Developers continue to flock to Southern Wisconsin because of its low taxes and business-friendly climate. But why else has the market been quick to gain traction? And what sets it apart?
Chicago Industrial Properties recently spoke with HSA Commercial Real Estate CEO & Vice Chairman Robert Smietana and JLL Senior Director, Capital Markets Kurt Sarbaugh to find out.
The market, to start, is just north of the Illinois state line, with most of the development occurring along the Interstate 94 North-South stretch connecting Chicago to Milwaukee. It’s an area that’s seen constant activity over time but has caught fire in the last 10 years in terms of interest. Kenosha County and Racine County have seen the highest activity, Kenosha being closer to Illinois and Racine about 15 miles from the border.
Some big companies have exhibited interest in the market for a long time, Smietana said, specifically ULINE. Headquartered in Kenosha County, the national company has many facilities across the U.S. In fact, HSA Commercial has several companies like that occupying their buildings, including XPO Logistics and Ryder Logistics.
“A lot of buildings going up and a lot of space is being leased,” Smietana said. “HSA Commercial has been a big part of that.”
But its top-tier location is not the only asset that makes Southern Wisconsin one to watch. It’s a number of things. Availability of land for larger buildings. Business-driven communities. Updated infrastructure. A lower cost of businesses. A strong labor force. The list goes on, and there’s been no lack of attention from a wide mix of prospective users, both local and not.
HSA Commercial is currently working on a project called Bristol Highlands, which will be about 1.3 million square feet upon completion. The company developed them on a speculative basis, and the first two were leased prior to completion. Last year, HARIBO of America, Inc. executed a 157,656-square-foot, full-building lease at Bristol Highlands, which is located just a few miles from the gummi manufacturer’s first-ever North American production plant. HSA Commercial leased the adjoining 470,000-square-foot building to a company based in Lake County, Illinois, that wanted to open an additional facility.
Growth, growth, and more growth. But can we expect the same momentum in the years to come? Yes. Southern Wisconsin is likely to attract even more attention as projects are completed.
“We’ve been in this market a long time,” Smietana said, “and therefore have a unique perspective on its continued growth and evolution. There’s a lot of development activity. Ten million square feet are proposed or under construction in this submarket alone, and the numbers for absorption last year were just shy of six million square feet. Vacancy rates are still low, and demand for space remains high.”
Good thing there’s more land to be developed.
Another company that has their finger on the market pulse, so to speak, is JLL. They recently completed the sale of an eight-building portfolio of 3,825,589 square feet of in Pleasant Prairie, Wisconsin, and North Chicago, Illinois, on behalf of CenterPoint Properties. EQT Exeter acquired the portfolio.
All of the buildings are 400,000- to 500,000-square foot bulk distribution buildings, according to Kurt Sarbaugh, and are fully leased to big players like ULINE (60%). Distribution use and 3PLs make up the majority of the demand in the market.
The properties include:
- 8123 116th St., Pleasant Prairie, WI
- 8495 116th St., Pleasant Prairie, WI
- 8500 109th St., Pleasant Prairie, WI
- 10490 88th Ave., Pleasant Prairie, WI
- 11290 80th Ave., Pleasant Prairie, WI
- 11400 88th Ave., Pleasant Prairie, WI
- 11559 80th Ave., Pleasant Prairie, WI
- 3200 Skokie Highway, North Chicago, IL
In addition to the properties, the portfolio included six land sites — 144 acres — in Pleasant Prairie. Sarbaugh said the plan is to develop them one by one over time, and construction is expected to begin soon.
The portfolio is almost entirely located within LakeView Corporate Park close to Interstate 94, strategically located to provide connectivity to population hubs like Chicago and Milwaukee.
“This is one of the healthiest development markets,” Sarbaugh said. “At close to 75 million square feet, there’s a healthy number of projects in progress.”
