Any barometer you want to use. Sales. Rents. Vacancies. New development. Steve Palec, chief marketing officer with the Milwaukee office of Irgens, says they all highlight just how busy Milwaukee’s commercial real estate market is today.
As Palec says, 2020 has looked a lot like 2019 for Milwaukee’s commercial real estate market. And that’s good news for commercial brokers here.
“Last year was off the charts,” Palec said. “So this year being similar is great. If you compare the last couple of years to the 10 years before those, it’s like comparing Danny DeVito to Arnold Schwarzenegger.”
No offense to DeVito, but Milwaukee’s commercial real estate market is especially muscular today. That’s largely because developers have flocked to the city, particularly its downtown, to add new office space, hotels, entertainment venues and, of course, apartment units.
And the best news? Commercial professionals working in this city say that Milwaukee’s hot market isn’t about to cool off anytime soon.
Just ask Palec. He’s a longtime veteran of Milwaukee’s CRE business. He can’t predict how long Milwaukee’s construction blitz will last. But he doesn’t see developers losing interest in his city soon.
“Everything in the last five years compared to the 35 I’ve worked in commercial real estate here is truly off the charts,” Palec said.
A change in attitude
Jerome Janzer, chief executive officer with the Milwaukee office of Reinhart Boerner Van Deuren, is another believer in Milwaukee’s commercial real estate industry. He said that the impressive amount of new construction taking place downtown has created a sense of excitement.
He pointed to the planned expansion of the Wisconsin Center, Milwaukee’s downtown convention center, as yet another example of the increased activity in the heart of the city. The goal of the Wisconsin Center District, which oversees the convention center, is to break ground on the redevelopment in the spring of 2021.
Jantzer said that the Fiserv Forum, which opened in the fall of 2018 and is home to the NBA’s Milwaukee Bucks, has helped spur further development in the downtown area.
“There is significant activity in that area of downtown,” Jantzer said. “It’s not just about the Milwaukee Bucks. The area around the Forum has become a community gathering spot.”
There are plenty of reasons for the commercial activity hitting Milwaukee today. The city has a strong location in the middle of the country and a solid transportation system. It boasts a strong labor force, affordable construction costs and a reasonable cost of living.
But just as important? Palec says that there’s been a change of attitude among commercial and government leaders in this often-modest Midwest city.
“Milwaukee has long had this self-effacing attitude,” Palec said. “It used to be about beer, cheese and being very, very risk-averse. We still have great beer and cheese, but we also have world-class restaurants to go with it. The self-effacing attitude has gone away.”
Palec said that while Milwaukee is still a secondary market, it is now receiving plenty of national attention. The city is blessed with strong companies that have committed to growing in Milwaukee.
Northwestern Mutual is a good example. The insurance giant committed to a 1-million-square-foot addition to its headquarters campus in downtown Milwaukee. The insurer is also building a large apartment building in the city’s downtown.
“That wasn’t a catalyst, it was an exclamation point,” Palec said.
Palec also pointed to a generational shift in Milwaukee. There have been plenty of commercial real estate pioneers who have left their mark on the commercial real estate scene here. But the younger generation of leaders in the city are more willing to take risks, Palec said.
“There was a time when people in Milwaukee would look in a mirror and say, ‘Better not. Why take a chance?’” Palec said. “All of a sudden, this attitude has changed. Now people are saying, ‘Why not? We can do anything here.’ We ae feeling the benefit of that now.”
Irgens has been particularly busy in Milwaukee. The company, for instance, in 2016 started construction on 833 E. Michigan, an 18-story office building in downtown Milwaukee. Now complete, that building, with about 360,000 square feet of office space, became a sought-after destination for companies that wanted a presence in the city’s urban core.
That property featured a higher quality of construction than was common in the Milwaukee office market at the time. Thanks to this, it was able to charge higher rental rates. That served as a boost to other developers who began to see the potential in downtown Milwaukee.
Irgens is now making an impact with BMO Tower, a 25-story, Class-A office tower now under construction and slated for completion sometime in May of this year. The property, located at 790 N. Water St., will feature more than 360,000 square feet of office and more than 20,000 square feet of retail space. It will also come with 653 indoor parking spaces.
This is just the start of the new construction taking place in Milwaukee. Construction started on the Huron Building at 511 N. Broadway last year. Developed by J. Jeffers & Co., with law firm Husch Blackwell as its lead tenant, this new office building will rise 11 stories in the air when finished.
Then there’s The Avenue at 275 W. Wisconsin Ave., a conversion of the struggling Grand Avenue mall in downtown into a mixed-use development featuring apartments, office and retail. The project will soon feature a sprawling food hall to be known as the 3rd Street Market Hall. Hempel Cos. and Interstate Development Partners LLC are partners in The Avenue project.
The Milwaukee Symphony Orchestra is also impacting the city’s downtown. The orchestra is now restoring and renovating the Warner Grand Theater on West Wisconsin Avenue to serve as its new performance space.
All this activity has been a positive for the city. This doesn’t mean that Milwaukee doesn’t have problems. But the strength of its commercial real estate market isn’t one of them.
“Milwaukee has issues like any city has,” Palec said. “We have issues with our school system, with segregation. But those problems can get solved when you take advantage of these times when things are going great with development and the economy. There is no one who can look me in the eye and say that the real estate market isn’t great in Milwaukee today.”
Another important project in the city? Jantzer pointed to plans by Michels for a $100 million development in Milwaukee’s Harbor District, transforming a six-acre site into a mixed-use development called RIVER 1. This development, at the corner of Becher and 1st Streets, is yet another sign of how strong Milwaukee’s CRE market is, Jantzer said.
When built out, the campus will include 220,000 square feet of office space, 67 units of multifamily housing, 19,000 square feet of retail, a hotel with 103 rooms and nearly 1,000 underground parking spaces.
Milwaukee Mayor Tom Barrett, in a statement, said that the project will help transform the city’s riverfront.
“What the Michels family proposes on the banks of the Kinnickinnic River adds economic activity, public access to the water and a transformative new investment in the Harbor District,” said Barrett.
Jantzer said that projects like this point to a bright future for Milwaukee.
“I’ve worked downtown for more than 30 years,” he said. “Milwaukee has always been a solid, stable city. Now it is seen as a city reinventing itself. There is a renewed vibrancy in the downtown, more so than in any other time I can remember.”
This has led to several companies relocating from the suburbs or other areas to downtown Milwaukee, Jantzer said.
“The newer generation of employees wants to work and live in a downtown urban area,” Jantzer said. “They want all of the amenities that comes with that.”
Not surprisingly, the multifamily market in downtown Milwaukee remains a strong one. Jantzer said that monthly apartment rents are rising and new developments are filling quickly.
But the apartment market isn’t thriving just in downtown. Jantzer said that there is plenty of multifamily growth from Milwaukee to the Illinois/Wisconsin state line. There are plenty of new jobs springing up there, even with the controversy surrounding the new Foxconn development in Mount Pleasant, Wisconsin.
It’s still uncertain how large the Foxconn development will be or what, exactly, will be manufactured there. But Jantzer said that Foxconn is building something in the area. At the same time, Amazon is increasing its presence in this area while other companies are opening distribution centers in this slice of Wisconsin.
It’s all added up to new jobs and a demand for new multifamily housing in this area, too, Jantzer said.
“I am optimistic about the future in Milwaukee,” Jantzer said. “There is a tremendous amount of interest in this area. It’s an attractive place for investment. The macroeconomic issues could have an effect. The COVID-19 virus could hurt, certainly. There is a tremendous amount of uncertainty surrounding that. That can cause people to become more cautious. But for the long-term? The future does look bright for Milwaukee.”
What makes Milwaukee such a desirable home for businesses? Palec points to the amenities that the city offers. It has culture, museums, theaters, world-class restaurants and major sports teams. It’s also easy to get around the city: You can generally get from one end of Milwaukee to the other in a 20-minute car ride.
At the same time, developers have been conservative here. They aren’t overbuilding. That has kept demand strong for the developments that have risen in Milwaukee.
What Milwaukee does need? Palec said that the city still isn’t attracting enough investors from outside the region.
“We have strong, growing local companies,” Palec said. “We have a lot of entrepreneurs working here. But to really escalate things, you need to attract investment from outside the area.”
One way to promote the city to outside investors is scheduled to take place in July of this year, the Democratic National Convention. This big event will be held at the Fiserv Forum in downtown Milwaukee and should bring plenty of attention to Milwaukee. (This story was written during the early days of the COVID-19 virus, so it is assumed that the convention will still take place.)
“I’m an eternal optimist, but I’m also a realist,” Palec said. “Even though there are companies here that are growing and the demand for real estate is here, I do think the total package has to include our being able to attract from outside the market. We have to put more attention on ourselves. It is time for the rest of the country to see what they can get by being in the Midwest. We should open our arms and welcome the rest of the country.”