Overall, 2014 was a very strong year for the Southeast Wisconsin market. According to Tony Pricco, principal at Bridge Development Partners, there isn’t a lot of speculative development happening in the area, and what is—or was—available is being leased or acquired by users.
“There is very little available product in the market, which is why we see so much build to suit activity,” Pricco said. “Obviously the numbers are probably skewed, but very good, because in a market that is not huge, when you get a deal like Amazon for 1.6 million square feet that helps quite a bit.”
Pricco continued, “So I think between Amazon, the deal that we did with Uline, and the deals that CenterPoint’s been able to sign in their buildings in Pleasant Prairie, 2014 was a strong year for the market. I would bet vacancy is almost zero for new Class A product.”
Bridge sold upwards of 200 acres to Uline, and will oversee the land development beginning in the spring with the construction of required offsite access and utility improvements. Uline plans to build a nearly three million-square-foot campus, with initial plans for a one million square foot warehouse facility and 50,000 square feet of office and call center space. Uline plans to take occupancy in mid-2016.
“Uline will consolidate three facilities in Waukegan and North Chicago into this campus moving about 475 jobs,” Pricco said. “They wanted to stay in Illinois but couldn’t find enough land to do what they wanted to do, so they looked in Wisconsin.”
Pricco noted that it is surprising, but people assume that there’s an abundance of land available, ready to go, and that there is an unlimited supply of developable sites in Southeast Wisconsin.
“That’s really not the case,” he said. “A lot of the land up there is not zoned, and isn’t serviced with utilities. So there’s not as many sites as you think up and down I-94 that are able to be developed. We like our position up there, and in addition to the land we have sold to Uline, we have 160 acres total in two sites.”
Uline was one of several companies last year who made the migration to Southeast Wisconsin. Pricco noted that Bridge certainly sees that trend continuing.
“Companies are being forced to go over the state line whether they want to or not,” he said. “There are a lot of benefits to Wisconsin. In the past, we would see many companies who wanted to stay in Illinois for a number of reasons, but now they are attracted to Wisconsin—whether it is the amount of land to do a big box, state incentives, or their competitive electricity rates. It’s really more of an economic benefit.”
With recently elected Governor Rauner in office, according to Pricco, things may change now in Illinois with the new administration. “I hope it’s more of a pro-business administration. Governor Walker has been very aggressive on pulling companies across the state line.”
Although there has been—and still is—a lot of activity in Southeast Wisconsin, Pricco pointed out that the one negative to the area is that it’s still pretty young compared to other markets around Chicagoland. “So the question is the consistency of the deal velocity,” Pricco said. “It’s been strong, there has been a lot of deal volume, and a lot of it is somewhat unique—like Amazon and Uline. They couldn’t just go into an existing building. But I think that is the question, will we see more speculative development?”
As far as which commercial sectors are thriving in the area, according to Pricco, a fair amount of retail has popped up, but not as much as one would think.
“A lot of the development that I’ve seen has been more industrial focused,” he said. “There are a lot of companies that are manufacturing. Those include deals like Kennel Manufacturing—they’re a lighting company—and Niagra Water.”
Pricco continued, “So there are companies that are going to Wisconsin for a number of different reasons, that are investing millions of dollars in infrastructure, and they are employing not just warehouse workers, but in many cases, skilled laborers to production, manufacturing, light assembly, and a number of different areas.”
Southeast Wisconsin has also become a very strong distribution market, and according to Pricco, an alternative to the Lake County market that either has limitations on larger sites or buildings.
“Frankly there are communities within Lake County that do not want development,” he said. “They do not want industrial buildings built in their town, and that has pushed a lot of development north as well.”
Overall, Pricco expects 2015 to be another strong year for the market based on the activity he saw at the end of 2014.
“There were a lot of companies looking for space either in central to northern Lake County, up into Wisconsin,” he said. “I think you’ll continue to see a lot of user demand. That demand will outpace the supply, especially in Wisconsin where we have seen hesitancy for developers to build speculatively.”
