Kohl’s HQ project is another missed opportunity for downtown

Menomonee Falls-based Kohl’s Corp. is considering plans to build a new 1 million-square-foot corporate headquarters in the Woodland Prime office park northwest of U.S. Highway 41/45 and Good Hope Road in Menomonee Falls, according to commercial real estate sources.

A key consideration for the company will be if the new facility is a replacement for its existing 885,000-square-foot headquarters complex at N56 W17000 Ridgewood Dr., just off of Silver Spring Drive, or if it will continue to use the current headquarters for additional office space after the new facility is built.

Kohl’s Corp. representatives have declined to comment on the company’s plans for a new corporate headquarters.

The company apparently gave little consideration to building a new headquarters in downtown Milwaukee. The company surveyed its employees and they overwhelmingly supported keeping the headquarters located in Menomonee Falls, according to one source.

If that is the case then the Kohl’s project will become the latest example of a major southeastern Wisconsin company that opted to grow or move to an office development outside of downtown Milwaukee. Those projects include:

  • Northwestern Mutual Life Insurance Co., which is based in downtown Milwaukee, built a 500,000-square-foot office building in Franklin in 2004, and then added a 386,000-square-foot addition to the Franklin campus in 2008.
  • GE Healthcare strongly considered building a major facility in downtown Milwaukee, but instead opted for a 506,195-square-foot building that was built in Wauwatosa.
  • Cleveland-based Eaton Corp. considered plans to move its Milwaukee operations to the former Pabst brewery complex in downtown Milwaukee, but instead recently chose a proposed 90,000-square-foot building project in Wauwatosa.
  • RedPrairie Corp. considered plans to move its corporate headquarters from the Town of Brookfield to downtown Milwaukee. But in 2008 the company decided to move the headquarters to a proposed development in Delafield. Later, the company dropped those plans and eventually shifted the corporate headquarters to Atlanta, while maintaining a significant presence in Brookfield.

One of the few major companies in the region that have chosen a development in downtown Milwaukee in recent years is Manpower Inc., which moved its corporate headquarters in 2007 from Glendale to a new 280,000-square-foot building downtown.

The city provided $25 million in tax incremental financing for the Manpower project. City officials were eager to attract Manpower after GE Healthcare chose Wauwatosa, said Bill Bonifas, executive vice president for CB Richard Ellis.

“The city got religion on Manpower because they had just lost one,” he said.

Why is downtown Milwaukee struggling to attract more of these major office developments?

Higher taxes, higher land costs and the higher cost to build structured parking downtown vs. surface parking in the suburbs are all likely contributing factors. Some employees in the suburbs, like many of those at Kohl’s, are reluctant to commute to work downtown.

Some commercial real estate professionals say city government is the biggest problem. Excessive regulation discourage businesses from coming downtown and city officials have failed to build relationships with the business community, some say.

“(Downtown Milwaukee) is not an attractive place to do business,” said one Milwaukee real estate developer. “The town’s dying. The city has to talk to the businesses and say, ‘What do we have to do to get you to come in?’ It’s an attitude. You have to be able to communicate with business leaders.”

The city needs to find ways to help businesses that are already here grow and succeed and convince them to stay, another commercial real estate executive said. City leaders need to get more aggressive, he said.

“The style of Milwaukee is still too laid back, not proactive, aggressive and innovative,” he said. “(City leaders) need to be asking, ‘What’s it going to take to do this.’ They should be talking (with business executives) all the time asking, ‘What can we do to help?’ There are small businesses in the city that want to grow. They need help.”

But Department of City Development Commissioner Richard “Rocky” Marcoux, strongly defends the city’s outreach efforts with the business community and its efforts to attract development downtown.

“I met with six CEOs last week,” Marcoux said recently. “An overwhelming majority of CEOs in this city have been contacted by me, Mayor (Tom) Barrett or someone on our behalf. We are directly talking to corporate Milwaukee.”

Not everyone in the commercial real estate industry blames City Hall for businesses choosing to locate outside of the city.

“Each company has its own unique issues,” said Bonifas.

Many large companies like Kohl’s prefer a suburban campus setting because as they grow it is easier to expand there than in a building in a dense downtown site, Bonifas said.

“For a (office space) user that’s dynamic, the campus makes some sense,” he said. “Downtowns anywhere have a hard time competing with that.”

Although the downtown area is not attracting many huge tenants to move in, more smaller office tenants are expressing an interest in moving into the downtown area, said Inland Companies principal Lyle Landowski.

“I see more tenants interested in downtown than there were five years ago,” he said.

One example is Baker Tilly Virchow Krause LLP, which is considering plans to move from the Honey Creek Corporate Center on the west side of Milwaukee to a new office building development downtown. The firm is seeking about 70,000 square feet of space.

The downtown Milwaukee residential population surged during the condo boom prior to the Great Recession and some of those new residents are business owners and executives that see the area as a potential location for their business.

And although downtown has struggled to attract and support retailers, more restaurants, bars and clubs have opened downtown in recent years, giving the area a trendier vibe that is attractive to some businesses, Landowski said.

However, while downtown has become a more appealing business district in recent years, for some businesses the area has not become so attractive that it outweighs the higher taxes and higher property and parking costs downtown, Bonifas said.

But downtown Milwaukee is still the heart of the region’s business community with major cultural assets and the region’s most prominent banks, accounting firms and law firms, Marcoux said.

“All of those major players are not in the suburbs, their headquarters are in downtown Milwaukee,” he said. “There’s nothing wrong with downtown. The trend you are trying to put together isn’t a trend. The trend is people are coming to the city.”

But if the city could get a major employer like Kohl’s, which has more than 3,000 employees in its headquarters, to move downtown it would have a huge positive impact on the central business district, Landowski said

“That would be incredibly catalytic,” he said.

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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