2018 Year End Report
INTERACTIVE REPORT
Colliers | Wisconsin is pleased to present our annual year end office report for metro Milwaukee. Throughout 2018, local real estate fundamentals remained strong. Not only did vacancy and absorption continue on their positive trajectory, but multiple assets hit the sale block and garnered national attention. Moving into 2019, a few large blocks of space will come online, and additional assets are expected to hit the sale block.
Within this report you will find not only the highlights from the year, but also insight into the various office parks around the metro area.
METRO OVERVIEW
OFFICE PARKS
INTRODUCTION
COLLIERS INTERNATIONAL | WISCONSIN
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METRO OVERVIEW
OFFICE PARKS
INTRODUCTION
PARK NAM
COLLIERS INTERNATIONAL | WISCONSIN
As a leading expert in the market, Colliers | Wisconsin has identified and examined the most active office corridors in the area. Click on one of the map markers to view an availability snapshot for each of the major office corridors. The buildings and locations that follow show a sampling of the market and are not meant to be all encompassing.
RIVERWOOD
CROSSROADS
BROOKFIELD LAKES
EXECUTIVE DR
RESEARCH PARK
HONEY CREEK
PARK PLACE
DOWNTOWN NORTH
DOWNTOWN EAST
DOWNTOWN WEST
THIRD WARD
OFFICE PARKS
METRO MILWAUKEE
CLICK THE PINS TO EXPLORE EACH OFFICE PARK
SUSSEX
WEST ALLIS
HALES CORNERS
GREENDALE
ST. FRANCIS
SOUTH MILWAUKEE
OAK CREEK
WAUWATOSA
PEWAUKEE
BUTLER
GLENDALE
WHITEFISH BAY
SHOREWOOD
BROWN DEER
RIVER HILLS
BROOKFIELD
WAUKESHA
MENOMONEE FALLS
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BOTTOM
833 E Michigan St, Milwaukee WI, 53202
INTRODUCTION
OFFICE PARKS
METRO OVERVIEW
METROPOLITAN MILWAUKEE OVERVIEW
Following a year of corporate investment in 2017, 2018 was more about the multi-tenant office market. Vacancy of metro Milwaukee office space decreased 44 basis points during 2018, ending the year at 9.11 percent market-wide. Overall market absorption was 401,192 square feet. This is significantly down from 2016 and 2017, where large new deliveries on both the multi-tenant and single tenant front drove absorption. While 2018 had a few smaller deliveries, absorption for the year was primarily driven by user expansions and new-to-market tenants.
MARKET
VACANCY
ABSORPTION
CONSTRUCTION
CENTRAL SUBMARKET
Of the more active submarkets, the Central submarket continued its dominance in 2018. In the past few years, the gravity of the CBD has resulted in increased demand in the Central submarket as companies seek to attract talent while keeping their occupancy costs lower by not making the jump to CBD product. Year over year, the Central submarket experienced a 116-basis point drop in vacancy and positive absorption of 111,791 square feet, which is only a third of the submarket’s 2017 absorption. In 2019, additional Central submarket space is expected to come available. Honey Creek Corporate Park is expected to lose a few larger tenants who are vacating in favor of CBD product. Additionally, Irgens’ newest multi-tenant building, Muir Woods is set to deliver in Q3 2019 in the Research Park and will be anchored by accounting firm Schenck. In West Allis, Cobalt Partners has a proposed development expected to break ground in 2019 that would further increase the availability in this submarket.
CENTRAL BUSINESS DISTRICT
The CBD, which includes Downtown East, Downtown West, the Third Ward, Walker’s Point and newly designated Downtown North, had a healthy year despite the numbers suggesting otherwise. Significantly impacting the CBD numbers was Boston Store vacating their Downtown West operations when parent company BonTon declared bankruptcy in April. This announcement led to nearly 300,000 square feet of office space coming available in one quarter. The space is now undergoing extensive renovations and is being marketed as a multi-tenant building with some of the largest floorplates in the market. Despite the Boston Store vacating, CBD vacancy only increased 17 basis points year over year and still realized positive net absorption for 2018.
Other drivers in the CBD submarket were new deliveries and the gravity of downtown. In 2018, two properties delivered in Downtown North. Both properties have roughly 44,000 square feet available, adding nearly 90,000 square feet of vacant space to the market. Building Forty Two was delivered in Q3 and Hammes Company Headquarters delivered at the end of the year.
WEST & NORTHWEST SUBMARKETS
Both the West and Northwest submarkets have struggled to retain tenants in recent years as other submarkets continue to gain momentum. Despite this, both experienced year over year decreases in vacancy in 2018 with the West seeing a decrease of 22 basis points and the Northwest experiencing a 37 basis point decrease. The West continues to have strength in attracting smaller tenants while the Northwest secured a few larger back office deals. In the Northwest, Molina Healthcare downsized and moved into 32,000 square feet at the Waters of Park Place. Moving into their old space was FIS and Equiniti. At the beginning of 2018, Manitowoc Company relocated to One Park Plaza, taking 16,000 square feet of space. Also in the Northwest submarket, AO Smith completed their new 42,700 square foot technology center in Q4. All of these drivers resulted in the Northwest realizing positive net absorption on the year.
YEAR END OFFICE STATISTICS
EXISTING PROPERTIES
TOTAL VACANCY
NET ABSORPTION - SF
NEW SUPPLY - SF
UNDER CONSTRUCTION - SF
BLDG TYPE
BLDGS
TOTAL SF
SF
Q4 2018
Q4 2017
Q4 2018
2018 YTD
Q4 2018
2018 YTD
Q4 2018
A
B
C
Total
30
101
13
144
8,239,290
11,018,594
781,322
20,039,206
809,031
1,005,307
11,928
1,826,266
9.82%
9.12%
1.53%
9.11%
10.51%
7.72%
1.20%
8.60%
40,489
(10,103)
3,300
33,686
177,080
(161,849)
(2,428)
12,803
82,720
-
-
82,720
132,720
-
-
132,720
380,017
-
-
380,017
CBD - Downtown North, Downtown East, Downtown West, Third Ward & Walker's Point
A
B
C
Total
21
59
21
101
2,953,279
3,744,206
1,061,179
7,758,664
169,131
308,480
38,977
516,588
5.73%
8.24%
3.67%
6.66%
5.92%
8.74%
9.83%
7.82%
(9,703)
2,724
-
(6,979)
4,906
40,874
66,011
111,791
-
-
-
-
-
22,000
-
22,000
85,000
-
-
85,000
CENTRAL - Near West Side, Wauwatosa, West Allis
A
B
C
Total
12
63
5
80
1,101,565
2,852,257
367,329
4,321,151
14,290
220,932
4,870
240,092
1.30%
7.75%
1.33%
5.56%
4.55%
8.72%
1.71%
7.09%
10,555
22,844
(380)
33,019
33,088
26,762
1,423
61,273
-
-
-
-
-
-
-
-
-
-
-
-
NORTH - Milwaukee East, North Shore, Mequon
A
B
C
Total
17
40
2
59
2,659,419
1,637,177
61,199
4,357,795
258,880
189,197
-
448,077
9.73%
11.56%
0.00%
10.28%
11.65%
13.89%
0.00%
12.36%
94,571
25,684
-
120,255
88,677
47,477
-
136,154
42,700
-
-
42,700
42,700
-
-
42,700
-
-
-
-
NORTHWEST - Northwest Milwaukee, Menomonee Falls, Germantown
A
B
C
Total
5
26
7
38
1,074,691
1,183,653
257,833
2,516,177
-
128,346
8,414
136,760
0.00%
10.84%
3.26%
5.44%
0.00%
13.19%
11.24%
6.92%
-
14,485
17,490
31,975
-
26,835
20,566
47,401
-
-
-
-
-
-
-
-
-
-
-
-
SOUTH - Greenfield, South Milwaukee, Oak Creek, Franklin
A
B
C
Total
43
145
7
195
3,558,314
6,559,311
197,791
10,315,416
549,529
763,963
8,607
1,322,099
15.44%
11.65%
4.35%
12.82%
15.36%
12.50%
0.00%
13.21%
9,553
(131)
(6,284)
3,138
(2,942)
43,319
(8,607)
31,770
-
-
-
-
-
-
-
-
135,300
-
-
-
WEST - Brookfield, Waukesha, New Berlin, Pewaukee
A
B
C
Total
128
434
55
617
19,586,558
26,995,198
2,726,653
49,308,409
1,800,861
2,616,225
72,796
4,489,882
9.19%
9.69%
2.67%
9.11%
9.88%
9.75%
5.40%
9.55%
145,465
55,503
14,126
215,094
300,809
23,418
76,965
401,192
125,420
-
-
125,420
175,420
22,000
-
197,420
600,317
-
-
600,317
GRAND TOTAL
CONTACT US
Lyle Landowski
PARTNER | WISCONSIN
414 278 6827
lyle.landowski@colliers.com
Margaret Blair
DIRECTOR OF MARKETING & RESEARCH
414 278 6801
margaret.blair@colliers.com
CBD
CENTRAL
WEST
NORTH
NORTHWEST
SOUTH
9.11%
6.66%
5.56%
10.28%
5.44%
12.82%
CBD
111,791 SF
61,273 SF
47,401 SF
136,154 SF
31,770 SF
12,803 SF
CENTRAL
NORTH
NORTHWEST
SOUTH
WEST
CENTRAL BUSINESS DISTRICT Cont.
Throughout the year, tenants who opened a downtown office included Rite-Hite, co-working firm Spaces, National General Insurance, Bank of America and Foxconn. In December, engineering firm Graef announced plans to relocate operations to Downtown West. In addition to these larger tenants, smaller tenants remained active with A/B product being the most active product type throughout the year.
Important to note was the strength of the sale market in 2018. Throughout the year, multiple noteworthy CBD assets traded hands and were put on the sale block. The Tannery was sold in a portfolio sale to Chicago based R2 Companies, who also purchased the Downtown Post Office Complex in 2015. ASQ Center in Downtown West sold to Interstate Development Partners for $132 per square foot. On the user side, FoxConn made significant purchases around the state, including the purchase of 611 E Wisconsin Ave from Northwestern Mutual. Assets available for sale include Schlitz Office Park, which is expected to close in the first part of Q1. CityCenter, located at 735 N Water also remains available for sale.
NORTH & SOUTH SUBMARKETS
The North and South submarkets experienced the lowest vacancy rates throughout the year but are also two of the smaller submarkets. In both submarkets, availability of class A and class C space is especially constrained due to lack of product, driving lower vacancy rates in these markets. Both submarkets ended the year with decent positive net absorption that was driven by the class B & C markets. Moving into 2019, availability of class A space is positioned to increase. In the North submarket, Milwaukee developer Irgens announced plans to build two speculative office building in Mequon Corporate Park.
2019: THE YEAR AHEAD
As 2019 begins, demand for office space remains strong, with over 2.5 million square feet of space currently sought by tenants in the market. The demand is near a cycle high and is a healthy mix of existing tenants, expanding tenants, new to market tenants and retracting tenants. With a few construction projects underway, such as BMO Tower in the CBD and Muir Woods in the Central submarket, availability of space is likely to uptick slightly despite the strength of demand. Additionally, as proposed projects move towards fruition, availability could further increase. It could be that 2018 was the cycle low for both vacancy and availability.
Q4 2018
Q3 2018
Q2 2018
Q1 2018
617
615
615
615
49,308,409
49,085,073
49.025,994
49,082,640
4,489,882
4,579,556
4,636,631
4,619,580
9.11%
9.33%
9.49%
9.41%
-
-
-
-
215,094
129,075
(17,051)
74,074
-
-
-
-
125,420
72,000
-
-
197,420
72,000
-
72,000
600,317
714,720
707,220
707,220
QUARTERLY COMPARISON TOTAL
The annual activity in each of the submarkets is highlighted in the sections that follow.
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Building Name
BUILDING Address
Building Size
Delivery Date
Forty Two
1150 N 9th Street
50,000 SF
Q3 2018
Submarket
Downtown North
Bader Philanthropies
3318 N Dr Martin Luther King Jr
Central
22,000 SF
Q3 2018
Hammes Headquarters
210 E Knapp St
Downtown North
82,720 SF
Q4 2018
A.O. Smith Technologies
11000 W Park Place
Northwest
42,700 SF
Q4 2018
Milwaukee Tool Expansion
12930 W Lisbon Rd
Northwest
114,500 SF
Q2 2019
Muir Woods
10415 W Innovation Dr
Central
85,000 SF
Q3 2019
BMO Tower
790 N Water St
Downtown East
380,017
Q4 2019
2018 DELIVERIES AND CONSTRUCTION PROJECTS
2018 NET ABSORPTION
Q4 2018 SUBMARKET VACANCY
QUICK FACTS
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+48.9
MILLION
SF
Metro
Office Product
9.11%
MARKET VACANCY RATE
SUBURBAN class A
10.04%
DOWNTOWN class A
9.82%
401,192
2018 NET ABSORPTION
square feet
suburban
59%
downtown
41%
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