Milwaukee Tool predicts major win for downtown office market


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Milwaukee Tool’s expansion in downtown Milwaukee is a generational real estate opportunity that will give a boost to a local office market that is just beginning to emerge from a pandemic-fueled downturn. This is how the city leaders and …

Milwaukee Tool’s the expansion into downtown Milwaukee is a generational real estate opportunity that will give a boost to a local office market that’s just starting to emerge from a pandemic-fueled downturn.

This is how city leaders and experts in the commercial real estate industry describe the case.

Milwaukee Tool announced this spring that it plans to take over the old Assurant building at 501 W. Michigan St., where it will relocate one of its business divisions and hundreds, if not thousands, of jobs.

Ty Staviski, CFO of Milwaukee Tool, said in public hearings the company will have hundreds of construction jobs by October. An incentive agreement from the city provides for an initial 1,210 jobs in exchange for a subsidy of $ 12.1 million. A second grant of $ 7.9 million could support a building expansion and 790 other jobs there.

Milwaukee Mayor Tom Barrett said the expansion was the biggest one-time infusion of downtown jobs in at least 20 years, maybe even 50.

Milwaukee Tool will purchase the building and remodel it before moving in employees. It will require 372,000 square feet of office space outside of the downtown Milwaukee market, and more specifically the Westown neighborhood.

According to Chris Allen, national director of analysis at REDIComps and Catylist, the agreement would lower the office vacancy rate in the “Downtown West” market from 28% in the first quarter to 21%.

Downtown West had the highest office vacancy rate among the Milwaukee-area submarkets that REDIComps tracks, Allen said. He hasn’t moved much lately either. Its vacancy rate was almost the same in the first quarter of 2020.

The vacancy rate for the broader CBD, which also includes the eastern Milwaukee River as well as the Historic Third District, would also drop from 18.5% to 16.6%, he said.

“I would say it’s a needle pusher,” Allen said of the deal with Milwaukee Tool.

Clearing so many vacancies strengthens both the office market, said Ned Purtell, director of Founders 3.

“Having huge blocks of vacant housing doesn’t help landlords or the market as a whole to maintain healthy rental rates,” Purtell said.

More generally, the addition of these many employees will give a boost to others, such as those in the food and beverage or hospitality sector, he said.

The deal came in part out of necessity. Milwaukee Tool had hired hundreds of employees during the COVID-19 pandemic, when many were working from home, and they just didn’t have a place to set them up. But it is also about attracting young talent. It’s a common refrain from companies that have moved or opened new offices in city centers in recent years.

“By expanding our corporate presence in downtown Milwaukee, we are poised for continued growth,” said Steve Richman, president of Milwaukee Tool Group, in a statement. “As one of Southeastern Wisconsin‘s largest employers, we are excited to expand our presence in the city, as we continue to attract, retain and recruit from a diverse pool. of local talent. ”

Purtell said the Milwaukee Tool is a high-profile example of a general upturn in office operations in recent times. Activity calmed down at the height of the pandemic. While some deals have been made, many desktop users have chosen not to make big, long-term decisions about their space.

Things seem to be changing with the spread of vaccines and the easing of restrictions. Purtell said many users are considering office space again, including in Westown. They are also looking to re-sign long-term leases.

But the deal with Milwaukee Tool itself has spurred interest in the downtown market among office tenants, said Lyle Landowski, COO of Colliers International | Wisconsin.

Milwaukee Tool has long been in the suburbs when it comes to operations in the Milwaukee area. Its headquarters will remain in Brookfield and recently selected Menomonee Falls for a new multi-purpose corporate campus.

But its expansion to the Assurant building has brought other office users to take a closer look at downtown. Much of it is about attracting workers, Landowski said.

“Objectively speaking, the activity has accelerated considerably,” he said. “I think if you took a look at the market, you would find that last month the activity picked up. But there is no doubt, since the announcement of Milwaukee Tool, there has been a resurgence of interest in the downtown area.

“It’s more than superficial; there are a lot of companies that ask the question and are sincere about it: “How do we approach our talent management strategy?” Landowski added. “What if Milwaukee Tool does this, what does it mean for our organization?”

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