Region will be under construction in 2015

Several significant construction projects will be in full swing in southeastern Wisconsin in 2015, a tangible sign of the economic recovery.

Motorists will continue to dodge construction barrels at major road projects, including the $1.7 billion reconstruction of the Zoo Interchange, which won’t be complete until 2018, and the $226 million re-decking and repair project for the Hoan Bridge, which is expected to be completed this year.

The apartment building boom will continue this year, with several projects under construction or planned in downtown Milwaukee and in some suburban areas.

Construction will continue for two large office towers downtown.

Several major retail developments, or mixed-use developments with large retail components, are or will be under construction this year in the suburbs.

As many as three hotels could be under construction this year in and near downtown Milwaukee.
Numerous industrial buildings are under construction throughout the region

Then, there are the elephants in the room. Two major construction projects that could begin this year if they can clear major political hurdles: a new arena in downtown Milwaukee and a casino complex in Kenosha.

The new owners of the Milwaukee Bucks will seek approval to build a $400 to $500 million arena in downtown Milwaukee. The NBA says the city needs a new arena by 2017 to keep the Bucks. The Bucks’ new owners and former owner Herb Kohl have pledged to contribute $200 million to $250 million toward the arena project, but they are expected to seek some public funding as well. The Bucks’ owners also hope to attract a significant amount of additional development around the new arena.

Meanwhile, Gov. Scott Walker has until Feb. 19 to decide whether to approve or deny the Menominee Indian Tribe of Wisconsin’s request to build an off-reservation casino in Kenosha. The Menominee intend to partner with Hard Rock International and its parent company, The Seminole Tribe of Florida, to develop the $800 million Hard Rock Hotel and Casino project at the former site of Dairyland Greyhound Park. The project would include a 100,000-square-foot gaming floor with 3,100 slot machines, 75 table games, a 5,000-seat multi-purpose entertainment venue, 50,000 square feet of retail space, restaurants and a 400-room hotel.

RETAIL
One of the most significant development projects in the region that will be completed this year is the 138,000-square-foot Nordstrom department store at Mayfair Mall in Wauwatosa. The store is scheduled to open on Oct. 23.

Also in Wauwatosa, the second phase of the Mayfair Collection project northeast of U.S. Highway 45 and Burleigh Street is under construction and will include a Whole Foods store, which will be its second location in the region. HSA Commercial Real Estate, the developer for The Mayfair Collection, announced recently that Milwaukee-based Fiduciary Real Estate Development Inc. will build up to 1,050 luxury residences at the project. The firm plans to break ground this year on the first phase with a total of 250 units and 50,000 square feet of ground level specialty retail space.

Construction could finally begin this year on The Corners, a long-planned retail and apartment development at I-94, Bluemound Road and Barker Road in the Town of Brookfield. The project would have 390,000 square feet of retail space, including a Von Maur department store, its first location in the state.

The Nordstrom store at Mayfair Mall and projects such as the Mayfair Collection and The Corners are increasing the number of luxury retailers in the region.

“The Milwaukee area has historically been very underserved when it comes to high end retailers,” said Ross Koepsel, a partner with Commercial Property Associates. He expects more luxury retailers to come to the area. The Mayfair Collection project “has been an overwhelming success,” he said.

Cobalt Partners is building the White Stone Station project on a 65-acre site west of the U.S. Highway 41/45 and Pilgrim Road interchange in Menomonee Falls. The project will include a Costco store, additional retail stores and 320 apartments, which will be built by Fiduciary.

Costco also plans to build a store at Moorland Road and Grange Avenue in New Berlin.

Grand Rapids, Mich.-based Meijer is building several stores in the region and this year plans to open locations in Kenosha, Grafton, Wauwatosa and Oak Creek.

The Oak Creek store is part of the Drexel Town Square project at the 85-acre former Delphi plant site southwest of Drexel Avenue and Howell Avenue. The mixed-use project will create a downtown for Oak Creek. A new city hall/library and a Water Street Brewery restaurant will also be complete this year at Drexel Town Square. Other components of the project will break ground this year including apartments, a mixed-use main street and a health care building anchored by a Froedtert medical center.

The addition of the Meijer stores will add a major player to an increasingly competitive grocery marketplace in southeastern Wisconsin. Walmart, Woodman’s, Costco, Whole Foods, Trader Joe’s and Sendik’s all have either added stores in the region in recent years, or plan to add more stores in the region.

Also, construction of a new Sam’s Club store will begin this year at West Bradley Road and North 124th Street on the far northwest side of Milwaukee. The store will replace the Sam’s Club store at 7701 W. Calumet Road in Milwaukee.

The addition of so many grocery stores, with more on the way, in a region with modest population growth is cutting into the market share for the area’s leading grocer, Milwaukee-based Roundy’s. Grocery industry consultant David Livingston, a former Roundy’s executive, predicts the company will have to close several of its Pick ’n Save stores over the next two years.

“I think we’re going to have a lot of stores go dark,” he said.

Several grocers are eyeing existing Pick ’n Save stores for purchase opportunities, Livingston said. Some grocers might buy a Pick ’n Save store to close it and move their store there to get a better location, similar to what the Piggly Wiggly store in Saukville did recently.

“(Roundy’s) competitors know a number of the (Pick ’n Save) stores are underperforming,” he said. “You can’t perpetually operate poorly performing stores.”

By the end of 2016, Livingston predicts the region’s grocery marketplace will be “way different than it is today.”

OFFICE
Two major downtown Milwaukee office building projects began construction in 2014 and will remain under construction for all of 2015.

Construction is ongoing at Northwestern Mutual Life Insurance Co.’s $450 million, 32-story, 1.1 million-square-foot Northwestern Mutual Tower and Commons at its downtown Milwaukee campus. The project is expected to be complete in 2017.

Northwestern Mutual is also working on plans for more development to the west of its downtown campus. After the Milwaukee County Board rejected the company’s bid to buy the O’Donnell Park parking structure and park, the company announced it plans to build a mixed-use development with 1,000 parking spaces, residential units and retail space. The company owns the entire block southwest of Van Buren Street and Wisconsin Avenue and most of the block bounded by Van Buren, Jackson, Mason and Wells streets. It could choose to build on one or both of those sites.

Meanwhile, construction also continues on Irgens’ 833 East project, a 17-story, 358,017-square-foot multi-tenant office tower under construction at 833 E. Michigan St. Construction of the project is expected to be complete in early 2016. Tenants in the building will include: Godfrey & Kahn S.C., Irgens, Colliers International|Wisconsin and Jason Inc. The 833 East building will provide a significant addition to the supply of class A office space in downtown Milwaukee.

Irgens is also working on plans for two new office buildings at the Milwaukee County Research Park in Wauwatosa. The firm recently purchased an 8.3-acre site at 10100 W. Innovation Drive and a 5.9-acre site at 10401 W. Innovation Drive. Irgens plans to build a 100,000-square-foot multi-tenant office building on the 8.3-acre site. Construction is expected to begin in early spring and be complete in the first quarter of 2016. On the 5.9-acre site, Irgens plans to build a 65,000- to 75,000-square-foot build-to-suit headquarters office building. Construction on that building could begin in the fourth quarter of 2015. No tenants have been named for the two office building projects.

Irgens is also working on plans for The Corridor, a 66-acre mixed-use development at the Ruby Farm site in Brookfield that will include office buildings, retail space, health facilities and fitness centers. Construction is expected to begin during the second quarter of 2015.

The region’s office market absorbed 510,657 square feet of space in 2014, according to Xceligent, and the vacancy rate in the fourth quarter of 2014 was at 18 percent, down from 19.25 percent a year ago.

“The pulse of the market is very good,” said Colliers International|Wisconsin partner Lyle Landowski. “The vast majority of tenants are expanding, not retracting. I think 2015 is looking up for sure.”

Another big corporate headquarters expansion is under construction in Sheboygan, where property and casualty insurer Acuity is building a $130 million, 260,000-square-foot addition to its headquarters, which currently has 400,000 square feet of space.

Construction will continue in 2015 on the Northwestern Mutual Tower and Commons project.

INDUSTRIAL
The industrial real estate market remains the strongest sector of the southeastern Wisconsin commercial real estate market. The region’s industrial space vacancy rate has fallen from nearly 10 percent during the Great Recession to 5.1 percent and has had 18 consecutive quarters of positive absorption, according to Xceligent.

Finally, speculative industrial development is picking up in the region to meet the demand for industrial space and several projects are under construction or could break ground in 2015.

“We’re going to see more spec building occurring and users building their own buildings,” said James T. Barry III, president of DTZ Barry. “I think we’re going to see renewed interest in land, construction and speculative space (for industrial real estate).”

Compared to some other similar-sized U.S. markets, spec industrial development in the Milwaukee area has been sluggish and what space has been built has been absorbed quickly, Barry said. But the pace of spec industrial development in the region could quicken in 2015, he said.

The Kenosha County I-94 corridor remains a hot spot for industrial development, particularly for distribution centers, that benefits from its location between Chicago and Milwaukee.

Amazon.com recently built a 500,000-square-foot distribution center in Kenosha and is nearing completion of a 1 million-square-foot distribution center there.

Uline will double the size of its headquarters campus in Pleasant Prairie with a second 275,000-square-foot office building and another 1 million-square-foot distribution center. Construction of the distribution center is already underway and will be complete by next fall. Construction of the office building is expected to begin in the spring. Uline also will move its Midwest customer fulfillment distribution center operations from Waukegan to a new facility that will be built on a 200-acre site at Highway 142 and I-94 in Kenosha. The company plans to build a 60,000-square-foot office building and a 1 million-square-foot warehouse on the site. The office building will house the company’s largest call center and some sales staff. Construction of the company’s Kenosha facilities should begin next spring or summer. Uline also will occupy a 521,052-square-foot warehouse building that Centerpoint Wispark Land Company II LLC is building at 8495 116th St. in Pleasant Prairie.

Amazon.com will complete its 1.5 million-square-foot fulfillment center project in Kenosha this year.

HOTELS
Site work has begun at the northeast corner of Broadway and Chicago Street in Milwaukee’s Historic Third Ward, where HKS Holdings LLC will build a 158-room boutique hotel that will be operated by San Francisco-based Kimpton Hotels & Restaurants. The nine-story hotel will have a restaurant on the ground floor. The hotel is expected to open in 2016.

Two other hotel projects could break ground in downtown Milwaukee this year. Jackson Street Management LLC plans to build a 200-room Westin hotel on a vacant lot south of the U.S. Bank Center at 777 E. Wisconsin Ave. Jackson Street also plans to convert the Commerce Building, a six-story, 92,255-square-foot office building at 744 N. Fourth St. across the street from the downtown convention center, into a hotel.

Several suburban hotel projects are also planned or under construction.

In West Allis, a 100-room Hampton Inn & Suites hotel is under construction at 8201 W. Greenfield Ave., near Wisconsin State Fair Park. A Homewood Suites by Hilton hotel will be built at the Mayfair Collection project in Wauwatosa. Construction is expected to begin this year for a 128-room Residence Inn Marriott hotel at the UWM Innovation Campus site in Wauwatosa.

Construction is also expected to begin this year for a 108-room Four Points by Sheraton hotel at the Drexel Town Square project in Oak Creek. The hotel is expected to open on Sept. 24.

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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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