Real Estate: Can the city attract businesses to the Tower site?

Milwaukee’s central city is plagued with massive unemployment. More jobs are desperately needed in the area.

That’s why city officials plan to purchase 84 mostly unused acres of the former Tower Automotive site. Their vision is to clean up and redevelop the property to attract businesses. City officials say the property could someday have businesses with 700 to 1,000 employees.

“We think in the long run this can help us rehabilitate the site and make the surrounding neighborhoods and the city as a whole stronger,” said Milwaukee Mayor Tom Barrett. “We can’t afford to let this site lie fallow for decades. But this is a very long range project. This is not going to be an overnight sensation.”

The city plans to spend about $33 million to acquire, clean up and demolish structures on the property. The city plans to create a tax incremental financing (TIF) district to pay for some of the costs and will apply for state and federal grants to help pay for environmental remediation.

City officials hope to attract a mix of businesses to the property, but most will likely be industrial firms. Officials are comparing this project to their successful efforts to redevelop and attract businesses and jobs to the Menomonee Valley. Several businesses, including some from the suburbs, have moved to the Menomonee Valley in recent years including: Derse Inc., Proven Direct Inc. and Taylor Dynamometer Inc.

However, several commercial real estate brokers say that attracting businesses to the Tower site is going to be a lot harder than attracting them to the Menomonee Valley. The valley’s proximity to the freeway, low crime rate and its highly visible location between Miller Park and Potawatomi Bingo Casino are big advantages over the central city Tower site, which is located about 2 miles from the freeway in a neighborhood plagued with crime and poverty.

“(The Tower site) is definitely going to be a harder sell than the Menomonee Valley site,” said Jeff Horn, an industrial real estate broker and vice president of Brookfield-based Grubb & Ellis|Apex Commercial. He has done a lot of work in the 30th Street Industrial Corridor, which includes the Tower site.

It took more than 10 years to redevelop the Menomonee Valley. It might take that long, or even longer, for the more challenging Tower site.

“Really the Menomonee Valley was pretty low-hanging fruit, once you got past the environmental issues,” Horn said. “The Menomonee Valley from an industrial perspective is a great site. The freeway accessibility to the site is amazing. You can’t find that availability. The challenge for the Tower site is the accessibility.”

The Menomonee Valley is adjacent to I-94. In comparison, the Tower site is about 2 miles from I-43 and from the end of the U.S. Highway 41 stadium freeway spur. U.S. Highway 45 is about 5 miles to the west. The Highway 145 freeway is about 3 miles to the northwest.

Those distances might not sound like much, but they make a big difference to industrial firms that ship a lot via truck.

“If you meet (about a site) with companies that do a lot of distribution, they get out a stopwatch to see just how long it takes to get to the freeway,” Horn said. “We’re becoming more of a distribution economy.”

“The Valley is a far superior site to (Tower) in terms of accessibility and in terms of proximity to downtown,” said James T. Barry III, president and CEO of Milwaukee-based Colliers Barry. “(The Menomonee Valley) had a number of challenges, but it’s a superior site.”

One big advantage for the Tower site is its access to the Soo Line railroad tracks.

“The rail access is attractive to users,” said Scott Furmanski, a first vice president of CB Richard Ellis. “Users who need it have a hard time finding it.”

And not everyone is convinced that the Tower property’s distance from the freeway will be a problem.

“Being on the interstate is usually better, but there are those entities for who it won’t make that much of a difference,” said Robert Flood, a principal of Milwaukee-based RFP Commercial Inc.

An ever bigger obstacle to attracting business to the Tower site is central city crime, and the perception of crime in that area, Barry said.

“That has been a consistent concern we have seen in marketing properties in that area,” he said. “Until that is dealt with affectively that’s going to be a lingering issue.”

Despite the recession and rising unemployment, the Milwaukee Police Department has reported a decrease of crime in the city. MPD recently reported that “violent crime” in the first half of this year is down 15.5 percent from 2008 and 27 percent from 2007. Reports of robbery, aggravated assault, burglary, theft and auto theft in the first half of the year are all down significantly from 2008, according to the MPD. Homicides in the city were up 18.2 percent this year to 39, compared to 33 in the first half of 2008, but are still 18.8 percent lower than the first half of 2007, which had 48.

“Public safety has been my first priority as mayor,” Barrett said. “We are now headed in the right direction.”

“I’m (in the neighborhood near the Tower site) a lot. I never have any issues,” Horn said.

But despite those improving crime statistics, the perception of the central city as a dangerous place to be is still keeping many businesses away.

“It takes awhile for perceptions to turn around,” Barry said.

But real estate brokers are noticing the efforts by Milwaukee Police Chief Ed Flynn to reduce crime in the city.

“I certainly think things seem to be going in the right direction under the new police chief,” Barry said.

“We’ve got a police chief that’s doing a lot better job,” said David Boerke, principal of Milwaukee-based The Boerke Company Inc.

Another obstacle for the Tower site will be regulations that discourage businesses from coming to the city such as a sick leave mandate (which for now has been ruled unconstitutional) or prevailing wage requirements attached to city assistance for development, Horn said.

In the Menomonee Valley, city officials eagerly sought businesses with “family supporting” jobs and rejected operations with a small number of jobs, or low-paying jobs. In an ordeal that many in the business community have not forgotten New Berlin-based Buyseasons Inc. expressed interest in moving to the Menomonee Valley. Ald. Robert Donovan and U.S. Rep. Gwen Moore, D-Milwaukee, said they didn’t want the company there because its wages were too low and too many of its employees were seasonal.

Stung by that criticism, Buyseasons decided to expand in New Berlin instead, even though the Common Council eventually approved its plans to come to the Valley. Buyseasons built a 360,000-square-foot facility in New Berlin, now has 400 employees (150 full-time and 250-part time), and its president says the company is “bursting at the seams” in New Berlin and may need to expand again.

It remains to be seen what job standards the city will have for businesses interested in located at the Tower site. Barrett said the city will do a marketing study to determine what types of businesses that will be attracted to the Tower site, and what employment and wage expectations will be reasonable.

“In the valley we set forth a minimum jobs per acre requirement,” Barrett said. “That has worked well. (But the Tower property) is a different site than the valley.”

Considering the challenges facing the Tower site it will be interesting to see if city officials are again as picky about which businesses are allowed to move in.

Yet despite its challenges, the Tower site has several advantages. The property is close to a large pool of available workers.

“There’s a big employment base there,” Flood said.

The property will likely be cheap and the city may provide incentives for businesses to locate there.

“It is not going to be expensive to locate there,” Barrett said. “I certainly will not take city partnerships off the table.”

“It’s going to be tougher than the valley, no doubt,” said David Boerke, principal of Milwaukee-based The Boerke Company Inc. “(But) I do think the area has a fair amount of potential. There are a surprising number of high tech companies already located in the area,” he said pointing to DRS Technologies Inc., Eaton Corp. and Astronautics Corp. of America. However, Eaton and Astronautics have been looking for new locations.

Barrett said city officials will work hard to attract businesses to the Tower site and revitalize the neighborhood.

“I need to have businesses located there,” he said.

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