Similar to much of the nation, Wisconsin has been on the “slow and steady” course of economic improvement over the course of the past few years. The statewide unemployment rate was consistently on the decline in 2013, with November posting a 6.3% unemployment rate, less than the national rate of 7%. Over the past six months, Wisconsin’s economy saw the strongest job growth since 1997. The economic recovery is slowly inching back, but additional growth needs to be reached in order to be back at pre-recession levels.
The Milwaukee office market ended 2013 with the lowest vacancy in the last two years. Due to the decreasing vacancy rate and continued positive absorption, construction activity in the office sector is slated to pick up pace. The Southeastern Wisconsin office market posted a year-end vacancy rate of 19.6%, down 0.3 percentage points quarter-over-quarter and 0.8 percentage points year-over-year.
The Waukesha/Brookfield, Third Ward/Walker’s Point, and Waukesha/ Pewaukee submarkets helped contribute to the overall decrease, as the direct vacancy rates declined 2.7 percentage points, 1.0 percentage points, and 0.8 percentage points respectively quarter-over-quarter. The highest level of absorption in Q4 2013 occurred in the Waukesha/Brookfield submarket, with FedEx Smart Post leasing over 79,000 square feet (sf) at Brookfield Lakes Corporate Center XI.
INCREASED CONSTRUCTION ACTIVITY
Milwaukee-based Irgens has plans to develop a 17-story office building, 833 East, in the central business district (CBD) with construction scheduled to begin in the first quarter of 2014. Northwestern Mutual Life Insurance Company (NML), has begun demolition on its existing headquarters building to make way for the 32-story, 1.1-million-square-foot (msf) state-of-the art CBD office tower with an anticipated completion in 2017.
With two major developments scheduled to move forward, one local corporation has decided to alter its corporate real estate strategy. Kohl’s Corporation previously had anticipated to develop a 900,000-sf corporate headquarters building on its campus in Menomonee Falls,. However, the company decided to drop plans and instead operate in at least nine buildings within the Menomonee Falls and northwest side of Milwaukee vicinity instead.
The Milwaukee-metro office market is gaining momentum coming out of 2013, with declining vacancy and positive overall absorption. 2014 is slated to have multiple significant office ground breaking events as office tenants are ready to plan for future growth after spending the past few years hunkered down, waiting for political and economic uncertainty to resolve itself.
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