Some long-awaited projects will break ground by end of year

2016 Mid-Year Economic Forecast

The Couture

The ongoing saga of The Couture development near Milwaukee’s downtown lakefront looks like it will finally begin a new chapter this fall.

The potentially catalytic project is expected to break ground in September and the 44-story skyscraper will begin to rise from the ground.

Since 2013, when Milwaukee County chose Barrett Lo Visionary Development owner Rick Barrett to develop the project on the site currently occupied by the Downtown Transit Center, the Couture has conjured visions of excitement with its more than 300 apartments, 50,000 square feet of retail and a stop on the Milwaukee streetcar line.

Rendering of the Couture
Rendering of the Couture

Following several years of delays and threats of litigation by parks advocacy group Preserve Our Parks, the group’s lawsuit was dropped last fall, clearing the way for the $122 million development to finally move forward.

Another long-discussed and contentious project will also kick off soon, with construction on the mainline of the Milwaukee streetcar expected to begin by the end of summer. The 2.1-mile long mainline will connect the lower East Side, East Town and the Historic Third Ward with the Milwaukee Intermodal Station. Service is expected to begin in 2018. Work is also being done on the streetcar’s lakefront extension, which will add four-tenths of a mile and run from North Milwaukee Street to The Couture along West Clybourn and West Michigan streets.

The city is waiting to hear if it is approved for a federal grant that would extend the streetcar line approximately 1.2 miles north from the Intermodal Station to the site of the new Milwaukee Bucks arena.

And those aren’t the only major construction projects slated for the second half of the year.

Christine Korjenek, associate director of Marquette University’s Center for Real Estate, said nearly every community she can think of in the area has a major project going on, which she credits to successful public/private partnerships.

“The boom in commercial real estate in southeastern Wisconsin and Milwaukee is absolutely staggering,” Korjenek said. “The results are easy to see: economic development, tax base, temporary and permanent jobs. It’s amazing.”

Office

Milwaukee-based The Marcus Corp. and Brookfield-based Hammes Co. will likely each submit plans in the coming months for new downtown Milwaukee buildings.

Baltimore-based architectural firm InPlace Design had renderings on its website for a 780,000-square-foot downtown development planned by Marcus, which includes a movie theater, housing and offices. Marcus has not yet commented on the project, which would be located northwest of Water and Knapp streets.

Hammes also has submitted a request to the city for a zoning change to build an office building and parking structure on vacant land it owns in the Park East corridor, northeast of Water and Knapp.

In the Third Ward, Milwaukee-based developer Irgens has purchased a 0.8-acre site at 143 N. Milwaukee St. and is planning to develop a five-story office building as soon as it secures its first tenant.

“I can’t predict who the tenant will be, but I think it’s a really interesting idea,” said Jack Jacobson, principal at NAI MLG. “There is demand for that kind of space.”

Streetcar rendering Mason St.
Streetcar rendering Mason St.

Two large towers that won’t be completed this year but will continue to transform downtown are Northwestern Mutual Life Insurance Co.’s 32-story Tower and Commons office building and 33-story parking and residential tower. The $450 million, 1.1 million-square-foot headquarters office building is expected to be complete in 2017. The apartment tower is expected to be complete in 2018.

Overall, the region’s office market ended the second quarter with a vacancy rate of 18 percent and absorbed 90,980 square feet of space, according to data from Xceligent.

For the class A market in the downtown east submarket (the central business district), which includes 11 office buildings, the total vacancy rate in the second quarter was 12.8 percent. Absorption was negative 98,554 square feet, which is a direct result of the FBI moving out of 99,718 square feet of space at 330 E. Kilbourn Ave. and relocating to St. Francis.

Outside the central business district, in Schlitz Park, Assurant Health vacated 80,000 square feet during the second quarter. That space is already being backfilled.

Jacobson said it is a little worrisome to see such large blocks of office space on the market, but added that the space is being filled within 12 to 18 months.

“This is turning out to be a really solid year,” Jacobson said. “It’s not 2015, which was spectacular for everybody, but in talking to other brokers, the mood is good. No complaints.”

Retail

Dirt has been moving for several months in Greenfield on Cobalt Partners’ project, 84South, a 48-acre mixed-use development located along I-894 between 84th and 92nd streets, but by the end of this year the project will become visible.

an aerial photo of 84South.
an aerial photo of 84South.

Construction of the new Steinhafels store on the site will commence in late summer and two buildings comprising more than 200,000 square feet of retail, including a Fresh Thyme Farmers Market, are expected to break ground in late summer or early fall.

By early 2017, 84South will break ground on three concept restaurants and the first phase of more than 300 apartments, plus a second phase of the project that will be announced later this year, said Scott Yauck, president and chief executive officer of Cobalt Partners.

Cobalt Partners will also begin the final phase of White Stone Station, a mixed-use development on 60 acres in Menomonee Falls. Phase two will begin in spring 2017 and include several more restaurants and retailers that have not yet been announced, housed in up to six buildings on five acres.

Work continues on The Corners project in the Town of Brookfield, which will feature the state’s first Von Maur store. With construction about one-third complete, the mixed-use development at West Bluemound Road and I-94, just east of West Barker Road, is expected to open in spring 2017.

Irgens continues to work on The Corridor, a 66-acre mixed-use development at Calhoun and Bluemound roads in Brookfield. Portillo’s opened this month and Dick’s Sporting Goods is expected to open Aug. 3. An office building, hotel and conference center will follow.

Industrial

During the second quarter of 2016, the southeastern Wisconsin industrial market absorbed 848,163 square feet. Despite the positive net gains, the total vacancy rate climbed 0.1 percent from last quarter, to 4.2 percent, due to the completion of 1.16 million square feet of new inventory, according to Xceligent data.

Nathan Winkel, director of research at NAI MLG, said the biggest issue with the current industrial space availability is the low quality.

“Currently, there are approximately 45 blocks of available space over 100,000 square feet, with a majority of those blocks being in outdated facilities with either low clear heights, inadequate power or inconvenient freeway access,” Winkel said. “The upcoming round of deliveries and developable sites should help relieve a very tight market.”

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