The specter of higher taxes—and let’s be honest, general political disorder—is an ostensibly obvious facilitator of companies locating adjacent to, but outside of, Chicago’s and Illinois’ boundaries. But for Southeast Wisconsin, there are multiple reasons that the industrial submarket has flourished for so many years.
While taxes may have been more of a catalyst in the past, Tim Thompson, executive vice president and managing director of industrial brokerage at HSA Commercial Real Estate, believes the factors are more nuanced. The largest factor, he believes, is people.
“It’s a chicken and egg situation,” Thompson said. “What happened first, did manufacturing start going up here and then people followed or did people start coming up here and manufacturing followed? I don’t know.”
Though the rates of growth have slowed from the turn of the millennium, Kenosha and Racine Counties have seen population growth over the past decade while across the border, Lake and Cook Counties have lost population. Part of that is taxes, but according to Thompson its’ also residents seeking out an overall better quality of life. The economic, cultural and other benefits of Chicago are still in reach, but in a location with a slower pace.
For manufacturers, distributors and other industrial companies, this submarket is an ideal target because of the infill nature of Lake County. With a dearth of available, buildable land in Lake County, the market has had little option other than spreading out and northward.
“An industrial user who’s located in Lake Forest, Lake Bluff or Waukegan, for example, and looking to expand is very rarely going to go south because chances are 50 percent or more of their employees come from the north,” Thompson said. “Southeast Wisconsin is benefiting from the fact that there’s very little, if any, developable land left in northern Lake County.”
HSA has been developing industrial projects in Southeast Wisconsin for decades. Their latest project is the Bristol Highlands Commerce Center in Bristol, Wisconsin, near I-94 and the Wisconsin-Illinois border. Despite inclement weather, and a global pandemic, the first phase of the project is on schedule to deliver later this year.
“We are one of the only developers—and I think the only developer in Southeast Wisconsin—who has powered through the COVID situation,” said Thompson. “Everybody else kind of pulled back but we moved forward.”
The initial phase is comprised of two speculative buildings, a rear-load 157,656-square-foot warehouse building with 31 truck docks, as well as a cross-docked, 472,216-square-foot distribution center with 72 truck docks. The site includes another 25-acre parcel that can accommodate up to 450,000 square feet of warehouse space. One unique feature for the industrial park is its campus-like design that includes generous setbacks, enhanced landscaping and walking paths that will be accessible to warehouse employees.
Southeast Wisconsin’s greenfield nature makes it desirable for spec developers, though it can’t compete with the I-80 and I-55 corridors when it comes to rail and interstate access. Looking ahead, this submarket may be the beneficiary—more so than its neighboring Illinois submarkets—if and when manufacturers start to bring operations back to the United States.
“When you consider the onshoring that’s going to start happening,” Thompson said, “Southeast Wisconsin will probably benefit. Illinois will probably get in their own way.”
Since people, as Thompson puts it, are the principal catalyst for industrial growth in Southeast Wisconsin, there is a lot of stock in factors such as improved school systems. The pandemic may also play a part moving forward.
“There was a big drive of people moving to urban areas. Well, there’s also a pretty big drive of people moving to rural areas, especially in light of COVID,” said Thompson. “Urban settings aren’t as attractive to certain individuals as they used to be.”