Milwaukee isn’t different from most Midwest cities: The COVID-19 pandemic has upended life here, with kids attending school remotely, businesses working under capacity restrictions and municipal leaders trying to coordinate the distribution of vaccines to a population hungry for normalcy.
And the commercial real estate market here? It’s changed, too, during the last 12 months. But the good news is that Milwaukee and its suburbs have proven resilient during these challenging times. Yes, leasing activity has slowed. Retailers have struggled. And offices in the city’s CBD largely remain quiet.
But the real estate pros working this market say that the market has survived. And the rest of the year looks brighter.
Tom Irgens, executive vice president with the Milwaukee office of developer, investor and property management firm Irgens, said that the pandemic has hit downtown Milwaukee harder than it has the suburbs and surrounding neighborhoods. This is most evident in the office market, with leasing activity having fallen significantly in Milwaukee’s CBD during the last 12 months.
The suburbs, though, have been resilient. Irgens said that suburban office leasing activity remains strong and is almost at pre-pandemic levels in terms of showing volume and requests for proposals.
Irgens said that Milwaukee has fared about as well as any major city during the last 12 months. Part of the reason? Milwaukee doesn’t rely on public transportation like some other big urban areas. Today, that’s a plus as many people are still hesitant to crowd into trains and subway cars.
“We are not dependent on mass transportation like the Chicagos or New York Citys of the world,” Irgens said. “We are a car-centric marketplace. Getting to and from work has not been an issue here.”
Milwaukee’s commercial real estate market has benefitted, too, from the fact that there aren’t many speculative buildings going up. That means there aren’t too many nearly empty buildings dotting the Milwaukee market.
“The market fundamentals in Milwaukee are sound,” Irgens said. “Once businesses are ready to start making long-term commitments again, the market will do well.”
That isn’t to say that 2020 wasn’t a challenging year for Milwaukee. The city was supposed to host the Democratic National Convention last year. That didn’t happen, of course, with the convention instead being held virtually. And nearby Kohler, Wisconsin, was scheduled to host golf’s Ryder Cup. That event, too, didn’t happen, being rescheduled instead for 2021.
“Everyone thought 2020 was going to be a terrific year for this area,” Irgens said. “The pandemic threw a wrench in those plans. Hotel rooms were booked across the city, even into the northern suburbs of Chicago and west to Madison. There were going to be thousands and thousands of people who were coming to that event. The cancellation was a big blow to hotel owners and the event spaces. It hurt bars and restaurants that were going to do well that weekend.”
But are employees returning to the office? That depends largely on the size of particular companies, Irgens said. Smaller, more entrepreneurial firms currently have more employees working from their offices. Larger businesses, though, have been more cautious throughout the pandemic and still have the vast majority of their employees working from home, Irgens said.
“The larger the organization and the larger footprint they have, the more conservaitve they have been about their return-to-work plans,” Irgens said. “The return to the office will happen incrementally. Companies might start by bringing 10 percent of their members back. Then they’ll ramp up over time.”
Office plans might experience a shift from what the industry has seen during the last 10 years, Irgens said. The trend had been to densify workspaces, with companies investing in less square feet for each employee. That, Irgens said, will be revisited moving forward. After all, how do you provide six feet of distancing in a denser office space?
Companies will also take a closer look at common spaces such as kitchens and conference rooms.
“I don’t see many businesses just pulling out of the central office space completely,” Irgens said. “The physical workspace will still exist. I do think people will look at it differently, though. They will take the steps necessary to make them enticing. They want their team members to feel safe and comfortable when they come back to the office.”
The pandemic has also changed what tenants are looking for in office space, Irgens said. Air quality, open space and air flow have all become more important in the last 12 months, he said.
The work Irgens has done in its office portfolio is a good example. Irgens has installed MERV 13 filters in its office buildings and has increased the frequency of filter changes. The company has also focused on creating a limited-touch experience at building entrances, common areas and restrooms. In Irgens’ recently opened BMO Tower project in downtown Milwaukee, for example, employees waive their hands across a sensor to open the entrance doors.
Restrooms at Irgens’ office buildings have been retrofitted with hands-free faucets, soap dispensers and paper towel dispensers. HVAC procedures have been modified to increase outside air changes and bring a greater amount of outside air into office buildings.
Even during the worst days of the pandemic, Irgens has remained busy. The company preleased two office buildings at The Corridor in Brookfield, Wisconsin, last year and began construction on them in the fall. One was a 45,000-square-foot build-to-suit and lease for Hydrite Chemical Company. Irgens also signed a lease with Milliman, Inc. for 118,000 square feet to build a six-story, 186,000-square-foot office building.
Irgens also completed the 25-story BMO Tower in downtown Milwaukee in April in the middle of the pandemic.
“The Milwaukee market continues to be resilient through the pandemic,” Irgens said. “We are seeing users come back out to market. Many users did short-term extensions in 2020 and will be out looking for space during the next six to 24 months. I expect there to be a flight to quality.”
And the rest of this year? Irgens expects it to be a busy one for commercial real estate. He also expects companies to slowly begin the return to the office.
Irgens himself is looking forward to the day when his company’s offices are again filled with busy employees.
“My personal experience with working from home was not a positive, and I found my productivity diminished,” Irgens said. “Virtual meetings will never replace in-person collaboration and relationship-building, which drives an organization like Irgens. We have many younger team members who grow based on the experience and interaction with Irgens’ more seasoned team members.”