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The retail real estate market in the metro Milwaukee area strengthened in 2011, posting lower vacancy rates and increased absorption, according to market reports. The decreasing vacancy rates come just as several real estate development projects are in the works that will add a significant amount of new space to the market.
The overall retail vacancy rate for the Milwaukee area was 9.4 percent in the fourth quarter, and the multi-tenant retail vacancy rate for the region was 10.7 percent, according to a market report from CBRE. Both of those rates had increased from the previous quarter, but were down from a year ago. At the end of 2010 the region’s overall retail vacancy rate was at 9.6 percent and the multi-tenant rate was at 11.6 percent.
The fourth quarter market report by Xceligent and the Commercial Association of Realtors Wisconsin (CARW) pegs the retail space vacancy rate for the region at 6.7 percent, down from 8.2 percent in the fourth quarter of 2010. However, that report only tracks properties with more than 30,000 square feet of space. The vacancy rate is closer to 13 percent when looking at properties in the 15,000 to 30,000-square-foot range, according to Xceligent.
“Last year I think we saw a significant improvement in the occupancy rate in existing shopping centers in prime retail areas throughout the market, such as Bluemound Road,” said Peter Glaser, first vice president of CBRE’s Milwaukee office.
The region absorbed 1 million square feet of retail space in 2011, according to the Xceligent and CARW report. That includes 310,980 square feet in the third quarter and 378,585 square feet in the fourth quarter.
“2011 was a very active year,” Glaser said. “These retailers didn’t do anything from 2008 to 2010. They started planning (new stores) in 2010 and the deals happened in 2011.”
The opening of a new 140,000-square-foot Costco store in Pewaukee and the addition of a 150,000-square-foot Macy’s department store (expected to open in March) at Southridge Mall in Greendale, were the biggest contributors to the region’s 2011 fourth quarter retail space absorption.
Other large retail deals in the fourth quarter included the addition of a 50,000-square-foot Sendik’s store and a 26,197-square-foot Planet Fitness store in West Bend; construction of a 62,000-square-foot Cermak Fresh Market store in West Milwaukee; the 45,000-square-foot expansion of the Walmart store in Saukville; and the opening of a 22,000-square-foot GFS Marketplace store in West Milwaukee.
The biggest losses for the region’s retail market during the fourth quarter of 2011 included the closing of the 117,609-square-foot Lowe’s store at 6300 W. Brown Deer Road, Brown Deer. In addition, the Germantown Market Place shopping center had negative absorption of 20,011 square feet during the fourth quarter.
Some of the larger vacancies at multi-tenant retail buildings in the region now include: Hartford Plaza, 1201 Bell Ave., Hartford, (57,600 square feet vacant); Sheboygan Plaza, 725 S. Taylor Dr., Sheboygan, (53,911 square feet vacant); Geneva Square Shopping Center, 100 Highway 120, Lake Geneva, (36,446 square feet vacant); and Falls Plaza, 14900 Appleton Ave., Menomonee Falls, (35,301 square feet vacant), according to Xceligent.
Retail properties located in prime areas, especially those near regional malls, are performing well, Glaser said. Properties in fringe retail areas without a traffic generating anchor store are struggling, he said.
New player
A new retailer to the Milwaukee area is expected to fill two of the region’s few larger vacant retail spaces this year. Indianapolis-based H.H. Gregg Inc. plans to occupy the 40,000-square-foot former Circuit City and Ultimate Electronics store at 4585 S. 76th St. in Greenfield and the 37,000-square-foot former Marshalls store at 9140 N. Green Bay Road in Brown Deer. H.H. Gregg will open a big-box appliance and electronics store at the sites.
Retail lease rates declined during the Great Recession, which contributed to the increase in leasing activity last year, Glaser said. Lease rates in prime retail areas should increase this year, he said.
Several new retail developments are in the works in the Milwaukee area as retailers seek to add locations and grow as the economic recovery slowly gains steam and consumer spending picks up. Increased spending by consumers off of the rock bottom lows of the Great Recession have encouraged retailers to open additional stores, Glaser said.
“That’s certainly driving some of the expansion and lease-up,” he said.
The addition of the Macy’s store at Southridge, and Simon Property Group’s remodeling of the mall, could have a major impact on the South 76th Street retail corridor. The Macy’s store will be the retailer’s second location in the region. The other is at Mayfair Mall in Wauwatosa.
“I think (the Southridge Macy’s store) is going to draw a lot more traffic to that area,” Glaser said. “That’s going to keep a lot of the south side shoppers (shopping) on the south side. And it will help lease up other spaces in that area.”
The Mayfair Collection
In Wauwatosa, Chicago-based HSA Commercial Real Estate Inc. is planning a 250,000-square-foot retail development, called The Mayfair Collection, for a portion of the former Roundy’s Supermarkets Inc. distribution center northeast of Highway 45 and West Burleigh Street. The project is expected to break ground this year and be completed next year.
The Mayfair Collection will help fill a need for retailers that want to be located near, but not in, Mayfair Mall, Glaser said.
“It will help strengthen the Mayfair shopping area,” he said.
Minneapolis-based Ryan Cos. is building a Target store on Bluemound Road in Brookfield. The project will include a few other retailers, including a Trader Joe’s grocery store.
As many as nine Walmart stores could be under construction in southeastern Wisconsin in 2012 as the world’s largest retailer moves to expand into established urbanized areas. Dickson, Tenn.-based Gatlin Development Co. Inc., a major Walmart store developer, is the developer for many of the Walmart projects that are in the works in southeastern Wisconsin. Walmart has plans to build two stores in the city of Milwaukee, two in Kenosha and one each in Greendale, Menomonee Falls, South Milwaukee and Wauwatosa. All of those stores could be under construction in 2012. Another store is already under construction in Greenfield.
The Target and Walmart stores will help attract other stores that want to be located nearby, Glaser said.
Long term, Milwaukee-based The Marcus Corp. is working on plans for The Corners, a $125 million upscale shopping center and office space development it plans to build southwest of Bluemound Road and Barker Road in the Town of Brookfield. A 140,000-square-foot Von Maur department store would anchor the shopping center, which would have an additional 230,000 square feet of retail and restaurant space. The start of the project has been delayed as Marcus Corp. continues to work to line up tenants. Von Maur only opens its stores in October or November, so Marcus wants to have tenants lined up so it can time the start of construction so that the entire development is completed together, said Katie Falvey, director of real estate for Marcus Corp.
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