Before foreclosure proceedings officially began against 100 East, speculation about the office tower’s future was a top conversation topic among downtown Milwaukee real estate observers.
Now that a Milwaukee County Circuit Court judge has approved the sale of the 36-story building to developers who plan to convert it into apartments, office space brokers across the city have been fine tuning their pitches, hoping to secure some of the building’s remaining tenants.
But while netting a tenant like Gruber Law Offices or The Marcus Corp., which currently occupy about 18,000 and 35,000 square feet, respectively, would markedly reduce the vacancy of any individual office building, the impact to the central business district’s overall office vacancy rate would be minimal.
Removing all of the building’s 435,557 rentable square feet from the market, in fact, would only reduce the vacancy rate among multi-tenant office buildings in the central business district by 1.6%, according to data compiled by Catylist and REDIcomps, dropping that rate from 27.1% (where it was at the end of the fourth quarter of 2022) to roughly 25.5%.
The vacancy rate could fall further once the tenants leaving 100 East fill empty spaces at other buildings, but that all depends on how much space they end up leasing, explained Jeremy Bengtson, chief executive officer of REDIcomps.
It also depends on when REDIcomps, and other real estate tracking firms, officially stop considering 100 East to be an office building, which typically doesn’t happen until the conversion begins, Bengtson said.
In the meantime, office brokers are busy courting 100 East’s remaining tenants. In addition to Marcus Corp. and Gruber Law Offices, 100 East tenants in play include Sperling Law Offices LLC, Grant Thornton LLP, Hinshaw & Culbertson LLP, Marietta Investment Partners and Holter Financial Group. Representatives with Wells Fargo – which has a 3,000-square-foot branch space on the lobby floor – and restaurant Tua Pasta on the building’s lower level, said neither business is looking to relocate at this time.
“We are in negotiations to see if we will be staying in the building. We still don’t know,” said Alvaro Nino de Guzman, owner of Tua Pasta.
As for the largest of the building’s tenants, they’ll likely be taking their time to find the right space and the right terms.
Marcus Corp., for instance, is searching for about 50,000 square feet of Class A office space and was most recently considering three serious options, said broker Bill Bonifas, executive vice president at CBRE in Milwaukee.
“They are committed to a new headquarters. We have a broad-based search going, and it’s all in the CBD,” Bonifas added.
At Gruber Law Offices, company leaders don’t appear to be in any rush.
“Our current lease runs through November of 2024, and we will of course continue to evaluate the market for future options,” said attorney Steven Gruber in a statement.
With BMO Tower roughly 83% full, other Class A buildings could end up snagging some of 100 East’s biggest remaining tenants.
The Huron Building, which has 58,000 contiguous square feet available, could do well, as could the Associated Bank River Center, which is currently undergoing renovations, said Ned Purtell, a principal at Founders 3 who handles leasing at The Huron.
The U.S. Bank Center could also attract larger tenants, said leasing agent Jim Cavanaugh, partner at Cushman & Wakefield | Boerke.
“We have the 32nd, 33rd and 34th floors (at U.S. Bank Center) available,” Cavanaugh said. “We think it will make a logical fit for any number of downtown office tenants, but certainly those tenants coming out of 100 East. It’s the three highest (available) floors of any building in Milwaukee.”
Jenna Maguire, vice president of Colliers’ Wisconsin office brokerage group, is hoping 100 East tenants will consider Michels Corp.’s R1VER building, just south of downtown in the city’s Harbor District. Constructed in 2021 along the Kinnickinnic River, the glass office building has three 27,200-square-foot floors available.
“We are definitely engaging in conversations with 100 East tenants and trying to get them through to look at the space,” Maguire said. “With everything happening at BMO Tower, there are probably only a few, true Class A spaces available on the market in the central business district.”