ECONOMIC OVERVIEW

Wisconsin’s unemployment rate declined to 5.2% for November, a decrease of 0.2 percentage point (pp) from the prior month and 1.2 pp decrease from a year ago. The 5.2% unemployment rate for Wisconsin is also the lowest since October of 2008 and remains lower than the national unemployment rate of 5.8%.

The Institute of Supply Management Report on Manufacturing, scored Wisconsin and Northern Illinois at 70.25 for November 2014, indicating positive growth and capturing an all-time high index.  A score in excess of 50 demonstrates growth as a measure of new orders, production, employment, supplier deliveries and inventories in the manufacturing industry.  Growth was not as robust in December, when the area recorded a 57.6.

According to the ASQ 2015 Manufacturing Outlook Survey, manufacturers are becoming increasingly positive and optimistic.  Of those surveyed, 83% expect revenue growth in 2015, up from 64% who anticipated growth in 2014.  Also, more manufacturers are expecting salary increases and an increase in health benefits within 2015.

Stats on the go Industrial q4 2014

CONTINUED POSITIVE ABSORPTION

For the 18th consecutive quarter, the Milwaukee industrial market experienced positive overall absorption, with over 2.1 million square feet absorbed year-to-date.  All four counties experienced positive absorption in Q4 2014.  Milwaukee County experienced the majority of absorption for the quarter, with over 474,000 square feet (sf) absorbed.  In addition to overall positive absorption, the vacancy rate continued to decline, with Q4 2014 posting a 0.4 percentage-point decrease quarter-over-quarter to 5.7%, marking a 1.0-percentage-point decrease year-over-year.

overall 2014 q4 industrial

 BUILD TO SUIT AND SPECULATIVE CONSTRUCTION ACTIVITY ON THE RISE

The metropolitan Milwaukee industrial market’s construction activity is on the rise, with over 7.3 million square feet (msf) projected to be delivered to the market in 2015.   Within the past two quarters, speculative development has increased, with over 1.2 msf currently under construction and an additional 3.2 msf proposed to break ground within the coming year.  In addition, new industrial parks are being planned from Milwaukee to the Illinois border.  Developer and owners alike are seeking the help of Tax Incremental Financing in many instances to help bridge the financing gap, thus enabling projects to break ground.

OUTLOOK

Industrial real estate investment and industrial construction activity will be the talk of the market through 2015.  There is a strong demand for institutional portfolios of industrial real estate with two class A portfolios and one class B portfolio set to trade in the first quarter.  Anticipate tightening vacancy to continue through 2015, reaching into the 4% range.

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