building will provide a large amount of office space comparable to taller but narrower buildings, such as the 26-story, 378,717-square-foot Milwaukee Center building at 111 E. Kilbourn Ave.

The 833 East Michigan building has a 26,000-square-foot floor plate, larger than many other downtown Milwaukee office buildings, Irgens said.

“(Larger floor plates) is what the demand is and that is what corporate America wants,” Irgens said.

The building will also provide much needed new class A office space in downtown Milwaukee, Irgens said. The last new multi-tenant office buildings downtown were built about 10 years ago (Cathedral Place and 875 East Wisconsin). Much of the downtown’s existing class A office space inventory is aging and would not be considered class A space in other markets, Irgens said.

The downtown Milwaukee east submarket had a class A office space vacancy rate of 9.8 percent in the first quarter, according to Xceligent’s quarterly report. The submarket has a total of 4.26 million class A office space, and about 419,000 square feet of it is vacant, according to the report.

Downtown Milwaukee needs to add more new class A office space so the central business district can attract new tenants and maintain existing downtown tenants that are growing and need more space, Irgens said. Office tenants usually do not want to wait for a new building to get built, which can take two years to construct. Having more space available will help the downtown office market remain competitive with other areas, Irgens said.

“If tenants can’t get what they need downtown they may go elsewhere,” he said.

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