The Brewery Works Inc.’s plans for a $30 million renovation of its Schlitz Park office complex is a major sign of confidence in the downtown Milwaukee office market.
The project will include remodeling 350,000 square feet of office and public spaces in the 1.2 million square foot complex. The remodeled space will provide room for additional tenants with up to 1,800 employees, said Schlitz Park co-owner and developer Gary Grunau. Currently 4,200 people work in the complex, including the ManpowerGroup and Time Warner Cable buildings, he said.
The Brewery Works is optimistic that Schlitz Park will be able to capitalize on a national trend of businesses moving to downtown office locations, in part to help attract younger workers.
“Young people don’t want to the out on the fringe,” Grunau said. “People are coming back to the urban core.”
The Brewery Works is planning the $30 million Schlitz Park makeover at a time when the downtown Milwaukee office market has a 31.48 percent vacancy rate for class B office space, such as Schlitz Park, according to Inland Companies’ first quarter office market report. Schlitz Park has a vacancy rate of about 20 percent, according to Grunau.
However, Schlitz Park has several advantages over other class B office properties downtown and its renovation project and re-branding campaign should help it attract more tenants, commercial real estate brokers say.
“They do have a history of being successful in modifying that park to meet the needs of tenants,” said NAI MLG Commercial principal Jack Jacobson. “They’ve been very creative in how they go after tenants. They do have the skills to compete for tenants. They’re good at it.”
In conjunction with the announcement of its renovations plans, Schlitz Park revealed its new brand slogan, “The Best of All Worlds.” That new slogan reflects Schlitz Park’s advantages, brokers say. The Schlitz Park campus is easily accessible from the freeway, provides free parking, offers low lease rates and has large blocks of space available, all in a downtown location along the Milwaukee River.
“The big distinction that Schlitz has is they really offer a suburban campus in a downtown setting,” said Lyle Landowski of Inland Companies. “They can do aggressive deals and on top of that you have free parking. It is a unique offering. (Grunau) is well positioned.”
The Brewery Works purchased the former Schlitz Brewery property in 1983 and worked for years to convert it into an office complex. The redevelopment was a major success, but in recent years the complex has had a stale reputation, said William Bonifas of CB Richard Ellis.
“The problem is there was nothing sexy about Schlitz Park,” he said.
However, the $30 million renovation project could change that by creating modernized office spaces and common areas, plus the planned addition of several “green” features. The Brewery Works will seek U.S. Green Building Council LEED certification for all of its buildings. An electrical vehicle charging station was added recently to the complex and the renovation project will be designed to make the park accessible for people to walk and bike to work, Grunau said. The project will also create two public park spaces at Schlitz Park.
“I think they’re trying to re-create the excitement level at Schlitz,” Bonifas said. “I think it will be successful.”
Schlitz Park is well positioned to compete for tenants seeking larger class B office spaces, in the 20,000- to 60,000-square-foot range, brokers say. Although the downtown class B office vacancy rate is high, there are not very many class B office buildings in the downtown area with large available office space floorplates.
According to the Schlitz Park web site the RiverCenter building has 70,832 square feet of vacant office space, Bottlehouse A has 92,039 square feet, Bottlehouse B has 12,961 square feet and the Executive Building has 140,000 square feet of vacant office space.
“If you are a class B tenant looking for a large block of space, Schlitz is at the top of your list more often than not,” Landowski said.
“For any large user, I think Schlitz will make the short list,” Bonifas said.
Although Schlitz Park is not likely to attract law firms or corporate office tenants that prefer locations in class A buildings at the heart of the central business district, it competes well for back office operations, non-profits and government deals, Landowski said.
Grunau said Schlitz Park is “seeing very good activity,” from prospective tenants right now. The Defense Contract Management Agency, part of the U.S. Defense Department, recently leased 10,000 square feet of space in the Keg House building and will move there in a few months. That building is now 100 percent leased, Grunau said.
Current tenants in Schlitz Park include: U.S. Bank, Metavante, Aurora Health Care, Marshall & Ilsley, Previant & Goldberg, United Way, Children’s Health Educational Center, Shaw, iCare, State of Wisconsin, Greater Milwaukee Foundation, ECE, Gilbane, DPI, Assurant and Kaplan College.
A revamped Schlitz Park will place even more pressure on the class B downtown office market. Although Grunau says the complex will help downtown attract office tenants from the suburbs, some tenants may move to Schlitz Park from other class B downtown office buildings.
“They’re going to have to rob Peter to pay Paul, or they are going to have to steal Paul from the suburbs,” Bonifas said.
If the Schlitz Park renovation project is successful Schlitz Park could become a magnet for tenants, similar to the Summit Place project in part of the former Allis Chalmers complex in West Allis that attracted numerous tenants in 2004-08. Summit Place attracted tenants from the downtown area and other suburban properties.
While the Schlitz Park renovation will create increased competition for tenants amoung downtown class B office buildings, another downtown development should provide a boost to the beleaguered class B office market. Rosemont, Ill.-based First Hospitality Group plans to convert the 125-year-old Loyalty Building at 611 N. Broadway in downtown Milwaukee, into a 128-room Hilton Garden Inn Hotel. The project will take the 92,000-square-foot Loyalty Building out of the downtown class B office market inventory. The building is mostly vacant, but its few office tenants will have to move to other buildings, boosting occupancy in those properties.
For example, investment banking firm Emory & Co. will move from the Loyalty Building to 3,300 square feet of space on the ninth floor of the 250 E. Wisconsin Ave. building.
“I think we looked at 19 different buildings,” said John Emory Jr., president and CEO. “There’s a lot of space out there.”