The latest office buildings added to downtown Milwaukee are more than shiny new towers. They represent the advancing standards of “Class A” office space, which has implications for the broader local office market.
The two latest entries to the downtown office market are The Huron Building at 511 N. Broadway and the BMO Tower at 790 N. Water St. They are both new buildings that opened in 2020 and boast high-end amenities such as outdoor balconies or terraces, conference rooms and fitness centers.
“I think that really both of them are pushing the boundaries of amenity-rich buildings and helping to create more of an experience around coming to the office every day,” said Josh Jeffers, developer of the Huron Building and founder and chief executive officer of Milwaukee-based J. Jeffers & Co.
The real estate industry views Class A office space as the priciest in a market, with high-quality architecture, finishes, building systems and amenities.
Take the BMO Tower as an example.
When factoring in base rent and operating expenses, pricing on a per-square-foot basis totals around $35 triple net (meaning tenants pay for real estate taxes, building insurance and maintenance), said Mark Irgens, BMO Tower developer and CEO and manager of Milwaukee-based Irgens Partners LLC.
That’s the very high end of the market. But the building offers floor plates of up to 26,000 square feet, also among the largest in the market. And tenants get amenities such as the large conference room, fitness center complete with locker rooms, private showers and towel service, and a secure, heated parking structure, Irgens said.
“I think (the amenities at the new office buildings establish) a barrier to entry (for the local Class A office market),” said Andrew Jensen, office broker with Cushman & Wakefield | Boerke. “If you don’t have a lot of these amenities, you’re just not going to be on the short list for a tenant to consider.”
He emphasized the popularity of balconies and destination-type restaurants on the ground floor. The Huron Building has that with Tupelo Honey, which opened earlier this month. Jensen said there’s opportunity for the BMO Tower to do the same with its vacant ground-floor space facing North Broadway.
And the local office market is picking up steam, industry insiders say. Jeanine Sweeney, office broker with Founders 3, said there is pent-up demand due to office users putting off major decisions about their leases during the height of the COVID-19 pandemic.
Downtown touring activity is booming, said Sweeney, whose firm is marketing the Huron Building for lease.
The new group of Class A buildings will force owners of some of the older office buildings to make upgrades, said Sweeney.
Landlords may need to look at improving their fitness centers and building systems.
“Especially now, if you have a fitness center, Peloton is everything,” Sweeney said.
But not every building will follow that formula; nor should it, Jeffers said. For example, historic buildings attract users for their unique architectural character. And the advantage for other older office buildings is cheaper rents with some amenities, like covered parking and lobby concierge service.
The newer Class A buildings could put Milwaukee in an interesting position, local office brokers say. Jensen said national firms, particularly law firms, that want satellite offices in the Midwest should perhaps give Milwaukee a look as a more affordable but high-quality alternative to Chicago. He acknowledged this hasn’t happened yet.
“I think there’s a really good story to talk about to folks from outside the area,” Irgens said. “But we really don’t see that many companies moving in. Most of the growth in the area has been from within, from companies that have been created (and) grown here.”