07 Nov 2014
November 7, 2014

Milwaukee Office MarketBeat Q3 2014

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ECONOMIC OVERVIEW

Wisconsin’s unemployment rate declined to 5.6% for August, a decrease of 0.2 percentage points (pp) from the prior month and 1.1 pp decrease from a year ago. The 5.6% unemployment rate for Wisconsin is also the lowest since October of 2008 and remains lower than the national unemployment rate of 6.1%.

According to the latest Business Outlook Survey, conducted by the Metropolitan Milwaukee Association of Commerce, most Milwaukee area employers project companies to finish 2014 strong.  The rate of job growth is sited as being at a post-recession high point, and survey expectations suggest strong employment growth to continue through the end of 2014.

In addition, according to the latest Manpower Employment Outlook Survey, Wisconsin employers project a 19% net employment outlook, with employers surveyed anticipating a brisk pace in hiring during the fourth quarter of 2014.  This represents a 10% increase year-over year and 4 percentage points higher than the United States as a whole, which has a net employment outlook of 15%.

CONTINUED OFFICE MARKET IMPROVEMENT 

The Milwaukee office market continues to show improvement as we enter the fourth quarter of 2014, a welcomed sign that our local economy is slowly improving.  Positive absorption continues throughout Metro-Milwaukee, with over 104,000 square feet (sf) absorbed in the third quarter.  The overall vacancy rate indicates a 0.1 percentage point decrease quarter-over-quarter, decreasing to 19.6% and is a full 1.0 percentage point lower than Q3 2013.  The West Allis and Third Ward Submarkets experienced the most activity in the third quarter when Children’s Hospital of Wisconsin leased 47,056 sf of office space in Summit Place and Springfield College leased 22,178 sf in the Timbers Building, as the existing location is slated to be converted to a hotel use.

ADAPTIVE REUSE 

Multiple proposed developments are still slated to break ground in 2014, converting office buildings into large housing developments.  The Germania office building was awarded $850,000 in tax credit to convert the former office building into 70 affordable apartments.  Also located in Milwaukee’s CBD, the Posner building will be converted into 105 apartments with first floor retail and the former Blue Cross Blue Shield office building at 401 W Michigan Street will be converted into 188 apartments.

OUTLOOK

With the mid-term elections on the immediate horizon, businesses continue to remain cautiously optimistic about continued economic improvement.  While economic progress has been slow and steady over the past year, expect to see moderate increase in real estate activity.  Developers are becoming more active in our region and the first major office development, 833 East, broke ground this year. The Irgens project is the first major office development to break ground in over a decade.

To download this report and view past Milwaukee MarketBeat reports for both Industrial and Office, head over to our Research page.