More vacant office space in region

As the economy took a dive during the fourth quarter of 2008, more office space in the Milwaukee area was vacated, according to a pair of new office market reports

According to Boston-based Colliers International, whose local affiliate is Colliers Barry, the downtown Milwaukee office space vacancy rate rose from 15.9 percent in the third quarter to 17.5 percent in the fourth quarter. The class A office space vacancy rate downtown rose from 9.6 percent in the third quarter to 12.6 percent in the fourth quarter.

In the suburbs, the office space vacancy rate rose from 15.0 percent in the third quarter to 16.4 percent in the fourth quarter. The class A office space vacancy rate in the suburbs rose from 12.1 percent in the third quarter to 12.4 percent in the fourth quarter.

The newest office market report from Milwaukee-based Inland Companies shows even higher levels of office space vacancy in the region. The Milwaukee area's office space vacancy rate rose from 16.6 percent in the third quarter to 16.9 percent in the fourth quarter, according to Inland, and the class A vacancy rate rose from 12.0 percent in the third quarter to 12.4 percent in the fourth quarter. Downtown, the office space vacancy rate held steady at 19.5 percent in the third quarter, while the class A vacancy rate rose slightly from 11.7 percent in the third quarter to 11.8 percent in the fourth quarter.

The Milwaukee area's office market had a negative absorption of 84,354 square feet during the fourth quarter and had a negative absorption of 59,214 square feet for all of 2008, according to the Inland report.

The downtown office market had a better year than the suburban market, according to the Inland report. The downtown submarkets had positive absorption of 53,409 square feet of office space in 2008, while the suburbs had a negative absorption of 112,623 square feet of space.

The brightest spot for the office market in 2008 was the downtown west submarket, which had positive absorption of 97,316 square feet. Most of that can be attributed to leases at the Reuss Federal Plaza building and the Boiler House building at the former Pabst brewery complex, the Inland report said.

"With most of the local layoffs hitting in the fourth quarter of 2008 and continued instability on a national level, do not expect the Milwaukee office market to rebound quickly in 2009," the Inland report said. "However, with little construction underway and good activity in the first month of the year, the Milwaukee office market should begin to stabilize by the end of 2009."

MLG "optimistic" about area's industrial market in '09

In its 2009 forecast for the metro Milwaukee commercial real estate market, Brookfield-based NAI MLG Commercial says "continued positive absorption" is expected this year for the area's industrial space.

"Industrial activity in Milwaukee remains stable after a volatile economic year," the report states. "The 2008 industrial market experienced an increase in leasing compared to 2007. However, there were virtually no new 'spec' buildings built in 2008, which is why continued positive absorption is anticipated in 2009. Indications are that there are a number of companies waiting on the sidelines to pull the trigger on buying or leasing additional space. Due to the conservative nature of southeastern Wisconsin, there are a number of companies that are able to withstand and prosper during this economic downturn, which leads to an optimistic outlook for real estate in 2009."

However, the picture is not so bright for the area's office market, the NAI MLG report says. In 2008 net absorption was negative for every submarket in the area, except for downtown Milwaukee west, "and the expectation is that this situation will get worse," the report says.

The area's retail real estate market has slowed but, "remains relatively strong due to historically conservative practices," the NAI MLG report says. After years of inflation, retail land prices are coming down as developers are forced to charge lower rents as a result of the economic downturn. However, retail leasing activity in the Milwaukee area remains steady, the report says. "The retail market will experience a decline in 2009 in terms of lease rates," the report says. "However, absorption and vacancy rates should remain stable."

Deal of the week

Wisconsin Arts Lab LLC recently purchased a 14,400-square-foot, two-story building, at 1422 N. 4th St., Milwaukee. Thomas Pogodzinski and Jeno Cataldo of Brookfield-based NAI MLG Commercial represented Wisconsin Arts Lab LLC in the transaction. The seller and the sale price were not disclosed by NAI MLG. However, the Milwaukee city assessor's web site indicates that the owner of the building was R.C. Schmidt Jr., and the building has an assessed value of $336,000.

Wisconsin Arts Lab has donated the lease of the entire building to RedLine Milwaukee, which is an urban arts incubator. RedLine will provide professional resident artists and mentoring artists with affordable studio space. RedLine will also house an exhibition hall, library and a community room that can be used by their neighbors. RedLine will also house a print shop for use by RedLine artists and to others in the community, through a membership

Pick 'n Save to move Good Hope Road store

Milwaukee-based Roundy's Supermarkets Inc. plans to move its Pick 'n Save store at 7830 W. Good Hope Road, Milwaukee, to the former Home Depot building at 7401 W. Good Hope Road.

"All I will say … is that we have signed a lease for this project, yet there is still much work to be done," said Roundy's spokeswoman Vivian King.

The move will shift the Pick 'n Save store from a 62,764-square-foot building northwest of Good Hope Road and North 76th Street to a 102,000-square-foot building southeast of Good Hope and 76th.

The Home Depot store closed last summer when the Atlanta-based home improvement store chain closed 15 under-performing stores in the United States.

Milwaukee-based development firm Boulder Venture LLC is buying the building and the 10.8-acre site from Home Depot and will lease the space to Roundy's. Jon Thoresen of Commercial Property Associates Inc. represented Home Depot in brokering the sale of the building.

"We had multiple offers," Thoresen said. Thoresen and Boulder Venture managing partner Robert Schmidt III declined to disclose the sale price for the property, but its assessed value is $8.549 million, according to city records.

Area home sales down 32.2 percent in January

Home sales in the Milwaukee area were down 32.2 percent in January, compared to January of 2007, according to statistics released Tuesday by Metro MLS Inc.
In addition, January was the 18th straight month that listings of homes for sale in the Milwaukee area were down compared to the same month of the previous year. Listings in January were down 32.1 percent in January, compared to January of 2007, as many home owners reacted to the extreme buyer's market by not putting their home up for sale.

"The tough sales figures were not unexpected given the hard Wisconsin winter weather we experienced in December and January, and the tumultuous economic news we are hearing about each day," said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors. "We still believe that the market in southeastern Wisconsin has put the majority of the housing correction behind it, faring much better than most other markets in the nation. What we are experiencing now is a market that has plateaued at a more affordable level, but will experience slight ups and downs until the overall economy recovers."

West Allis shopping center to add access to Summit Place

Farmington Hills, Mich.-based Ramco-Gershenson Properties Trust, real estate investment trust (REIT), is planning a $9.5 million remodeling of the West Allis Towne Centre shopping center at 6740-6800 W. Greenfield Ave.

Ramco-Gershenson wants to improve the shopping center's access to the highly successful Summit Place office complex, located to the north. So the firm plans to demolish the Fashion Bug tenant space and vacant spaces formerly occupied by Hallmark on the north side of the shopping center to build a new access road through the shopping center that will connect Greenfield Avenue with Summit Place, where about 4,000 people work.

The project would also include the creation of two new tenant spaces, a 9,091-square-foot space for three tenants in the eastern half and a 2,573-square-foot space on the western half.

Ramco-Gershenson also plans to prepare two pads in the shopping center for future outlots. The firm is hoping to attract a restaurant or other tenants to building separate buildings on the outlots.

Summit Place and the West Allis Towne Centere were parts of the former Allis Chalmers complex that were redeveloped into their current uses.

Tenants at the West Allis Towne Centre include K-Mart, Office Depot, Dollar Tree and Famous Footwear.

Real estate odds and ends

Milwaukee-based Kahler Slater recently received four awards at the American Society of Interior Design - Wisconsin Chapter competition. The architectural firm received a Gold Award in the Health Care/Medical category for facilities larger than 50,000 square feet for its work on Grand Itasca Clinic and Hospital, a replacement hospital with an integrated 50-physician clinic on a new rural campus in Grand Rapids, Minn. The firm was also honored with two Silver Awards in the Recreation/Hospitality category - one for the country’s first Bimbamboo Restaurant, an Asian-influenced casual dining restaurant in Boulder, Colo., and the second for the Fratellos Waterfront Restaurant in Milwaukee. The fourth award was a Bronze Award in the Medium-size Office/Corporate category for Kahler Slater’s design of its own new office space in Madison.