When CenterPoint Properties was a REIT, they were one of the first institutions to get into Wisconsin back in 1999. According to James Clewlow, chief investment officer at CenterPoint Properties, the company’s belief was that Milwaukee and Chicago would grow together.
“We’ve talked about this growing Megalopolis forever,” he said. “We really saw that happening, so we had our initial investment in the WisPark projects. WisPark was a developer owned by Wisconsin Energy, and they built up to 2,000 acres of business parks along I-94 on the Wisconsin side.”
“They’re really nice people,” he continued. “But it wasn’t until we got involved with them in 1999 that they really picked up, because we were able to institutionalize their process of finding the right users for what they had. Once we did that, that market really took off. CenterPoint did a lot in mobilizing the interest of users in Kenosha and Racine. That was 1999-2000, and we haven’t looked back.”
CenterPoint certainly hasn’t, as they have recently submitted plans to the Village of Pleasant Prairie for two separate speculative industrial buildings. The plans call for one 521,000 square foot facility and a second 412,000 square foot building. Both buildings will be constructed in the Southwest Corner of LakeView Corporate Park.
Clewlow said what the company’s seeing is Milwaukee growing south. “Along I-94 you’re seeing more logistics companies move south if they were located in Milwaukee. Or, if they’re manufacturers, and they have a warehousing function, they’re moving south as well. This is all a part of a larger trend which leads us to believe that users want to be close to the transportation infrastructure, like intermodals or ports.”
Although there is a small port in Milwaukee, what’s driving logistics today in the Midwest, according to Clewlow, is being close to those big intermodal terminals in Joliet and Ellwood CenterPoint built over 15 years ago.
“There are some older existing ones as well, on Northlake, and down on the southeast and southwest sides of Chicago. You can see the logistics companies, and the manufacturers that are doing warehousing, all moving towards that. It’s slow, and it doesn’t happen overnight, but overtime as they grow, consolidate their operations and become more efficient, they’re gravitating—to what I call—transportation nexus.”
Clewlow calls that a macro trend with Milwaukee users trending down the state line to be closer to transportation infrastructures. He pointed out another trend—Illinois companies who are relocating to Southeast Wisconsin. “I think they are seeking low utility costs, and are now driven by lower rental rates,” he said. “Northeast Illinois land is very expensive, so companies can move right across the border. Instead of paying $5 and up, they’ll pay $3.25 or something like that. So it’s a substantial rental discount with just going up I-94.”
“A lot of labor lives there anyway,” Clewlow added. “So it isn’t a lot of friction for companies to move north because, let’s just say, 30 to 40% of their labor are coming in from Wisconsin. So now you’re seeing the epicenter being between Racine and Kenosha.”
CBRE stats for Kenosha and Racine show a total base of 55 million square feet, and an availability rate of 4.7%. Clewlow said that included subleases, and spaces that are occupied, that haven’t yet become available.
“That’s really low,” he said. “The overall availability rate of Chicago is roughly eight percent. If you combine Milwaukee with Chicago, and average the vacancies, they’re around 8.5%. So you’re about 50%, and it’s pretty remarkable.”
“It’s showing you that the market is thriving,” he continued. “If you look at all the stats from CBRE, it would appear to be the lowest availability rate of all the different submarkets. You can determine strength by a lot of things. One measure would be what the vacancy is, and this measure is 4.7%.”
Everyone’s talking about Amazon, who’s currently constructing a massive customer fulfillment center complex in Kenosha. The project includes two buildings, totaling 1.5 million square feet, and represents a total capital investment of more than $200 million.
“They’re clearly the name that everybody knows,” Clewlow said, “But I’d be remiss if I didn’t mention the fact that ULINE is a behemoth there. They’re leasing space like you wouldn’t believe, and they’re growing like a weed too.”
ULINE, a privately held, family-owned distributor of packaging and shipping supplies, made two major announcements recently regarding plans to develop multiple new facilities, at separate sites, in Kenosha County.These projects represent nearly $200 million in new capital investment and will generate over 1,000 new jobs – pushing ULINE’s total Kenosha County employment over 2,000 once completed.
As far as commercial sectors thriving, Clewlow said there’s a lot of strength in food processing, beverage processing, as well as distribution.
“We’ve become an exporter to the rest of the world for food products, so we see that growing rapidly. I think in terms of manufacturing, that’s picked up a lot over the last couple of years because it was hit hard. We’ve seen a lot of manufacturers pick up and go to China or Mexico, and I think we’re starting to see a revival of manufacturing here in the Midwest. That revival isn’t huge by historic standards, but there are some roots as it’s starting to grow.”