Where will NML build?

Northwestern Mutual Life Insurance Co. Inc. announced recently that it plans to tear down a 16-story office building on its downtown Milwaukee campus. The company plans to replace the building, but has not made specific plans.

“We have not yet determined the size, scope or location of what will replace the building,” the company said. “The primary focus of our long-range planning process is to define future space needs and evaluate options for meeting those space needs either at our downtown campus, Franklin campus or a combination of both, while also pinpointing costs.”

The company’s decision of where to build, which could take about a year to make, will be followed carefully by many in the Milwaukee business community. About 1,100 employees work in the building that Northwestern Mutual plans to tear down. If the company decides to move those employees to a new building in Franklin, it would provide a significant boost for the South 27th Street corridor in Franklin and Oak Creek, but it would be a major hit to downtown.

“It would be very devastating (to downtown),” one commercial real estate broker said.

“That would be a big blow to the businesses downtown,” said Joel Lee, president of Van Buren Management Inc., one of the largest downtown property owners.

However, if the company decides to put up a new building at its downtown campus, the project would create a major opportunity to enhance the downtown, said Department of City Development Commissioner Richard “Rocky” Marcoux.

“We’re very excited about the opportunity here,” he said.

One construction industry source who said he has spoken with Northwestern Mutual representatives said the company appears to favor the downtown campus for the new building.

“A preference for a lot of their staff is to be downtown,” he said. “A lot of their staff would have to move (if the new building was located in Franklin). Franklin is a stretch for a lot of people.”

But a new building in Franklin might cost less and could be an appealing option for the company. The company first developed the Franklin campus, located northwest of South 27th Street and Drexel Avenue, when it built a 500,000-square-foot office building in 2004. Then in 2008 it added a 386,000-square-foot addition to the Franklin campus. The company has completed two of the four phase development plan for the Franklin campus.

“They have room for two more buildings down there,” the construction industry source said.

City of Milwaukee officials have been meeting with Northwestern Mutual about the company’s plans, said Marcoux, who expressed optimism that the company would build a new building at its downtown campus.

“I’m very confident they are going to build it downtown,” he said. “I believe they have a strong commitment to downtown and the city, which they have demonstrated for years. They’ve invested a significant amount of money downtown.”

Franklin Mayor Tom Taylor said Northwestern Mutual representatives met with him recently to discuss the company’s plans.

“They indicated to me that we are definitely in the hunt,” Taylor said. “We’ll do what we can to bring them to Franklin again.”

Northwestern Mutual has about 3,000 employees at its corporate headquarters campus in downtown Milwaukee. The company also has about 2,000 employees at its campus in Franklin.

The company has not indicated that it will seek any subsidies from the city to assist construction of a new downtown building, Marcoux said.

“We’re not talking about (tax incremental financing),” he said.

Taylor also said his conversations with company officials have not included any talk of incentives.

Northwestern Mutual issued a statement about its plans, but a company spokesman declined a request for an in-depth interview about the project with a company executive.

One commercial real estate broker said he was aware of the company’s plans to demolish the downtown building prior to the announcement, but that he was surprised that the company indicated it was going to consider the Franklin campus as an option for the building’s replacement.

“I didn’t know that Franklin was a possibility,” he said. “Maybe it’s a position thing.”

However, other sources said they doubt that Northwestern Mutual will play Milwaukee against Franklin to seek a subsidy for the project.

“I don’t think NML fools around, to be honest with you,” Lee said. “I don’t think they play games.”

But one commercial real estate source predicts the company will make its decision based on the bottom line and said city officials will play a crucial role in determining if the project is built downtown.

“I think it will be dollars and cents and what is going to be the spread,” he said. “It’s the city’s to win or lose.”

“I’m a downtown guy. I hope like heck to see them stay downtown,” said Gary Grunau, president of Milwaukee-based Grucon Group. “There are basically three companies in Milwaukee that are growing right now: Kohl’s, Johnson Controls and Northwestern Mutual, and they are all growing outside of the city. The companies that are growing just aren’t in the city right now. I hope we can reverse that trend.”

The building that Northwestern Mutual plans to tear down has an assessed value of $52.26 million, according to city records. If the company does not build a building downtown to replace it, the demolition of the building would put a significant dent in the city’s tax base.

No matter where the company chooses to build, it will be interesting to see how big of a building it decides to construct. The 16-story building that it plans to tear down has 451,964 square feet of space, according to city records. The company might decide to build a larger building to replace the existing space and to accommodate future growth.

“They could build the tallest building in the city if they wanted to,” the construction industry source said. However, that appears unlikely because the company does not have the type of culture that suggests it would build “a monument to themselves,” the source said.

The 16-story building that the company plans to tear down is only 33 years old. However, the company said the building “cannot effectively serve our long-term needs.”

“”Apparently there’s a lot of structural problems,” a commercial real estate source said.

The company insists the building is safe, but says expensive maintenance needs are one reason that the building will be replaced.

“While the building is currently both functional and safe, it will require extensive, costly maintenance to its exterior and to its internal systems,” the company said. “Future repair costs were a big factor in this decision, but they were not the only one. Part of our long-term campus planning deals with creating the functionality and space we need for the future. Removing the building gives us the added flexibility to do so.”

If the company decides to build a new building downtown, it may need to temporarily house employees in other downtown buildings once demolition begins on the existing building and until the new building is complete. That could provide a temporarily boost other nearby office buildings. Lee owns several buildings in the area, but said he has not talked to the company about leasing space.

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