It’s been nearly a decade since Amazon planted its flag in southeast Wisconsin, spurring a wave of industrial development that has transformed the Interstate 94 corridor into one of the fastest-growing submarkets in Chicagoland.
In fact, the inventory of industrial product in southeast Wisconsin is now more than 84 million square feet across 652 buildings, surpassing that of the older and more established Lake County submarket, which comprises 80 million square feet, according to CBRE.
Abundant, large parcels of improved land made it easy for developers to launch new projects, many of them big-box warehouses ranging from 500,000 to 1 million-plus square feet, with plenty of space for trailer parking as well.
Millions of dollars in infrastructure improvements, including the expansion of I-94 to eight lanes and addition of underground utilities, also helped fuel development activity, as have lower taxes and population growth that has deepened the labor pool. In addition, the pro-business communities of Bristol and Somers have been extremely helpful in approving development plans.
Huge amounts of speculative industrial space was recently delivered in southeast Wisconsin, with 3.5 million square feet added in 2022 and 3.7 million square feet in 2023, according to Cushman & Wakefield. These deliveries pushed the vacancy rate up to 9.8% in Q2, but speculative construction dropped off dramatically this year, to only 900,000 square feet so far in 2024, because of the higher development costs and lower availability of capital. Leasing activity remains strong and reached 1.9 million square feet this year as of the end of the second quarter, which is the most first-half transactions signed since 2022.
In a testament to the desirability of southeast Wisconsin, our firm, HSA Commercial, executed the submarket’s largest lease in fourth-quarter 2023: a 447,216-square-foot full-building lease with HARIBO of America, Inc., at Bristol Highlands Commerce Center East, our 68-acre industrial park in Bristol. The development, which has 157,000 square feet still available, is also home to Visual Pak, a Waukegan, Ill.-based provider of contract packaging and manufacturing that occupies a 472,176-square-foot warehouse in the park.
In late 2023, we also completed one of Wisconsin’s largest-ever speculative industrial buildings: Highland Commerce Center of Somers, a 918,844-square-foot distribution center located directly east of I-94 at the Burlington Road interchange in Somers. Leased by Cushman & Wakefield, the space offers 40-foot clear heights, 109 dock doors, 165 truck trailer parking stalls and 511 employee parking spaces.
Also last year, we delivered a 550,647-square-foot warehouse that is the first of three buildings in our new Bristol Highlands Commerce Center West project at the southeast corner of 136th Avenue and Wilmot Road in Kenosha. The new 82-acre warehouse park will total 1.3 million square feet upon full buildout and is located near HSA Commercial’s existing Bristol Highlands Commerce Center East development, completed in 2020. Together, the two phases will total six buildings and 2.4 million square feet.
We are actively marketing these two latest developments to large users in need of modern warehouse space that supports continued business expansion between Chicago and Milwaukee. Southeast Wisconsin continues to attract all types of tenants, from warehouse to manufacturing to product fulfillment and assembly. There’s a steady stream of firms both locally and regionally looking in this market.
In the near term, we expect recently completed speculative spaces to be absorbed and rents to remain stable. HSA Commercial has nearly 3 million square feet of industrial product in southeast Wisconsin, and we are looking to acquire additional land sites in the submarket for both speculative and build-to-suit development. As a firm that has been actively developing along the I-94 corridor for more than 30 years, we remain bullish on its future as a critical link in ever-evolving supply chains.
Tim Thompson is executive vice president of Chicago-based HSA Commercial Real Estate.
