Real Estate Weekly for Wednesday, November 14, 2007

Wednesday, November 14, 2007

Downtown office market shows more improvement

The downtown Milwaukee office space vacancy rate continues to improve, according to the third quarter office market report by Boston-based Colliers International, whose local affiliate is Milwaukee-based Colliers Barry.

The vacancy rate for the downtown Milwaukee office market fell from 13.6 percent to 13.1 percent during the third quarter, according to the Colliers International report.

However, the vacancy rate for class A office space in downtown Milwaukee rose from 8.5 percent at the end of the second quarter to 9.3 percent at the end of the third quarter, according to the report. Still, that's an improvement over the 12.1 vacancy rate for class A downtown Milwaukee office space that Colliers reported at the end of the first quarter.

Nationally, the downtown office markets with the highest vacancy rates are Kansas City (22.0 percent), Dallas (21.3 percent) and St. Louis (20.1) percent, according to the Colliers report. Of the larger cities, the downtown office markets with the lowest vacancy rates are Charlotte, N.C. (3.1 percent), Midtown Manhattan (6.4 percent), Downtown Manhattan (7.4 percent), Midtown South Manhattan (7.4 percent), Washington D.C. (7.2 percent), Seattle (8.0 percent) and Miami (8.8 percent).

Filling smaller downtown Milwaukee spaces has been difficult, but several larger office space tenants (users of 50,000 square feet or more) in the suburbs are considering moving downtown, and some downtown tenants are considering relocating, said David Barry, a commercial real estate broker for Colliers Barry.

"I'm hearing rumblings from brokers and developers that there are a number of them looking downtown," he said. "Larger tenants are starting to look downtown because the space is available."

One example is Mequon-based Infinity HealthCare, which plans to move its headquarters to the Chase Tower at 111 E. Wisconsin Ave. in downtown Milwaukee. The company will bring about 150 employees downtown and will occupy about 62,000 square feet of space on floors 19-21 in the Chase Tower. Infinity currently leases about 30,000 square feet of space at 1035 W. Glen Oaks Lane in Mequon. The company’s space is spread out in a couple different buildings.

"It was hard for us to find 50,000 to 60,000 square feet of contiguous space in Mequon," Infinity HealthCare chief operating officer Gregory Cierlik.

Town of Brookfield-based RedPrairie Corp. has been considering a move downtown, said Neal Driscoll, director of leasing and development for Malvern, Pa.-based Liberty Property Trust's Milwaukee office. Liberty Property Trust owns the building that RedPrairie currently occupies.

Cramer-Krasselt, a Chicago-based advertising and marketing firm, is an example of a downtown Milwaukee office tenant that is planning to relocate to another downtown location. The company plans to move out of its current downtown Milwaukee location at 733 N. Van Buren St., but earlier this year dropped plans to move to a new development in the Park East corridor and is looking for another downtown location. The company is looking for 50,000 square feet of office space.

The overall suburban Milwaukee office space vacancy rate rose from 10.6 percent at the end of the second quarter to 11.4 percent at the end of the third quarter, according to Colliers. The class A suburban office space vacancy rate rose from 11.4 percent at the end of the second quarter to 16.2 percent at the end of the third quarter.

The rise in the class A suburban office space vacancy rate was a result of a change in how the data is collected, Barry said.

"We've changed the way we had been looking at the market," he said. "We've taken some of the owner-occupied buildings out of the mix."

The suburban office markets with the lowest vacancy rates are Miami (7.1 percent), San Jose, Calif. (7.8 percent) and Orlando, Fla. (8.8 percent). The suburban office markets with the highest vacancy rates are Tampa, Fla. (33.2 percent), Cincinnati (20.6 percent) and Chicago (19.6 percent), according to the Colliers report.

According to Colliers International, the sales price for office space in downtown Milwaukee is about $225 per square foot and the sales price for office space in the suburbs is about $140 per square foot. The downtown Milwaukee office space cap rate (calculated by dividing net operating income by purchase price) is 7.50, and the suburban office space cap rate is 8.00.

Franklin Staybridge Suites to break ground

A groundbreaking ceremony will be held Friday to celebrate the start of construction of a Staybridge Suites hotel at the southwest corner of South 27th Street and Ryan Road in Franklin. The $10 million, five-story hotel will have 114 rooms. It is being developed by Park Ridge, Ill.-based The Bricton Group Inc. It will be the first chain hotel in Franklin and is the third Staybridge Suites planned in southeastern Wisconsin. One is under construction in downtown Milwaukee, and the third is being planned for the Pabst Farms development in Oconomowoc. Staybridge Suites is an extended-stay hotel concept owned by Windsor, U.K.-based InterContinental Hotels Group.

Extended stay hotel planned for Oak Creek

Wichita, Kan.-based Value Place LLC plans to build a 121-room extended stay, economy hotel at 9315 S. 13th St. in Oak Creek. The four-story, 42,964-square-foot hotel would be built on a 6.8-acre site. There are more than 60 Value Place locations in the U.S. This will be the first Value Place location in Wisconsin.

Groundbreaking Friday for massive Kenosha warehouse

Chicago-based First Industrial Realty Trust Inc. will host a groundbreaking ceremony to celebrate the start of construction of a 600,000-square-foot distribution center that it is building at Highway 158 and 88th Avenue in Kenosha. The actual construction project began recently. The building will be occupied by Rust-Oleum Corp. The building could be expanded in the future to 850,000 square feet. It will anchor the new 169-acre First Park Kenosha business park that is being developed by First Industrial. The business park will be able to accommodate more than 1.6 million square feet of space. Bannockburn, Ill.-based Principle Construction Corp. is the general contractor for the building. Itasca, Ill.-based Heitman Architects Inc. designed by the building. John Sharpe of Lee & Associates is the marketing agent for First Park Kenosha.

Columbia St. Mary's completes new medical office building

This week, Columbia St. Mary's is opening the 162,000-square-foot Water Tower Medical Commons building at 2350 N. Lake Dr. The new structure is the second office building to open as part of Columbia St. Mary's $417 million project on the east side of Milwaukee. Prospect Medical Commons, located above the Whole Foods store at the corner of North Avenue and Prospect Avenue, opened in 2005.

Water Tower Medical Commons will include offices for independent physician practices and physicians employed by Columbia St. Mary's Community Physicians. Columbia St. Mary's new, 40,000-square-foot cancer center will be located in the building and will open in January.

Many of the physicians in Water Tower Medical Commons were previously located in Seton Tower, the building located across the street that will be demolished. The demolition work will begin on Nov. 26 and will take about three months. Seton Tower, built in 1976, is being demolished to accommodate construction of the new hospital building.

Big crowd attended SBT Commercial Real Estate & Development Conference

A sellout crowd of more than 600 people attended the fifth annual Small Business Times Commercial Real Estate & Development Conference recently at the Italian Community Center. The theme of this year's conference was "Back to the City," as the speakers shed light on the demographic, sociological and economic factors that are prompting more people to move downtown. Go to SBT Around Town to see photos of the event.

Real estate profile: Brett West

Title: Team Leader for the Business Environments Team/Associate Principal
Company: Kahler Slater
Education: Master's of architecture, master's of business administration, University of Nebraska
Family: Wife, Pam; daughter, Drew (5) and son, Luke (3)
City of Residence: Milwaukee
Hobbies and Interests: Basketball, golf and buildings
What are you working on? "Catalyst project with the Ghazi Company, the Aloft Hotel and The Residences Above with Ruvin Development, Capital Heights with Venture Development, Bimbamboo Restaurant in Boulder, Colo., and a lot of other fun projects."
How does the market look to you? "The market looks opportunistic. There are going to be some great projects that will get off the ground and many that will not. I think there is more focus on creating stronger teams to pursue deals in the marketplace. You are going to have to be clear on your niche, your market position and make sure you are adding value for your clients and to the user experience."
What was the best deal you've ever been involved in? "Every deal has been good in its own way but the most rewarding was a project I just completed with my wife's pediatrics practice and another physicians group. We designed a medical office building in Wauwatosa, and I was able to really dig deep into the project and see it from all sides. It was enlightening and it really made me a more well-rounded architect. I am really looking forward to seeing the Aloft and the Catalyst projects get going. Those are going to be great for the city!"
What was the funniest moment of your career? "One of the firm's chief executives asked me to 'stalk' (in a good way) Tom Peters, the business guru. I met him at a conference in Colorado and he had a speaking engagement here in Milwaukee. Our client services department made up a small clear plastic cylinder with red caps on either end and a note tucked inside inviting him to visit our offices and to take a guided tour of the city. I remember sitting through the entire conference wondering how I had gotten myself into the position of having to hand off a note to a celebrity … I felt like I was in sixth grade again. He graciously took the package, but I will never forget the look of bewilderment on Tom Peters' face."

Real estate deals of the week

Ace Industrial Properties Inc. recently purchased the 120,000-square-foot industrial building at 420 W. St. Paul Ave., Milwaukee, from Frank G. O'Connor Jr. and Linda L. O'Connor for $2.75 million. Dave Hazenfield and Sam Dickman Jr. of The Dickman Company Inc. brokered the sale. Hazenfield represented the seller and Dickman represented the buyer. The seven-story building is located across the street from the downtown Milwaukee train station that is being renovated into the Milwaukee Intermodal Station and is now anchored by Amtrak and Greyhound. It is occupied by Iron Mountain, a records storage company.

A.B. Data Ltd., a Fox Point-based direct marketing services firm, announced that it has entered into a contract with Manpower Inc. to acquire the former Manpower international headquarters campus in Glendale. A.B. Data has offices in Washington, D.C., New York, Chicago and Tel Aviv, Israel.
"The 16-acre campus will allow A.B. Data to consolidate most of its employees based in Fox Point and Shorewood under one roof and with far greater amenities," said Charles Pruitt, co-managing director of A.B. Data. "The need for a larger facility is being driven by significant growth in our Business Critical Communications Group and our Class Action Administration Division," said Bruce Arbit, co-managing director of the firm. "Glendale is a great place to be."
"The Manpower building brings with it a historical legacy of a homegrown Milwaukee business success story," said Jerry Benjamin, co-managing director. "Great men like Elmer Winter with his Horatio Alger like story and Mitchell Fromstein, an international business legend, were there before us."
A.B. Data plans to move 250 people in its first phase to the facility around the first of the year.
The transaction is scheduled to close at the end of November. The purchase price was not disclosed.
Manpower moved its headquarters to downtown Milwaukee earlier this year.

Real estate people in the news

Milwaukee-based Siegel-Gallagher recently hired Anthony M. Stich as the company's new marketing manager.

Brookfield-based Shorewest Realtors recently promoted Casey Clickner to vice president and Wendy Norem to assistant vice president.

James T. Barry III, the presdient and CEO of Milwaukee-based Colliers Barry Inc., and his wife, Nora, recently had a new baby boy. His name? James T. Barry IV. The couple also have a daughter, Joan.

Real estate odds and ends

A rededication ceremony will be held for the North Point Lighthouse, located at Lake Park in Milwaukee, on Friday from 10:30-11:15 a.m. The North Point Lighthouse Friends are rededicating the tower and the keep's quarters to its new mission as a portal to Milwaukee's past.

Wauwatosa-based James Craig Builders Inc. recently built a home in Sussex for Andy Wilson, a firefighter whose family lost its home to a fire, and another in Merton that will be sold to help pay for a lung transplant for one of the company's founders, James "Jim" Nichols. The Merton home was built with support of James Craig's subcontractors and suppliers. Proceeds from the sale of the Merton home will fund a trust set up to aid Nichols and his family with the costs of his transplant surgery.

Milwaukee-based F.J.A. Christiansen Roofing Co. Inc. recently received a Merit Award of the 2007 Projects of Distinction from the Associated Builders and Contractors of Wisconsin for the installation of its TectaGreen green roof system on the city of Milwaukee's building at 809 N. Broadway.

The DNR’s Remediation and Redevelopment (RR) Program recently unveiled a web site highlighting more than 30 successful brownfield redevelopments across Wisconsin. The brownfield success stories give a brief history of each property, how the site was cleaned up and how each community worked together with the DNR and other partners to revitalize these blighted areas. Each two-page story not only highlights what types of financial and technical assistance communities received, but also provides key players and contact information. "We think it's important to tell how communities overcame brownfield obstacles and turned these former eyesores into economic and, in many cases, environmental assets," said Darsi Foss, brownfields section chief for the DNR's Remediation and Redevelopment (RR) Program. More information about the RR Program's brownfields tools is available at the DNR Web site. For more information, contact Andrew Savagian at (608) 261-6422.

Real estate events

NAIOP Wisconsin Chapter Annual Meeting, Wednesday, Nov. 14, 4:30-7 p.m., JohnsonDiversey Building, 901 Renaissance Blvd., Sturtevant. Building tour will be followed by annual meeting at the Charcoal Grill in Racine. For more information call (262) 522-6375.

30th Street Industrial Corridor Corporation business mixer, Thursday, Nov. 15, 5-7 p.m., at Perpendicular Wine Bar & Art Gallery, 5000 W. Vliet St., Milwaukee. RSVP by Friday, Nov. 9. For more information call Brenna Holly at (414) 444-4706.

NAIOP 2007 Industrial and Office Market Update, Wednesday, Dec. 5, 7:15-9 a.m., Italian Community Center, 631 E. Chicago St., Milwaukee. For more information call (262) 522-6375.

IREM Holiday Party, Thursday, Dec. 6, 5:30-9 p.m., North Hills Country Club, N73 W13430 Appleton Ave., Menomonee Falls. For more information call (414) 476-4736.

BOMA/AOMA January Luncheon, Wednesday, Jan. 9, 11:30 a.m. to 1 p.m., Milwaukee Athletic Club, 758 N. Broadway, Milwaukee. Call (414) 278-7557 for more information.

IREM Forecast Breakfast, Thursday, Jan. 17, 8 a.m., Italian Community Center, 631 E. Chicago St., Milwaukee. For more information, call (414) 476-4736.

The 46th annual Milwaukee/NARI Home Improvement Show, Thursday, Feb. 7 - Sun., Feb. 10, 2008 at the Wisconsin Exposition Center at State Fair Park in West Allis.

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BizTimes Real Estate Weekly is compiled by Small Business Times managing editor Andrew Weiland. This bulletin is published every Wednesday morning. Send real estate news tips to Andrew.Weiland@biztimes.com or call him at (414) 277-8181, ext. 120.