“For the first time in a few years, some deals have temporarily fallen apart,” Shumow said. “The double whammy of interest rate uncertainty and rising con struction costs and inflation has had an impact. Not very many deals have fallen apart yet. There is still healthy deal flow here. At some point, though, some deals become untenable. We are not quite there for most deals, despite the interest rate and inflation.”
And the best news? The real estate professionals working in the city and its suburbs say that the future remains bright for commercial real estate in Milwaukee.
CRE MARKETPLACE PAGE 29: ARCHITECTS/DESIGN-BUILD FIRMS ASSET/PROPERTY MANAGEMENT FIRMS FINANCEDEVELOPERS&INVESTMENT CONSTRUCTION/PROJECTFIRMSMANAGEMENT
By Dan Rafter, Editor
Still fighting: Milwaukee commercial real estate market not letting challenges disrupt its rise
When the Federal Reserve in the summer raised interest rates by three-quarters of a percentage point, it ranked as the agency’s most aggressive such hike since 1994. The Fed made this move to combat inflation. But the providers of commercial financing worry that rising interest rates could scuttle construction and acquisition deals that were set to close but might no longer make sense now that rates are higher.
FINANCE
ike it has in all major cities, Milwaukee’s com mercial real estate market has faced a tough one-two punch: the COVID-19 pandemic and now the uncertainties that come with rising interest rates. But the CRE market here? It is holding steady in some sectors and thriving in others, despite the hurdles thrown up by these major challenges.
Still fighting: Milwaukee commercial real estate market not letting challenges disrupt its rise
MILWAUKEE (continued on page 17)
How many deals will rising interest rates wipe away? CRE pros in wait-and-see mode
Joseph Shumow, shareholder and chair of the real estate practice in the Milwaukee office of law firm Re inhart, said that deal flow in the Milwaukee commercial real estate market remains healthy. But rising interest rates have brought uncertainty, he said.
By Dan Rafter, Editor FINANCE (continued on
MINNESOTA | MISSOURI | NEBRASKA | OHIO | TENNESSEE | WISCONSIN | THE DAKOTAS | ILLINOIS | INDIANA | IOWA | KANSAS | KENTUCKY | MICHIGAN VOLUMEWWW.REJOURNALS.COM 34 ISSUE 4 JULY/AUGUST 2022
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By Dan Rafter, Editor
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Staring down the challenges in
Milwaukee: Like it has in all major cities, Milwaukee’s commercial real estate market has faced a tough one-two punch: the COVID-19 pandemic and now rising interest rates. But the CRE market here? It is holding steady despite the hurdles thrown up by these major challenges. How many deals will rising interest rates wipe away? When the Federal Reserve in the summer raised interest rates by three-quarters of a percentage point, it ranked as the agency’s most aggressive such hike since 1994. Now the providers of commercial financing worry that rising interest rates could scuttle construction and acquisition deals.
The promise of onshoring: The industrial market across the country is enjoying plenty of momentum, with companies’ demand for new industrial space seemingly unquenchable. But a push by companies to open more manufacturing facilities in the United States is only adding fuel to the hot industrial market.
Steady wins in Kansas City: Will rising interest rates slow commercial real estate sales, leases and developments in the Kansas City market? That’s difficult to say. But what can’t be disputed is that Kansas City and its suburbs have benefitted from a steady commercial real estate market for years. A bright future in Iowa’s CRE market: Demand for industrial warehouse space in the biggest cities of Iowa? It’s at an all-time high. And industrial isn’t alone. Retail is adapting. Demand for multifamily is soaring. And office? Even this sector is showing signs of life. Do commercial real estate workers want to return to their desks?
A model of the post-pandemic office space: How can companies convince their employees to return to the office after more than 2-and-a-half years of working from home? What can they do to attract the best workers in a tight labor market? Amenities might be one of the keys.
296DEPARTMENTS/COLUMNSFromtheEditorMidwestMarketplaceDirectoryListings FEATURES118 12 2725232219 28 20 The Midwest’s commercial real estate publication, providing useful, unbiased and accurate coverage of the industry and its professionals
Just can’t dampen that appetite for industrial real estate: When will industrial real estate’s hot streak end? No one’s willing to guess just yet. And all signs point to the demand for this commercial sector to only continue to soar throughout the rest of 2022 and into next year. The net lease sector in 2022? So far, it’s almost all good news: Last year was a sizzling 12 months for the net lease sector of the commercial real estate business. And 2022? So far, it’s been strong, too. But can the rest of this year hope to measure up to 2021?
4 | Midwest Real Estate News | July/August 2022 | www.rejournals.com
It’s clear when looking at the quieter streets in downtowns across the Midwest that many office workers have still not returned to their cubicles and conference rooms. It’s equally clear that no one knows when workers will once again fill these office buildings.
Relying on top amenities to bring employees back to the office It remains a challenging time for the office sector, with many companies still not sure when, or if, they will bring their employees back to their cubicles and conference rooms on a full-time basis. That doesn’t mean that developers haven’t been busy transforming outdated office buildings into modern space that will help companies attract and retain employees when they are ready to bring their workers back.
PublisherWWW.REJOURNALS.COM | Mark Menzies menzies@rejournals.com Editor | Dan Rafter drafter@rejournals.com ADVERTISING Vice President of Sales & MW Conference Series Manager | Ernest Abood eabood@rejournals.com Vice President of Sales | Frank E. Biondo frank.biondo@rejournals.com Vice President of Sales | Marianne Grierson mgrierson@rejournals.com Classified Director | Susan Mickey smickey@rejournals.com &SupportEVENTS/CONFERENCESSpecialist,MediaEvents | Hayley Myers hayley.myers@rejournals.com Midwest Real Estate News brings real estate leaders together to explore the challenges and opportunities unique to their markets. ADDRESS 1010 Lake St Suite 210, Oak Park, IL 60301 Midwest Real Estate News® (ISSN 0893-2719) is published bimonthly by Real Estate Publishing Corp., Oak Park, Il 60301 (rejournals.com). Current and back issues and additional resourc es, including subscription request forms and an editorial calendar, are available on the internet at Subrejournals.com.scriptions:Within U.S.: 1 year, $69; 2 years, $89; 3 years, $109. Single copies, $10.00. Subscription information: Haley Myers 1010 Lake St Suite 210, Oak Park, IL ©2022708-622-0074.60301RealEstate Publishing Corp.
Location is everything? Nope. Now it’s lifestyle is everything: Location, location, location. That’s long been the mantra of residential real estate. But in today’s multifamily market? Lifestyle, lifestyle, lifestyle might be more accurate. since 1985.
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Midwest Real Estate News | July/August 2022 | www.rejournals.com6
I
There was some hope, too, from the survey. For U.S. equities, almost twothirds of respondents predicted that the S&P 500 would not fall below 3200. Only 27% believed oil would top $150 a barrel. And the results were evenly divided between those who felt that the 10-year Treasury would rise above 4.5%.
According to a new survey from Trepp, commercial real estate pro fessionals are concerned about rising interest rates and inflation, and expect that both will hurt their businesses before 2022 ends. But they also think that commercial real estate will escape the worst effects of these economic headwinds.
Financial pain? Trepp survey suggests it is so
A new survey suggests that an uncertain economy will bring plenty of it before 2022 ends. That doesn’t mean, though, that commercial real estate professionals don’t have hope that this pain will be relatively short-lived.
EQUAL
Editor PRIME
And more than half of respondents said that economic conditions and higher interest rates would impact their businesses negatively.
A total of 83% of survey respon dents predicted that during the next six months that delinquencies will increase in both the commercial real estate and commercial mort gage-backed securities industries.
SPACED OUT?
THE EDITOR
And what did respondents say? In little surprise, 70% of them said that they expect the office sector to suffer the most from economic challenges throughout the remainder of 2022. This sector, of course, has been hit hard throughout the COVID-19 pan demic, with many employees still working from home. Respondens said that they expect the next sever al months to remain challenging for this sector.
A total of 58% of respondents pre dicted that the multifamily sector will see the highest transaction vol ume during the next six months. And in a glimmer of hope for the office sector, 70% of participants reported that they are working in the office at least three days a week. Just under three-quarters of re spondents said that their firms were either unchanged or growing when compared to 2021. A total of 88% of participants said that they are either keeping their companies’ current headcount or hiring new employees as needed. Despite this, more than half of respondents said that economic conditions will have a negative impact on their businesses by the end of 2022.
“With many employees still working from home. Respondens said that they expect the next several months to remain challenging for this (office)
By Dan Rafter, INDUSTRIAL LOCATIONS WITH POWER, ACCESS AND INCENTIVES.
s more pain coming for com mercial real estate companies?
That’s according to the Trepp 2022 CRE Sentiment Survey. From July 13 through Aug. 1, Trepp polled its more than 20,000 clients, blog readers and listeners for their opinions on the near-term future of the commer cial real estate and commercial mort gage-backed securities markets.
pdbgroup.com Think Beyond the Build.
Will rising interest rates slow commercial real estate sales, leases and developments in the Kansas City market? That’s difficult to say. But what can’t be disputed is that Kansas City and its suburbs have benefitted from a steady commercial real estate market for years, one that has sur vived the challenges of the COVID-19 pandemic and is poised to make it through whatever economic uncer tainty hits next.
Kansas City benefits from its loca tion in the middle of the country, something that makes it attractive to companies that need to deliver their products to as many consumers as quickly as possible. This explains why the industrial market here is thriving.
But other commercial sectors are performing well, too. Demand re mains high for multifamily units in both the city and suburbs. Retailers are bouncing back from the toughest days of the pandemic and are fighting through a labor shortage as they adapt to the changing shopping hab its of consumers. And while the office market remains mired in uncertainty, the brokers working in the Kansas City market say they see signs of hope in this sector, too.
We spoke with two CRE profession als working in Kansas City – Daniel Brocato, vice president with Block & Company, Inc., Realtors, and Aaron Mesmer, principal of acquisitions and investment sales with Block Real Estate Services -- about the reasons behind the steady pace of Kansas City’s commercial real estate market.
How is the retail sector faring in the Kansas City market today?
KANSAS CITY
Midwest Real Estate News | July/August 2022 | www.rejournals.com8
Daniel Brocato: Retail has bounced back. It is almost better than pre-pan demic levels. The biggest issue that retailers are facing is employing people to work for them. There is so much demand for people to work at these jobs that they are facing a lot of competition for employees. That is making it more difficult for retailers to open and operate as many locations as they might want.
By Dan Rafter, Editor
Speaking of COVID, have retailers re tained many of the shopping options they enacted during the pandemic? Brocato: They have. Curbside pickup changed the way consumers thought about doing things. Places like Walmart, Price Chopper and Target were doing curbside pickup prior to COVID. The pandemic just ampli fied the importance of services like this. Now we are seeing designated parking spaces for curbside pickup outside many retailers. People are comfortable with this service. Some one might not have done curbside pickup or online ordering before the pandemic, but COVID forced them to try it. Because of this, it has become
Overcoming the challenges in Kansas City
Overall, though, leasing activity has greatly increased this year. We are seeing a lot less vacancy overall. As far as new construction, though, that has been a bit slower. Construction costs are so high that a lot of retail ers, and I’m talking more of the local mom-and-pop types, have opted to lease space as opposed to buying new construction. The more turnkey the better today with the rising con struction costs and lead times. It is taking so much longer for construc tion materials to ship. I had one client who was quoted a wait of five or six months for an AC unit to be delivered.
What are retailers doing to deal with the labor shortage? Brocato: I am working with a daycare that had three locations. Last year, I sold one for them. A different daycare opened there. My client closed its second location recently and consol idated all its operations into one loca tion. That solution is not ideal, but it has worked for a lot of people who are having staffing problems. Business owners take on less square footage, consolidating their locations because they can’t staff and keep operating multiple spots. Restaurants that used to operate a 5,000-square-foot space now want 2,000 to 2,500 square feet. Now they want a kitchen, an area to pick up food and a couple of dining area seats. That type of downsizing had been happening for the past several years before COVID. COVID just amplified this trend of retailers minimizing what they need.
Brocato: We are seeing a lot of restau rants that formerly had multiple locations consolidate into one or two locations. We have seen the addition of a lot of food trucks during the last year. We have a Mexican restaurant that used to open one location a year. This client is now down to two locations. But it has three or four food trucks busting all over Kansas City. It is a different way to adapt. If another form of COVID comes out, these restaurants will now have the freedom to still operate and make an income. Tensions have been mostly eliminated as far as COVID goes in the Kansas City market, but the pandemic is still in the back of everyone’s mind. I did a deal last year with a client that leased out a space in a strip shopping center. They intended to build out the interior space. Instead, they parked a food truck out front of their space and used the strip center space to store their supplies and make their food. They now serve their food out of the food truck parked in front. People have gotten really creative. We have a barbecue restaurant in Kansas City that has a vending machine that they stock at around 10 in the morning. Customers can also go to that vend ing machine and get barbecue sauce and pulled pork sandwiches. People are ordering that way. Are there any new retailers coming into the Kansas City market today? Brocato: One of the biggest new re tailers is Ollie’s Bargain Outlet. They have been opening new locations across the Midwest. They have been in Wichita, Kansas, now they have opened two locations in Kansas City and another in Overland Park, Kan sas. This is a good opportunity for CITY
KANSAS CITY A FULL SERVICE COMMERCIAL REAL ESTATE, BROKERAGE AND DEVELOPMENT COMPANY HEADQUARTERED IN KANSAS CITY, MISSOURI FOR LEASING OPPORTUNITIES: 4622 Pennsylvania Ave Kansas City, Missouri 64112 816.756.1400 • wwww.blockllc.com IN MORE THAN 325 OFFICE, INDUSTRIAL, RETAIL, MEDICAL OFFICE, AND MULTIFAMILY DEVELOPMENTS OF RETAIL, OFFICE AND INDUSTRIAL PROPERTIES UNDER MANAGEMENT BRES AND RELATED COMPANIES HAVE UNDER MANAGEMENT OVER9500+45 “The biggest issue that retailers are facing is employing people to work for them. There is so much demand for people to work at these jobs that they are facing a lot of competition for employees.” KANSAS
(continued on page 10)
www.rejournals.com | July/August 2022 | Midwest Real Estate News 9 a new way of doing things for a lot of shoppers. It is still a main focus of retailers to have that curbside or pick-up to-go locations designated. Restaurants in general are looking for drive-thru space. And that is nearly impossible to find in Kansas City right now. During the past year, every restaurant wants to go drive-th ru. Panera Bread is shifting all to drive-thru. Chipotle is doing the same thing. They are not opening any new locations without a drive-thru.
What other new trends are you see ing among retailers?
Just look at Panera. It used to want 6,000 square feet and an open area for seating. Now Panera wants closer to 4,000 square feet for their loca tions. It has deducted about 2,000 square feet from its general space and added the drive-thru. That is the common trend overall. That is the general idea with all restaurants and retailers. If they can get a drive-thru, they want it.
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KANSAS CITY them. All these big-box spaces have gone dark during the past several years. Major anchor tenants went to junior boxes. That meant an oppor tunity for Ollie’s to take advantage of these empty bigger spaces. Ollie’s is the biggest new arrival to our market as far as square footage goes. What are some of the positives of doing business in the Kansas City Brocato:market?
KANSAS CITY (continued from page 9)
Kansas City is the best of all worlds. We have enough of a down town that you can really enjoy living here if you are from a bigger city. We are not Chicago or New York City, but you still get that big-city feel. But you also get the small-town feel. And the suburbs of Kansas City are very well built-out without being overbuilt. Our highway system is great. You can get anywhere within 45 minutes. There is still a local art-type feel in our arts districts, in neighborhoods like Mid on top-10 lists for raising a family for years. The list goes on. We have a great food scene. We have a mix of everything you’d want in a city. What do you see for the immediate future of the retail market? Do you think the rebound will continue? Brocato: Coming out of COVID, so venue or shop at an actual store in stead of sitting in their sweatpants for three weeks straight and order ing everything online. The rest of the year looks to be strong for retail, and I expect the increased activity to bleed into next year, too. Have rising interest rates slowed deal activity at all in the Kansas City first part of the year was strong. A lot of people were still in a place where they could sell their real estate and still garner solid profits. As we get into the later part of 2022, though, there have been fewer trades in the market. The sellers are less motivated because the amount of profit they can make by selling has come down a bit. Look at it this way: If you had a deal worth $50 million and then four months later, you are now receiving offers for $45 million, are you as mo tivated to sell? Or would you rather hang onto that property? There is not a lot of distress in property fundamen tals today. Owners are not motivated from that standpoint to sell. If the properties are doing well, and you have in mind a valuation that you are no longer able to get today because of rising rates, you are more likely to hang onto that property instead of selling it. Deals with permanent financing might have prepayment penalties, too. If you can sell your property for a higher
Mesmer: Kansas City is a great place to live and work. It has a terrific quality of life. You still have access to all the big city amenities, professional sports teams, theater, great dining options. But it’s also a very livable community. You can get to downtown from the suburbs in 20 to 30 minutes. We also benefit from business-friendly practic es. A lot of companies recognize that we have a well-educated workforce. We also have lower taxes than in some of the coastal markets. From a logistics standpoint, we are right in the middle of the country. We go head-to-head with Chicago in terms of rail service, too. We have great rail service and available land for industrial development. That puts us on the radar when it comes to Ilogistics.feelthat we are also very entrepre neurial as a city. When something hap pens, when Sprint, say, is acquired by T-Mobile, people spring out of that and start their own telecommunications companies. They are willing to take that risk and be in this market. That adds to the vibrancy of this market
Mesmer: A lot of tenants want break areas with full kitchen setups. They want flexibility so that they can ac commodate a hybrid-work model. They want onsite fitness centers. Our office properties are also walkable to retail and restaurants. Tenants want to be able to offer their workers easy access to dining options, dry clean ing services and other services that they’d need. Are you seeing a return of people and companies to downtown Kansas City Mesmer:today?
From a user standpoint, we are seeing very strong demand in our multifamily properties. With interest rates going up, home buying has cooled off a bit. Typically, we work in the Class-A multifamily space, with people who are renters by choice. We would typically lose more residents to homeownership than for any other rea son. But that has slowed down because of rising interest rates. Our occupancies in our multifamily buildings are in the upper 90% range. That is pretty strong.
How is demand for some of the other commercial property types?
wait until the loan matures before sell ing and having to make a prepayment penalty. Despite the uncertainty that comes with rising interest rates, are you still seeing a strong demand for multi family properties in the Kansas City Mesmer:market?
www.rejournals.com | July/August 2022 | Midwest Real Estate News 11KANSAS CITY
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That is happening. We have a company that had 20,000 square feet in a building. That company reduced its footprint to about half of that, but it wanted to move to more compelling space for the workers they have who are coming back to the office. They wanted a class-A location and amenities. And that’s not uncommon. Companies are saying that they want to reduce their office footprints and put the savings into a higher-quality office space. This is a real thing. It’s not just a buzzword or talking point. We are seeing this hap pening in our office properties. What kind of amenities do tenants want in their office spaces?
We have two multifamily properties in downtown Kansas City. Both of those are now full, 98% oc cupied and 100% leased. People are interested in living downtown. There was a slowdown during the pandem ic. Property occupancies fell into the low 90% range. We were doing more concessions than we had previously done. But now our occupancy rates for downtown multifamily are back to full. The commercial real estate market in the Kansas City area has proven to be resilient. What is behind that?
Mesmer: We delivered two office buildings in 2020, brand-new multitenant office buildings. We saw a year without a lot of office activity in 2021. But during the past year, both of those buildings have gone from being 40% pre-leased to occupancies in the upper to mid-80% range. Even in office space, we are seeing good activity in Class-A, highly amenitized and well-located properties. I don’t know if it is the same for Class-B office space, but as people get more clarity about work plans in the post-COVID world, we are seeing office space start to fill up again. Are you seeing a flight to quality in the office Mesmer:sector?
Then there is the labor force through out Iowa’s biggest markets. As Ben nett says, there is plenty of skilled labor for developers and end users to choose from. And these workers tend to have that Midwest work ethic that companies like.
“I think we’ll continue to see out-ofstate developers coming to Iowa and the Midwest,” Bennett said. “A lot of these developers are trying to work with higher construction costs today. They are finding that the Midwest is a little less risky. It is more cost-effec tive to build here. As a result, they see some higher returns.”
Adam Kaduce, senior vice president and managing director with West Des Moines, Iowa-based R&R Realty Group, agreed that the industrial mar ket is thriving today in his state.
Bennett said that he, too, has seen out-of-state developers flocking to Des Moines. Again, location matters.
IOWA
A bright future even with rising interest rates, inflation? It looks that way for the commercial real estate market in Iowa’s biggest cities
By Dan Rafter, Editor
And when they do find it? They are willing to pay more for it. It all adds up to a booming industrial market in this Midwest state.
Location matters
Opus has entered the Des Moines market. Developers based in Minne apolis and Kansas City are now active in the city.
emand for industrial ware house space in the biggest cities of Iowa? It’s at an alltime high. And the brokers working this market don’t expect that to change anytime soon.
D
And industrial isn’t alone. Retail is adapting. Demand for multifamily is soaring. And office? Even this sector is showing signs of life. The bottom line? This is a good time to work in commercial real estate in the Des Moines, Iowa, market.
Just ask Blaise Bennett, associate director with Stan Johnson Company, who works the Des Moines, Iowa, market. He says that the lack of avail able warehouse supply throughout this market makes it challenging for end users to find the space they want.
“The bright spot in our market is definitely industrial,” Kaduce said. “We are seeing more spec industrial in this market than I’ve ever seen in my career. And we are going to see a fair bit of that spec space preleased before it delivers. Industrial space gets gobbled up quickly in Des Moines. A number of developments are multi-building projects or indus trial parks. They have kicked off their first buildings, so we will see more development from these projects in the future, too.”
Industrial still booming Bennett has the numbers showing just how strong industrial is. He says that asking rents for industrial ware house space have increased almost 50 cents a square foot from 2021 to the summer of this year in the Des Moines market. And vacancy rates? They, too, are well below the national average. Bennett said that industrial vacancy rates are more in the 2.5% range in Des Moines and the central and eastern markets of Iowa’sIowa.central location in the United States is one of the reasons for this rising demand. Companies want to get their products to customers as quickly as they can. Having more of it stored in the center of the country Athelps.the same time, Iowa offers plenty of opportunity for developers be cause it has so much available land, Bennett said. Iowa has long been known for farming and agriculture. Developers are now approaching the owners of this land, paying them to carve out large parcels for industrial
“Theydevelopment.knowthat there is a tremen dous wave of demand from different users across the country,” Bennett said. “Even on a national basis, com panies want to get into Iowa.” Kaduce said that there are plenty of reasons for the strong industrial mar ket in Iowa.
“Our location and access to the inter state system has always helped. We have good access to labor talent,” he said. “We also benefit from a low cost-of-living. And because our pop ulation has a high degree of educa tion, the residents here tend to have disposable income. For the Amazons of the world, Des Moines is a good market to be in.”
“You have a situation right now where there is an incredible lack of Class-A supply for industrial product,” Ben nett said. “Couple that with rising demand, with a lot of tenants want ing to operate and get into the Des Moines market, and we are seeing a very strong industrial market here. At the same time, we have rising con struction costs. It is all pushing rents to levels in these Iowa markets that people never expected to see.”
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At the same time, Des Moines and other big cities in Iowa are afford able places for companies looking for industrial space. Rental rates for industrial space in Des Moines, for instance, have long been in the $3to $4-a-square-foot range. That has risen a bit as construction costs and demand both increase. But industrial rents throughout the state are still lower than what end users would see in larger Developersmarkets.arenoticing this. Kaduce said that local developers once dominated the industrial market in Des Moines. That, though, has been changing as an influx of institutional players enter the market. Ryan Com panies has been developing here.
As Bennett says, you can reach 50% of the U.S. population in a one-day truck drive from Des Moines. That is a big plus for third-party lo gistics companies. At the same time, developable land in Iowa tends to be more affordable than it is in coastal
“Themarkets.cost of this land is increasing quickly,” Bennett said. “But relative to those other markets, entry costs are much more attractive for develop ers looking for land.”
“Industrial is a low-risk investment,” he said. “It is more affordable to develop in the industrial space than it is to develop in office. And there is strong demand for industrial real estate here. Developers coming into this market are chasing returns as cap rates have become compressed in other markets. Des Moines is still a place where you can make a sound, lower-risk investment.”
Bennett says that clear heights are key. Many end users are looking for a minimum 36-foot clear height in their warehouse spaces, he said.
“Theseestate. are not necessarily things we haven’t seen before,” Bennett said. “But some of these challenges seemed to happen almost overnight. With interest rates, they rose so sud denly after the Fed’s announcement. It might take a little bit of time, then, to soak in. People are feeling the stress of the sudden increase in rates.”
With demand soaring, and available industrial space limited, are develop ers turning more often to spec con struction throughout Iowa’s bigger markets? They are, Bennett says. There is a caveat here, though: Be cause demand for industrial space is so high, by the time developers finish building their Iowa spec projects, they tend to have the space filled.
Bennett said that the future looks bright for industrial, in Iowa and across the Midwest. There are chal lenges, of course, with rising inter est rates topping the list. Bennett, though, said that the combination of rising demand and a lack of available industrial space should keep this sector strong, even if interest rates continue to rise. Rising construction costs are another challenge that developers face. That combined with continuing slowdowns in the delivery of materials is making building new warehouses and manu facturing spaces a more difficult task.
Industrial, though, remains an attrac tive asset class for developers even as these costs rise, Kaduce said.
Office still in limbo?
The interest rate jump, though, re mains the biggest worry among de velopers and investors today. Bennett said that some of this worry stems from how quickly rates jumped. The Fed did not inch its interest rate up slowly to combat inflation. Instead, it boosted by a large percentage rather Thatquickly.resulted in a bit of a shock to those working in commercial real
“There is a crazy amount of spec building going on right now,” Bennett said. “But while it is spec today, most of our clients say that they are very bullish on having the space leased up before construction ends.”
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Cross-docking is important, too, Ben nett said. That’s because efficiency matters to “Companiestenants.are promising sameday delivery,” Bennett said. “When an order is placed, they need to be able to access that product quickly and efficiently and send it on its way. Cross-docking and clear heights are definitely features that we are seeing a lot of investors inquire about. They know ultimately that tenants will de mand those features.”
PAUL
When it comes to new construction, what are end users looking for today?
While industrial thrived throughout the COVID pandemic, the office mar ket took a major hit. In cities across the country, office space remains largely empty as many employees continue to work from home. Des Moines and the other major cities in Iowa didn’t escape this. And the state’s office sector has not been immune. However, while the office sector was hit by the pandemic, it wasn’t hit as hard as some of the bigger cities in the Midwest, such as Chicago or Minneapolis, Kaduce said.
RUPPRECHT President CHRIS CURRAN Senior Vice President ADAM KADUCE Managing Director & Sen or Vice President MA Vice MARIA DAVIS Vice President JONNY BOSWORTH Director GRANT TUCKER Manager ALEXA STRICKLER Representative S i n c e 1 9 8 5 , w e ' v e b e e n h e l p i n g l a r g e c o m p a n i e s a n d s m a l l b u s i n e s s e s a l i k e f i n d w o r k s p a c e a c r o s s t h e D e s M o i n e s m e t r o . F r o m b o u t i q u e r e t a i l t o l a r g e s c a l e w a r e h o u s e a n d i n n o v a t i v e o f f i c e s p a c e , o u r t e a m o f b r o k e r s c a n h e l p a n y b u s i n e s s f i n d t h e r i g h t s p a c e i n t h e r i g h t p l a c e . T a l k t o o u r t e a m o f w o r k s p a c e e xp e r t s t o d a y : W E ' R E D E S M O I N E S ' W O R K S P A C E E X P E R T S . RRREALTY.COM | (515) 223-4500 IOWA (continued on page 16)
“We like to pride ourselves on not having the high-highs and low-lows that other markets have. It’s been the same story during COVID,” Kaduce said. “We never saw our businesses
As Trebil says, investors still need to put their money somewhere, and com mercial real estate remains a favored investment type.
“That was a bit of a shock,” Collett said. “The cost of capital went up. Re finance activity that might have been in place suddenly went away.”
Marsha Goff, executive vice president and Fannie Mae and Freddie Mac chief underwriter in the Saint Paul office of Merchants Capital, said that her company is still busy providing financ ing for multifamily housing. The new interest rate environment, though, has made closing deals more challenging, she Goffsaid.said that permanent multifamily housing loans are usually priced in relation to the performance of the 10-year Treasury. Today, the 10-year Treasury is particularly volatile.
“There is a price discovery going on now between buyers and sellers, and lenders, too, on where to price debt now that rates have risen,” Trebil said.
Collett describes the commercial fi nance market as a bit more tempered today than it was before the Fed made its big “Peoplemove.have had to recalibrate,” he said. “It has slowed down a little. It’s not as frothy as it was. But there is still a lot of business getting done out Collettthere.” said that how investors view today’s higher interest rates might de pend on how they long they have been sinking their dollars in commercial real estate. As he says, the last 10 to 15 years of lower interest rates has been the anomaly. Today’s higher rates? They are closer to the historic norm. Again, though, it’s been the sudden ness of the jump in interest rates that has spooked many investors.
“I agree that a 50-basis-points to 75-basis-points increase is appropri ate, but the Fed needs to be careful not to overcorrect,” said Joshua Simon, chief executive officer of SimonCRE, in a statement. “Inflation is going to be a lagging indicator that needs to be watched. They will need to raise rates, but at some point, they need to wait to see the results before enacting more increases. There has been major fallout already within transactions and further investments will be delayed.”
But that doesn’t mean that such a sud den rate hike by the Fed doesn’t hurt, he said. “It is a bit of a shock to the system,” Collett said. “We all anticipated that we wouldn’t be at all-time low interest rates for the rest of our lives. But it is shocking how quickly they moved.”
Dan Trebil, managing director and senior vice president with the Minne apolis office of Northmarq, said that commercial real estate boasts some advantages that should help keep the deals and financing requests flowing, even with higher interest rates.
In his statement, Simon said that the Fed already reacted late in its efforts to combat inflation. This means that it must now enact larger rate hikes to make up for its earlier inaction.
“The good news is, there is still a lot of money out there,” Trebil said. “Real estate fundamentals are still good.
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Trebil, though, is realistic. He says that the rising rates have caused some investors who were ready to acquire new properties to pause their plans. These investors are waiting to see the full impact higher interest rates might have on commercial real estate.
As Collett says, Colliers Mortgage uses the 10-year Treasury to price many of its deals. That rate more than doubled after the Fed’s move.
Hoping for a more measured approach Goff is far from alone in seeing this uncertainty. Others in the commercial real estate space say that the Fed must be careful when handling interest rates. Being too aggressive could sig nificantly slow commercial real estate deals, they say.
Financing requests still coming in With that being said, Northmarq re mains busy, and commercial financing requests continue to roll in, Trebil said. And Trebil said that he expects this to continue.
“I was working with one client who said that he hasn’t had to do an inter est-rate lock for more than 10 years,” Goff said. “In the short term, many developers are being forced to get gap financing, have to put in more equity or are taking advantage of early rate or index locks.”
Because of that, many industry players will swallow the pain of higher interest rates to reap the still-lucrative finan cial rewards of commercial real estate.
FINANCE (continued from page 1) FINANCE
The consensus is that while interest rates could cause some commercial real estate developments and acquisi tions to stall, assets such as multifam ily buildings, drugstores, fast-casual restaurants and industrial space will remain attractive for investors looking for safe places to park their dollars and developers eager to build these lucrative products.
“We have definitely seen an impact from that volatility,” Goff said. “Most deals today are debt-service-con strained, not loan-to-volume-con Goffstrained.”pointed to two construction-fi nancing deals she has been working on since early June. As Merchants Capital was processing the loans and getting nearer to closing, the 10-year Treasury fluctuated frequently, rising to 3.5%, dropping to 2.6% and now moving to about 2.9%. This means that the loan amounts for these deals fluctuated, too, starting at about $33 million, dropping to $26 million and now rising back up to $31 million.
“Interest rates of 2% or 2.5% on big commercial deals are not normal,” Collett said. “People are just surprised when it goes from 2.5% to 4.5% within 90 days. You would’ve loved to have seen the Fed get ahead of inflation and raise rates naturally. That way, there would have been no shock to the sys tem. But that didn’t occur. The shock of the sudden increase sent people spiraling for a minute.”
“With that much volatility and with the loan amount changing, the developers have to put more equity into the deal and find additional sources of equity,” Goff said. “There is uncertainty today with getting transactions done.”
People’s properties are still operating well. A quick run-up in interest rates like this has put the brakes on some refinances that might have made sense before but don’t make sense now. But there is still demand for com mercial real estate.”
“This means we should see a slow down in activity to some extent, pri marily in floating-rate deals,” Simon said. “Construction will have to slow Haldown.”Collett, chief operating officer with the Minneapolis office of Colliers Mortgage, said that it was unrealistic to expect interest rates to remain as low as they had been. Such low rates were unprecedented.
Can CRE weather the storm?
How has this impacted commercial real estate financing deals so far? It’s still early, but CRE pros say they are keeping a close watch on deals in progress. Many are still closing, they say, but others will certainly crumble.
Goff said that borrowers and lenders are turning to early interest-rate locks to remove some of the volatility in today’s market. The downside to these locks? Borrowers have to pay more for them. Goff, though, said that many borrowers are willing to pay this extra upfront cost to help bring certainty to their deals.
FINANCE (continued on page 16) FINANCE Colliers Mortgage is the brand used by Colliers Mortgage LLC and Colliers Funding LLC. Corporate Office: 612.317.2100 | 866.922.0786 | colliers.com (find us under Greenwayservices)Apartments Minneapolis, Minnesota Affordable Multifamily 86 Units | HUD 221(d)(4) New Construction $12,503,200 Commercial Real Estate Finance Experts The enterprising team at Colliers Mortgage works collaboratively to analyze and uncover unique opportunities and finance alternatives to help make our clients’ projects successful. Through our broad platform, we can provide the best financing options available for each •transaction. Fannie Mae DUS® and FHA-insured mortgages • Tax-exempt credit enhancement • Low-income housing, historic and new markets tax credits • Various government programs for subordinated loans or grants • Construction lending • Bridge lending • Institutional loan placements • Tax-exempt bond underwriting for 4% LIHTC projects (through our affiliate Colliers Securities) Multifamily Housing | Affordable Housing | Independent Living | Assisted Living | Hospitals | Healthcare Facilities | Student Housing Zenith Duluth, Minnesota Mixed-income Housing 122 Units | HUD 221(d)(4) Acquisition and Rehabilitation $26,430,800 “The
they have?”
“It goes back to the fact that people still view real estate as an attractive asset class,” Trebil said. “A lot of money is still available out there.” At the same time, commercial real es tate remains a safe place for investor dollars. This is especially true with the multifamily and industrial sectors. But Trebil said that more financing requests are coming in for hospitality assets today, too. He’s even seen an increase in requests for retail proper Theties. office sector? That one still faces plenty of uncertainty, Trebil said. And because of that uncertainty, there ar en’t as many financing requests today for office investments or new develop “Aments.lotof the questions about office are still there,” Trebil said. “But a lot of properties are working through that as tenants’ leases expire. They are resiz ing. Their space needs might or might not have changed. As companies work through that, there will be less unknowns about this sector. The big question is what those tenants who signed office leases before COVID will do now that their leases are coming up for renewal. Will they take 50% less space? Will they stick with what they Evenhave?”with office’s challenges, Trebil sees plenty of positives in the com mercial financing business. He said that the progress he’s seen in the hospitality industry is especially im pressive.
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“We weren’t talking about hotels at all a year ago, except as problems,” Trebil said. “The hospitality market is doing surprisingly well today. We are also seeing more financing requests for manufactured housing and self-stor age. We are seeing a much broader spectrum in terms of the property types we are working with.”
COVID
Still, multifamily and industrial con tinue to account for the majority of financing requests today, Trebil said. And that doesn’t look to change any time Trebilsoon.saidthat multifamily remains es pecially strong, even in markets such as Minneapolis in which monthly rents haven’t been soaring quite as much. “The rental market has been really strong,” Trebil said. “Minneapolis doesn’t have the same kind of apart ment rent growth as you see in a lot of other markets across the country. A lot of markets, especially down south, are seeing huge rent increases on a year-over-year basis. We don’t see those big numbers, but we are still an attractive market. We are a stable, steady multifamily market.”
leases
renewal. Will
less space? Will they
office leases
Collett agrees that multifamily and industrial remain the biggest draw for financing dollars. He said, too, that healthcare and seniors housing are also generating a greater number of financing requests today. big question is what those tenants who signed before will do now that their are coming up for they take 50% stick with what
FINANCE (continued from page 15)
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“Industrial is a resilient asset that comes at a reasonable cost,” he said.
The hot housing market has boosted demand for multifamily assets, Collett said. Single-family home prices con tinue to rise. Renting for an extended period, then, makes financial sense for many. And because of this, developers are building more apartment develop ments and investors are gobbling up these assets as monthly rents rise.
When considering financing requests, and whether to approve them, North marq looks at several factors, Trebil said. Some of this has changed now that interest rates have risen. As Tre bil says, depending on the financing source, it’s no longer possible to always get to 75% or 85% leverage on deals.
“We are recognizing that we might not be able to get to the same dollar amounts because of where interest rates are,” Trebil said. “One of the factors we have to consider, then, is if the dollar amount being requested is Otherwise,realistic.”
IOWA
FINANCE
The demographics of the United States have played a role, too, Goff said. Younger adults who in the past would have been hunting for single-family homes are turning to apartments as housing prices rise too high. Many empty nesters are turning to apartment units as a way to avoid the upkeep on single-family homes.
“It’s a combination of different factors that have accounted for this high de mand for apartments,” Goff said. “It’s not just one thing that you can put your finger Industrialon.”is thriving today, too, and the requests for financing to fund projects and acquisitions in this sector continue at a steady pace. Collett said that he ex pects this sector to remain hot through out the rest of this year and into 2023.
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Northmarq still considers the same basic factors when evaluat ing financing requests: How strong is the sponsor and is the project being acquired or developed in a quality lo cation? get totally shut down. Office build ings even during COVID were still occupied. Healthcare businesses that needed to remain open stayed open. We never had lockdowns and stay-at-home orders that were as strict as they were in other markets. That helped keep businesses open.”
“People wait longer to get married. They want to live near places with lots of amenities. They want a short commute to work. It’s all led to more demand for multifamily.”
Goff said that the demand for multifam ily housing remains especially strong for that product type perched between affordable and luxury. There simply isn’t enough market-rate workforce multi family housing in most markets. The demand for this type of product, then, continues to rise across the country. Municipalities are working to help provide more market-rate multifamily housing in their communities, often offering tax breaks to developers, Goff said. Freddie Mac and Fannie Mae have also altered some of their programs to make it easier for developers to gain financing for these apartment types. But the supply of this type of multi family housing is still not meeting the demand for it, Goff said. “For the past 10 years, there has been a decrease in the homeownership rate. That has resulted in continued demand for rental housing,” Goff said. “At the same time, housing prices and con struction costs have gone up so much, it can be very expensive for people to get into a first-time home and move up. That has increased the demand for rental housing.”
“Back in the day, people would get married, get a house, have 2.5 kids and get a dog,” Collett said. “That’s no longer the case. People wait longer to get married. They want to live near places with lots of amenities. They want a short commute to work. It’s all led to more demand for multifamily. From an investment perspective, mul tifamily is a very attractive option. It holds up very effectively.”
“You don’t have a lot of overhead like you do with office assets. Industrial is an efficient investment. There are plen ty of opportunities for investors in the industrial side.”
In little surprise, Collett agreed that financing requests for the office sector were coming in at a far slower pace.
That doesn’t mean that Des Moines and the state’s other big markets aren’t seeing higher-than-normal vacancy rates in their office build ings. This is especially true with of fice space leased or owned by large national companies. Many of these companies are still determining when the majority of their workers will return to the office.
While many big companies are de manding that employees come back to the office, there is still no consen sus on whether workers will comply.
“Flexibleconditions.schedules are here to stay,” Collett said. “That will impact the demand for office space. Multifamily, industrial, seniors housing and health care remain the best investments. They have been the best investments for the last five years.”
Local and regional companies, though, have already brought many of their workers back to the office, Kaduce said. “That is the positive. For a while, everyone released dates for people to come back, but then they’d push them back. Now we are seeing the dates hold. Companies are going back,” Kaduce said. “The large, global companies, though, are going back with a form of hybrid work. Some tell their employees which days to come in. Some are letting their workers choose. You can tell when you are out and about: Tuesdays, Wednesdays and Thursdays you see more activity. Mondays and Fridays seem to be the most popular days for people to work from home.”
A return to the office will help the retail market, too, Kaduce said. Many of Des Moines’ downtown restaurants stayed open through out COVID. Some, though, closed or reduced their hours. As workers return to the office, it’s easier for these restaurants to attract enough business to keep their doors open.
Collett said that this approach will work for some major companies, but others might lose employees who find jobs that offer more flexible working
Like restaurants across the country, though, those in Des Moines and throughout the state are struggling to find enough workers. This has led many to reduce their operating hours. Those with drive-thru space might reduce the number of hours in which their dine-in areas remain
“Overall,open. though, the retail scene in Des Moines is positive,” Kaduce said. “We were not as over-retailed to the extent that some other mar kets were before COVID. We have seen some new retail construction, mostly in neighborhood centers with five or six tenants. Coffee retail ers have been hot. Dry cleaners, nail salons and healthcare retailers have done well. Those are our big drivers on the retail side.”
MILWAUKEE (continued from page 1)
www.mcshaneconstruction.comTheTrottaApartments
Daniel says that Baby Boomers are looking to downsize out of their sin gle-family homes. They no longer want the ongoing maintenance and costs that come with owning a home, and view apartment living as a stress-free way to spend their older years.
MILWAUKEE (continued on 18) 25 W. Main Street, 5th Floor Madison, WI 53703
“Peoplethem. who are going to build a new-construction anything, including an apartment building, are putting a fair amount of cushion in their num bers, anticipating higher costs and delays. There are good reasons for this. The average person building today is anticipating higher costs for the near term.”
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Kohl’s is opening a 40,000-square-foot store in the HUB640 building in downtown Milwaukee.
“It’s gotten very expensive to own a home,” Daniel said. “The cost of home ownership has gone up extraordinarily high. Younger people want the flexibili ty that apartments provide.”
Steady in multifamily One sector that is doing especially well in the Milwaukee market is multifamily. Daniel Management Group under stands this. The Chicago-based property management company has branched out to the Milwaukee market. This includes the recent $13 million in renovations it completed on Whitnall Park Apartments, a 480-unit apartment community that serves nearly 1,000 residents in the Milwaukee suburb of RogerFranklin.Daniel, president and founder of Daniel Management Group, said that the Milwaukee market remains a strong one for multifamily. And he expects the market to remain hot for the foresee able Danielfuture.said that demand remains espe cially strong for higher-end apartment communities and those in the suburbs of “TheMilwaukee.newerthe product in the subur ban market, the higher the demand,” Daniel said. While rising interest rates might pose a challenge for investors, they are a boon to those who already own apart ment product, Daniel said. If mortgage interest rates rise, it becomes more expensive for consumers to buy sin gle-family homes. This prices many out of homeownership, and leads them to the apartment rental market.
Developers are also facing the chal lenge of supply and labor shortages. That is the case in Milwaukee, too. But Daniel said that these problems have been happening for so long, that devel opers are learning how to work around
It helps, too, that apartments have become more attractive. Developers today must provide a host of high-end amenities if they want to attract rent ers. This holds true in the Milwaukee market, too, Daniel said. Renters today are looking for workout rooms, coworking spaces, community rooms and pools. High-speed Internet matters, too, Daniel said.
“People are really interested in the amenities today,” Daniel said. “They want the convenience of having all these features right in their own build Theings.”work that Daniel Management Group put into Whitnall Park is a good example. The goal was to transform this suburban product into a best-inclass asset. The work included exterior work and window replacements. Daniel Management Group also oversaw a rehab of about one-third of the proj ect’s apartment units and the building’s Thehallways.owners of buildings that don’t fea ture enhancements such as these will struggle to attract renters, Daniel said.
Daniel, then, said that he doesn’t expect rising interest rates to slow the apartment market in the Milwaukee Partarea.of the reason? So many different groups of buyers are interested in apartment living today. This includes members of Generation X and Millenni als who saw the values of their parents’ home topple during the last recession. This caused these younger consumers to look differently at homeownership, not automatically viewing it as inher ently better than renting. Younger people have also struggled to save enough money for down pay ments. This, too, has kept them in the rental market for longer. Rising housing prices are another factor that has kept members of the younger generation from flocking to the housing market as aggressively as their older peers did.
But it’s not just young people looking for multifamily living in Milwaukee.
Middleton, Wisconsin
www.rejournals.com | July/August 2022 | Midwest Real Estate News 17MILWAUKEE
Alison DirectorGorham,ofWisconsin Operations Building Our Roots in Wisconsin As one of the largest multi-family contractors in the country, we’re proud to call Wisconsin home.
“The bar has been raised when it comes to amenities,” he said. “Renters will pay more for better amenities. The amenities matter when it comes to not only getting renters, but keeping them. If you are in a position to do it, you’ll get stickier tenants.”
Life coming back to downtown Shumow said that the industrial and multifamily sectors remain the stron
“People want to live in the urban areas of Milwaukee,” Shumow said. “Looking forward into the crystal ball that I don’t have, I see that continuing to be a strong growth area for the city of Milwaukee.”
MILWAUKEE
Better times for retail The pandemic hit the retail sector hard during its earliest days. But now? Re tailers have adapted to the changing demands of consumers. They continue to offer curbside pick-up, enhanced de livery options and grab-and-go services, all alternatives that took on greater im portance during the pandemic. These services are helping the savviest of retailers not only survive today but thrive. The omnichannel approach, with retailers focusing both on in-store and online locations, has long been import ant. But today, retailers will struggle if they fail to offer consumers both online and in-person ways to shop.
“I don’t see a silver bullet for fixing affordable housing in the country,” he Onesaid. of the challenges is that govern ments typically rely on tax credits to increase the development of affordable multifamily housing, Shumow said. But this approach is limited: Only so many affordable units are going to be built each year when tax credits are the main tool that governments use. Tax credits also don’t help the owners of affordable rental housing maintain and operate their properties, another flaw of this approach.
“It can be expensive to operate an af fordable apartment property,” Shumow said. “Construction costs are still going up. Interest rates have ticked up for these affordable deals. These deals are put together 18 to 24 months before de velopers break ground. When you have radical price increases and uncertainty during those months, it makes those deals a lot harder to do. It has been a challenging few years for the develop ment community.”
Michael Fitzgerald, principal with Mid-America Real Estate in Milwaukee, said that this trend is strong in the Milwaukee market, too. Retail has trans formed, he said. And this is true not only in the suburbs but in downtown Milwaukee, too. Fol lowing a brief pause during the height of COVID, developers have once again returned to downtown Milwaukee, resuming the construction of new retail and mixed-use developments that have reinvigorated what once was a sleepy part of the city.
Immediately to the east of this new Kohl’s sits one of Milwaukee’s original enclosed shopping malls, the Grand Avenue mall. This mall has gone through several ownership changes and has since been renamed The Avenue. The big feature here is the 3rd Street Market Hall, Milwaukee’s largest food hall, one that attracts both locals and tourists to the “Thatarea.part of the city had languished behind some other areas of downtown,” Fitzgerald said. “Now we are seeing a resurgence here. New residential towers are being planned. There is some real excitement about this portion of down Kacmarciktown.”
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Enterprises and Bear Devel opment have unveiled their own sports and entertainment district planned for downtown Milwaukee, too, the Iron District. This development will be home to a professional soccer stadium, enter tainment venue, hotel space, retailers and dining options.
“This area used to be an isolated island in downtown,” Fitzgerald said. “Now we have a live-work-play dynamic in the Deer District. This district touches on a lot of items that consumers are looking for today. Had this vision not been there, this part of downtown would not be see ing the revitalization it is seeing now.”
“I have no magical statistic that shows what percentage of the workforce is back working downtown,” Fitzgerald said.
MILWAUKEE People want to live in the urban areas of Milwaukee. I see that continuing to be a strong growth area.”
There are big plans for the future of this district, too, including a music venue with two large music halls and a new Marriott hotel.
The city of Milwaukee is taking steps to boost the supply of affordable rental housing, Shumow said, creating affordable housing funds to spur new development. The state of Wisconsin has helped, too, he said. But there still isn’t nearly enough of a supply of affordable apartments in the city or its suburbs, Shumow said.
gest performers throughout Milwaukee and its suburbs. This isn’t unusual. But what is different, is that renters are again seeking apartment units in Milwaukee’s urban core, a rebound from the slight slowdown in this type of demand during the worst of the COVID-19 pandemic.
HUB640 itself is an important build ing in downtown Milwaukee. It is the former headquarters of Bon-Ton and the company’s flagship Boston Store department store. Bon-Ton and the Bos ton Store both closed here in 2018, after North Wells Capital acquired the proper ty. North Wells has since rebranded the space as HUB640, with a portion of the building transformed into 74 multifamily “Itunits.isa major win seeing a retailer that is based in the Milwaukee area bringing a store to downtown Milwaukee,” Fitzger ald said. “This will help to revitalize the Western corridor.”
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The challenge? Supply. There aren’t enough apartment units in the city to meet the demand for them, Shumow said. And supply is especially con strained in the affordable end of the market, he said. Affordable multifamily housing remains scarce in most major MSAs across the country. Shumow said that apartment rents continue to rise across the country. This is pricing several renters out of big cities as they struggle to find units that they can afford.
The two companies have agreed to pur chase an 11-acre parcel from Marquette University. The hope is that this devel opment will provide a boost to the city’s Westown neighborhood in downtown. The plan is for the soccer stadium to boast 8,000 seats.
Hines Develop ment has already started construction on a 30-story residential apartment project here that will feature more than 300 multifamily units. Fitzgerald said that developers are adding several new apartment projects to this area, a testa ment to the strength of the multifamily market throughout Milwaukee.
Fitzgerald describes 2021 as a robust year for Milwaukee’s retail sector and for Milwaukee in general. He points to two big events that helped bring new con sumers and interest to the Milwaukee market, golf’s Ryder Cup held in nearby Kohler, Wisconsin, and the 2021 NBA finals that, of course, featured a champi onship run by the Milwaukee Bucks.
“But it feels like we are getting closer to normal. You see people walking at night time and at lunch in downtown Milwau kee. You see patios and coffee shops with people sitting out. That vibrancy is coming back. It feels like we are getting back to pre-pandemic levels.”
“There are rumors that a professional soccer club is coming,” Fitzgerald said.
“This is all within a subset of downtown that over the last decade or two had been forgotten about. A project like this will continue to improve the overall via bility of what downtown Milwaukee is.” Then there is Milwaukee’s busy Third Ward neighborhood.
“We are seeing a lot of benefits today coming out of that busy 2021,” Fitzger ald said. “Commentators on the national networks were talking about how nice Milwaukee was. That brought a lot of attention to the city. It felt a bit like a new FitzgeraldMilwaukee.”says that he is especially excited about the retail activity taking place in downtown Milwaukee. He cites the Deer District, a new neighborhood in downtown Milwaukee that is home to the Milwaukee Bucks’ Fiserv Forum and a variety of dining, entertainment and retail options. This neighborhood has been developed on 30 acres of land that was once home to the Park East Freeway. The Deer District regularly brings a stream of consumers to downtown Milwaukee, Fitzgerald said.
People continue to move to Milwaukee, too, Shumow said. That is only spurring new demand for urban apartment units.
There are other exciting retail projects scheduled for downtown Milwaukee, too. Kohl’s will open a 40,000-squarefoot store in the fall of 2023 in down town on the ground floor of the HUB640 mixed-use building.
t’s clear when looking at the quiet er streets in downtowns across the Midwest that many office workers have still not returned to their cu bicles and conference rooms. It’s equally clear that no one knows when workers will once again fill these office Butbuildings.what about those working in the commercial real estate industry? Are they returning to the office? And do they want to?
Editor OFFICE OFFICE (continued on page 22)
Even a hybrid work schedule limits collaboration to some extent, Kincaid said. And this is one of the big con cerns that CRE companies have.
And employers who don’t give their workers some say in how many days a week they must come into the office? They might struggle to find and retain “Aemployees.company that isn’t doing this could lose strong employees to a different opportunity,” Kincaid said. “The flexi bility and hybrid schedules are a major retention tool for companies today. Employees are prioritizing flexibility over compensation in many cases. Em ployers have had to respond to that.”
In the past, the only employees who asked for remote work were generally people with childcare responsibilities, mostly women, Kincaid said. That is no longer the case. Today, many workers are seeking the flexibility to work from home at least part of the time, with some saying they’ll never come back to the office five days a week. This doesn’t mean that commercial real estate offices are empty. Kincaid said that few commercial real estate companies have not brought their employees back to the office in some Thiscapacity.isimportant, Kincaid said. Em ployers want their workers in the office at least part of the time as a way to fos ter collaboration and brainstorming.
Kaitlin Kincaid, senior managing di rector with Keller Augusta, said that these results aren’t overly surprising.
The firm recently conducted its second Workplace Reboot Survey, charting the opinions of 600 CRE employees and employers on whether brokers, developers and other CRE pros are re turning to the office, if now is the right time for this and what a return to the office will look like. What did this survey find? First, those working in commercial real estate are largely like most employees: They’re not eager to return to the office full time. Keller Augusta found that nearly half of all surveyed employees wanted to work one to days a week in the of Thefice. conflict? Only 20% of the employ ers surveyed by Keller Augusta mirror that hybrid schedule.
“The companies that quickly said that we are in the real estate business and we want people back in the office five days a week are losing people at such a high rate that they are backpedal ing and are now working on a hybrid model,” Kincaid said.
Employersconversation.”areconcerned, too, about mentorship and training. It’s more dif ficult to train younger workers when they aren’t in the office.
Are employers in the commercial real estate world responding to this challenge? Kincaid said that they are. She said that most CRE companies are operating on a hybrid model in which employees work part of the time from home and other days in the office.
Back to the office? CRE workers want to return to their desks?
That’s what Keller Augusta, a search and advisory firm focused on commer cial real estate, wanted to find out.
The COVID-19 pandemic changed the way many people think about work, and that includes those working in commercial real estate.
“Companies might soon start to say, ‘If you can go to restaurants and bars and go on vacation, you can come to the office,’” Kincaid said. “Companies ac commodated people who didn’t want to go into the office before we had vac cinations. Then companies kept this flexibility because they knew if they didn’t offer it, they’d lose workers. But when we continue to move past COVID will this working arrangement be here to stay? I don’t know.”
By Dan Rafter,
I
But how permanent is this change? That’s a tougher question to answer, Kincaid said.
“Most commercial real estate sales people and client-facing people were not sitting at a desk all day long before COVID,” Kincaid said. “But that doesn’t mean that commercial real estate companies didn’t face challenges with work-from-home. How do you manage a building from home? How do you build a building from home? How do you interact with tenants from home? A big part of the real estate industry is at the property level. When COVID hit, it became challenging when only emergency personnel were allowed to go to Thoseproperties.”CREworkers who were allowed to do their jobs remotely found that they liked the flexibility of working from home, Kincaid said. They no lon ger had to make long commutes each day. They could spend more time with their families. They had more time to Thisexercise.has forced many CRE employers to search for ways to provide at least some of that flexibility now, even as the United States has, hopefully, worked through the worst days of the pandemic. This might mean offering all CRE employees the option to work on a hybrid schedule, even those working in property management.
Kincaid said that she isn’t sure that hybrid work models are here to stay in the commercial real estate business. Many companies might be offering this flexibility on a temporary basis to keep their most talented workers. But the key word here is “temporary.”
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When everyone is working from home, that collaboration largely disappears.
“If everyone is in the office, that works well. If everyone is at home, that can work, too. But if some employees are at home and others are at work, that results in missed opportunities to have everyone collaborate at the same time,” Kincaid said. “The employees at home miss out on that moment when they are walking by someone’s desk and that person wants to sit and talk about a project. That is the part that is missing. If that one person is not in that day, that person might miss out on that
Do
“They didn’t have the same kind of training,” Kincaid said. “Their intern ships were canceled. Their first year on the job they worked form their parents’ basement. They are lighter across the board on overall profes sional experience. They lack some of that mentorship that is so important.”
Those who entered the workforce during COVID have borne the brunt of this, Kincaid said.
“The idea just made sense,” Smiet ana said. “HARIBO’s customer base in North America is very large. They were shipping and manufacturing their gummi bears from 10 countries around the world to North America. it was time for them to open a facility here to help meet the demand.”
During the earliest days of the COVID19 pandemic, consumers were shocked to find plenty of empty shelves at their local grocers and retailers. At the same time, those ordering exercise equip ment, electronics and clothing from Amazon and other online retailers no ticed that these products were taking longer to show up at their doors.
MANUFACTURING
Chris McKee, principal and chief devel opment officer for St. Louis-based real estate development and investment firm CRG, said that the demand for manufacturing space in the United States has consistently been on the rise since the start of the pandemic. And it’s not just onshoring that is be hind this. He said many companies are also modernizing their manufacturing base and are seeking newer, more modern facilities.
Companies don’t want this to happen again. Because of that, many are bringing their manufacturing opera tions back to the United States.
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The promise of onshoring: As companies bring manufacturing back to the U.S., demand for industrial space soars even higher
“IStates.”hopethis is a trend,” Smietana said. “It seems that having your manufac turing space near your distribution space near your customer has become more important. If you look at 20 years ago, companies were moving toward just-in-time deliveries and moving their manufacturing across the ocean. We’ve all found out during the past several years that this model is It’sflawed.”also more cost-efficient for com panies to manufacture products near their customer base, Smietana said. Even with labor being cheaper in many overseas locations, increased shipping and distribution costs make manufacturing overseas a more ex pensive proposition today. And as fuel
By Dan Rafter, Editor
This facility will rank as the largest capital investment in HARIBO’s his “Withtory. this substantial investment, we’re strategically setting our busi ness up for long term growth in the U.S., and we are looking forward to a bright future,” said Hans Guido Rie gel, managing partner of the HARIBO Group, in a statement. COVID-fueled McKee pointed to two reasons for this increase in demand. First, companies are working hard to keep their prod ucts on store shelves. To help avoid some of the product shortages that the country saw during the early days of COVID, companies are committing to manufacture more of their prod ucts in the United States instead of Atoverseas.thesame time, companies want their manufacturing facilities to be closer to their customers. They also want more control over the quality of their products. Locating manufac turing facilities in the United States instead of in overseas locations helps companies meet both goals. “What happened in China, with heavy-duty COVID lockdowns, took companies in the United States by surprise,” McKee said. “That is a big driver for this move. I also think part of it is the modernization of manufac turing. Companies that want to mod ernize their manufacturing processes are looking for space in the United
The industrial market across the country is enjoying plenty of momentum, with companies’ demand for new industrial space seemingly unquenchable. But a push by compa nies to open more manufacturing facil ities in the United States is only adding fuel to the hot industrial market.
What does this mean? Only that the onshoring of manufacturing back to the United States is providing yet another boost to the already sizzing industrial market.
Robert Smietana, vice chairman and chief executive officer of Chi cago-based HSA Commercial Real Estate, said that his company is still mainly developing industrial ware house space. But he, too, has seen an uptick in the number of companies looking for manufacturing space, too. A good example? HSA has been work ing with HARIBO, the company that makes all those multi-colored gummi bear candies, on its first North Amer ican manufacturing plant that will open in Pleasant Prairie, Wisconsin.
McKee said that this trend isn’t about to “Thereslow.are more users in the market who are manufacturers than at any point in my 20-year career,” he said. “The manufacturing sector is one of the strongest sectors in the industrial market. It’s been picking up steam for the last 12 months and has some legs.”
“ Knowledge of Midwest industrial real estate is DarwinPW’s strength. We want to share that strength and knowledge with you.”
CRG has faced this challenge, too, of course. But McKee said that the company’s integrated model – CRG acting as developer on projects, its construction firm Clayco building them and its in-house architecture firm handling the planning – has helped it keep projects on schedule, even when faced with supply and labor shortages.
Broker MANUFACTURING (continued
George Cibula, SIOR Managing Broker on
No end to the demand?
For over 45 years, DarwinPW Realty has been a leader in industrial and commercial real estate. The company specializes in brokerage, property management, investment and development services primarily in the Midwest. DarwinPW’s highly qualified professionals are problem solvers and utilize a breadth of tools and knowledge to serve our clients best.
“We are not negative when it comes to the shortages. It is what it is,” McKee said. “We are all facing this issue, and we are better suited than most to handle it. It is not something I stress and worry about every day. We focus on what we have to do each day to solve our customers’ problems.”
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Supply issues McKee said that this demand for new manufacturing space in the United States has been yet another boon to the industrial sector. Onshoring creates more demand, something that drives industrial development throughout the country. Of course, more demand puts even more pressure on the construction and development industries. It’s still a challenge for builders and developers to get the construction supplies they need, with several key components still taking months to show up to job sites. Onshoring will only exacerbate these challenges.
McKee said that while the shortages continue, there is more stability in the construction process today than there was last year and earlier this year. The shortages already rippled through several material types. Steel was the first material that became difficult to get. Then the industry saw shortages in insulation, roofing ma terials, roofing fasteners, electrical switch gear and concrete.
www.rejournals.com | July/August 2022 | Midwest Real Estate News 21MANUFACTURING prices remain high, these costs will only continue to rise.
“A lot of companies were looking at onshoring before COVID,” Smietana said. “The pandemic just reinforced their concerns. Right now, every man ufacturer and distributor of goods is taking a hard look at their options, and many are considering moving their operations back to the United States.”
By relying on the integrated model of construction and development, though, CRG has been able to more efficiently navigate these shortages, McKee said. “The issues in the supply chain have been significant for all of us,” he said. “And we don’t see these issues ending anytime soon. We have been fortunate, though, in that rents have continued to rise to support the in creased costs of construction. If we get to the point where that stops, then we’ll see a significant downward pressure on construction starts.”
McKee said that the demand for in dustrial is highest in markets in which there are high barriers to entry, large populations or growing populations. Demand remains high in the North east portion of the country, McKee says, because that slice of the United States has such a large population to serve. The Northeast also has high barriers to entry and long entitlement processes, with projects sometimes taking a year to complete. That makes this market extremely hot, McKee Thesaid. Southeast and Southwest re gions of the country are experiencing strong population growth. Part of this is because people had more choic es of where they could live during COVID. Many no longer had to live close to where they worked. This led to many people choosing the warmer temperatures of the southern part of the country. This booming population has led to a surge in demand for in dustrial space, whether manufactur ing or distribution. The Midwest is not a boom market, but it is still a strong region for indus trial demand, McKee said. Industrial users like the Midwest because it’s easier to find skilled labor here. The Midwest is also a steadier market, not experiencing the same boom-andbust cycles that many of the country’s hotter markets do.
All the long-standing characteristics of what makes a great industrial space option -- immediate interstate access, institutional-quality construc tion, ample parking andtrailer stalls -- are still important. However, we are seeing new interest in sustainability features, which likely stems from the growing popularity of ESG among corporations.
W
“Employees want to feel as if they have an opportunity to advance,” Kincaid said. “It’s about creating a career path that employees can aspire to. Employees that have a desire to do more, will be happier at a company that offers them more professional opportunities.”
Zilber Property Group’s Navis: Just can’t dampen that appetite for industrial real estate
By Dan Rafter, Editor
Do you think many of the changes that we saw during the pandemic –such as an even-greater increase in online shopping – will remain after the pandemic continues to wane? Will these changes continue to pos itively impact the demand for indus trial Navis:space?
Specific to the Milwaukee industrial market, it remains healthy given the lack of speculative space overbuilding, its high-quality labor force and the in creasing acceptance of the location by national investors. Are there any signs that demand for industrial space is lessening at all in your market? And what amenities are end users looking for when selecting industrial space in the Milwaukee Navis:area? We continue to see strength ening in demand in the Milwaukee market, which in part has created mea surable rent growth and asset-value appreciation.
hen will industrial real estate’s hot streak end? No one’s willing to guess just yet. And all signs point to the demand for this commercial sector to only continue to soar throughout the rest of 2022. That holds true in the Midwest, too.
Chad Navis, director of industrial invest ments with the Kenosha, Wisconsin, office of Zilber Property Group, knows all about this. He’s an experienced in dustrial veteran, and his local market of Milwaukee and its suburbs are seeing a steady increase in industrial real estate Midwestdemand.
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INDUSTRIAL OFFICE (continued from page 19)
Some CRE firms are holding more social events to encourage their workers to leave their homes and mingle with their fellow employees. This might mean company lunches and off-site activities. Others are or ganizing community service events to get employees interacting with each other again. “It’s about bringing people togeth er again,” Kincaid said. “They are trying to recreate those relation ships that employees had with their colleagues. They want their workers to say, ‘I enjoyed being with these people today. I want to go Theback.’”keysto retaining the top CRE workers, though, remain the same today as they were before the pan demic, Kincaid. It’s about offering not only solid compensation but opportunity, too.
Navis: The majority of spec industrial construction is experiencing quick absorption in the market. Often, lease-up is occurring prior to building completion. In addition to general demand, this is in part driven by the extended lead times to procure primary construction materials and labor resources, which has had the effect of encouraging companies that could have been build-to-suit candidates to more seriously focus on available speculative buildings. They do not now have the time to go through the longer build-to-suit pro cess and schedule.
Markets across the region are seeing an explosion of demand for warehouse and distribution space. They’re seeing a continued spike in the construction of spec industrial facilities, space that fills often before construction even wraps.
The pandemic certainly poured gas on the e-commerce fire, which certainly will not burn out and seems unlikely to die down. Addi tionally, it cast downside light on the frailty of the just-in-time supply chain design that has been the model for a long time. Now that companies have experienced the quantifiable costs of not having raw material and product safely stocked, many of them are re thinking their supply chain approach. That will likely result in the need for larger industrial-space footprints among those businesses. What makes the Milwaukee area, and the state of Wisconsin in gener al, such an attractive place for industrial Navis:tenants?
Real Estate News recently spoke with Navis about the strength of the industrial market today. Here is what he had to say. The industrial sector has been extremely strong throughout the pan demic. Can you talk a bit about the reasons for this? Why has this sector remained so resilient throughout the Milwaukee suburban market?
What are CRE employers doing to bring their workers back to the of fice, at least on a hybrid basis? Kin caid said that many companies are improving the work environment. This might mean something as sim ple as providing regular lunches and snacks onsite. Others are paying for their employees’ parking, while still others are bringing wellness services – everything from onsite fitness classes to mental health services – to their offices.
Labor is a top concern among industrial operations, and Wisconsin has a long history of having a sizable, skilled industrial labor force. Addi tionally, Wisconsin’s favorable regu latory and tax environment makes it an advantageous location to conduct business in.
Chad Navis: Although industrial occupiers faced practical pandemic challenges, such as disruptions to the labor force and the supply chain, they did not experience the same shutdown requirements that users that occupy retail/service and office space did. Cer tain segments of the industrial market, especially e-commerce-related oper ations, naturally benefitted from the acceleration of online shopping activity.
Are you seeing a lot of spec industri al construction in your market? And are those spaces filling quickly?
Drug stores like Walgreens remain popular in the net lease sector.
L ast year was a sizzling 12 months for the net lease sector of the commercial real estate business. And 2022? So far, it’s been strong, too. But can this year hope to measure up to We2021?spoke with Randy Blankstein, president of the Boulder Group in Wilmette, Illinois, about the hot net lease market and what he expects for the rest of the year. Here is what he had to say. Last year when we spoke, we talk ed a lot about how strong the nest lease sector was. What is the mar ket like today?
The net lease sector in 2022? So far, it’s almost all good news
Randy Blankstein: We saw very strong transaction volume last year. The net lease sector was the bene ficiary of all that was going on in the world. It represented a stable invest ment. Net lease generates reliable cash flow. It was all about certainty at a time when none of that existed elsewhere. It is a calm, boring, con servative investment, and people gravitated toward that last year when there was so much uncertainty Thereelsewhere.has been what could be a wrench, though, thrown in this, higher inflation and higher interest rates. We are waiting to see how that plays out. It has not changed the supply-and-demand side of the equation. A lot of people think it is a question of time as to when interest rates impact the net lease market. That typically lags a bit. The consensus, though, is that there will be upward pressure on cap rates. But the supply/demand equation is still favorable to sellers. There is not much new product out there, so demand is still high for net lease product, which means it is still an attractive investment option. Which net lease asset types are most attractive to investors today?
The big challenge now is inflation. A lot of leases in this space are long-term leases. Some have min imal rent escalations built into them. Investors are now gravitating toward leases that have more robust esca lations. A lot of the drug stores, for example, have fairly flat leases. The worries about inflation are changing some of these deals. Investors want the appropriate discounts applied to a long-term fixed income stream in an environment of inflation and interest-rate challenges. Investors are reevaluating what they want to pay for a fixed income return and they are hyper aware of what the escala tions are. It had been a more stable environment for the last 20 years. Inflation and rising interest rates are new headwinds that investors are considering. What about healthcare assets? Are they in demand today?
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Blankstein: For the most part, there are not a lot of single-tenant office spaces in downtowns. This means that net lease has avoided most of the worst problems you’ve seen in the office sector. Most net lease of fice space is suburban, single-tenant space, which has outperformed urban. That is a market people are watching closely. There are still ongo ing concerns about the office market, so transaction volume in that sector is on the lighter side. Industrial, though, there seems to be endless demand for. That is the hot test product out there. The fundamen tals in this sector are strong, especial ly here in the Midwest. The supply of industrial space will not catch up to the demand for it this year. There is an overwhelming number of people who have raised money and are dedicated to getting more into industrial. That is a sector that for this year will remain very strong with very little changes in supply. That is probably the sector that will perform the best this year. The retail sector remains strong on the net lease end of the market. Net lease retail spaces are a lot different from the enclosed malls and strip centers that are having issues today. The 7-11, dollar stores, Walgreens and Home Depots are all performing well. There is still a limited supply in net lease retail. New construction remains dampened from the supply chain issues we are facing. It is still difficult for developers to get enough contractors, not to mention lumber and other materials. Typically, the net lease product that trades is of a newer vintage. There has not been enough new construction to keep that stage of the market so robust. It is a seller’s market, for the most part. What are the challenges that this sector Blankstein:faces?
Blankstein: No question, there is a lot of demand for healthcare assets, from urgent care facilities and dialy sis centers to satellite locations op erated by major hospitals. There is a lot of money allocated for healthcare assets. We have an aging population in the United States. Healthcare real estate is a growing sector. His torically, it’s been under-allocated because there haven’t been as many freestanding medical facilities. That is changing. This is a category that investors are excited about. This asset type was the benefi ciary, too, of COVID-19 and all the testing that came with it. People went to these non-traditional or smaller-scale locations during the pandemic because they had more of a comfort level with medical care
By Dan Rafter, Editor
NET LEASE
NET LEASE (continued on
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As McKee says, when users need the space, they need the space. It’s why so many are willing to move into in dustrial space that has already been built rather than wait through the build-to-suit process.
“If you want to get rich, you buy vacant land or spec a product with no tenant. You buy a 7-11 or Walgreens if you want to get a fixed income and collect a regular check. That check comes in every month. It is predictable and exactly what people who buy it are looking for.”
Locking in fixed-rate financing gets more attractive as rates rise. A lot of the cost-benefit analysis has changed for many corporations where locking in sale-leaseback financing makes more sense. That is the major reason why sale-leaseback activity will increase.
LEASE
“Most of the growth in demand in the Midwest is driven by a need for manufacturers and end users to be closer to their population centers,” McKee said. “There’s also a cheaper cost of living here. It’s easier to live in the Midwest than it is to live on the coasts. The Midwest has a lot going for it. It might not be booming like what we’re seeing in the South east and Southwest, but it still is doing tremendously well when it comes to industrial activity.”
There were fears last year that the federal government might do away with 1031 exchanges. It seems that exchanges are now safe. Are they?
The strong demand for industrial assets means that it can be difficult for companies to find space in many markets. That’s led to a rise in spec industrial construction.
Midwest Real Estate News | July/August 2022 | www.rejournals.com24 being offered outside of a major hos pital campus. Investors have seen this and think this is a good space for investment.
MANUFACTURING (continued from page 21) NET LEASE (continued from page 23)
Blankstein: Last year was the most likely year in my lifetime for the elimination of 1031 exchanges. All the events were lining up behind that happening. The Biden admin istration was working on its Build Back Better package and 1031 exchanges were seen as potential revenue offset. There seemed to be a lot of momentum behind elimi nating the 1031 exchange program. But when the specifics of the Build Back Better package got finalized, the elimination of the 1031 exchange program didn’t go through. I’m not as concerned about the program this year, though it is always an ongo ing threat. The real estate industry did a good job last year getting the message across about the collateral repercussions of 1031s going away. The government was trying to paint 1031 exchanges as a tax benefit for high-net-worth individuals, and it is for some. But a lot of other people de pend on 1031s, from title companies and lawyers to people with REITs and pensions. Municipalities depend on them. A lot of unforeseen effects were brought to light. Everyone realized getting rid of 1031 exchanges was bad for commercial real estate in general and residential real estate, too. For the most part, the threat of get ting rid of 1031s is behind us. The imminent threat is behind us. The industry does need to stay vigilant, though. Last year was probably the biggest stress test in a long time, and we passed. I think 1031s are here to stay. Are you optimistic about the nearterm future of the net lease industry?
NET
Smietana said that this is a possibil ity. But many companies realize that they have a need to open manufac turing facilities in the United States, even if interest rates here are higher
Blankstein: The sale-leaseback market has been rather muted the last few years. With this sector, you are essentially locking in long-term financing. It is more expensive than if you are floating on LIBOR or anoth er line of credit. So sale-leasebacks might not have made a lot of sense the last few years in an environment of low interest rates. What will drive more sale-leaseback activity? An environment of rising interest rates.
Blankstein: Last year we saw a con fluence of events that might have been one-time-only events. We had a worldwide pandemic and people were coming out of it. There were a lot of changes that occurred because of COVID that greatly benefitted net lease. It might be tough to keep the volume of transactions in 2022 at the same level we saw in 2021. We are in an evolving industry. If we continue to see inflation and interest rates rise going forward, sale-leaseback volume will go up. Net lease always plays a part in people’s portfolio. It’s the defensive part, kind of like the bond market. Investors are not trying to hit homeruns with net lease in vestments. They are playing defense, trying to protect the gains they made in real estate. We also have an aging population closing in on retirement. Many of them are under-invested in their retirement savings. They are taking a closer look at all kinds of fixed-income alterna tives. As this group of retirees are looking at their retirement savings, net lease might be attractive to them. If you want to get rich, you buy vacant land or spec a product with no tenant. You buy a 7-11 or Walgreens if you want to get a fixed income and collect a regular check. That check comes in every month. It is predictable and exactly what people who buy it are looking for.
“Itoday.don’t think companies with these major plans are going to be wavered or hindered by these current eco nomic headwinds,” Smietana said.
As Smietana says, the hottest industrial markets will never be located in the Midwest. This doesn’t mean, though, that this region isn’t attractive to industrial end users. He says that today, there is plenty of demand for industrial space in mar kets such as Columbus and Nash ville. Smietana said that Chicago is always a strong industrial market and that Minneapolis, too, is seeing rising demand for industrial space. “The Midwest has always been a steady-Eddie market,” Smietana said. “The highs in the Midwest are never as high as the highs in the coasts, but the lows are never as low.”
What about the sale-leaseback end of the market? What do you expect from this end of the sector in 2022?
But what about rising interest rates? Is that one development that could slow demand for industrial space?
“There is no vacancy in many mar kets,” McKee said. “Users look and look and look and they struggle to find anything. Users must be very aggressive and make decisions about space quickly. They must take the space when it is available.”
By Dan Rafter, Editor Bendix opened its new headquarters in Avon, Ohio, at the end of 2021. The space is already paying off as a key recruitment and retention tool.
Wellness matters Jessica Urbin, vice president at JLL’s Cleveland office, said that the well ness features offered at Bendix’s new headquarters are key today. As employers and employees continue to work through the COVID-19 pan demic, the focus in office spaces has shifted to amenities that can boost example for other companies:
How can companies con vince their employees to re turn to the office after more than 2-and-a-half years of working from home? What can they do to attract the best work ers in a tight labor market? Amenities might be one of the keys.
“Recruiting was one of the reasons for Bendix to move into this location,” Duff said. “Their previous headquar ters was a bit more remote. So even though they were in that building for 80 years, they were ready to make a change. The area they have moved to has high visibility from the main highway. It is close to shopping and restaurants. Overall, it is a great spot for them.”
JLL’s project and development services team assisted Bendix on budgeting, site selection and design of the new headquarters space. Geis Construction served as the general contractor, while GLSD Architects served as the architect, engineer and LEED specialist. Hasenstab Architects designed the lab space. Bendix was previously headquartered in Elyria, JackOhio.
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An
Those companies that offer wellness amenities such as natural daylight, walking paths, green spaces, onsite fitness centers and healthy eating options gain an edge in attracting employees who can pick from multi ple job offers. They can also point to these amenities when enticing their own workers to return to the office, at least on a part-time basis. As an example, consider Bendix Commercial Vehicle Systems, a company that designs and supplies safety technologies, energy manage ment solutions and braking systems for trucks, trailers, buses and other commercial vehicles. The company opened its new headquarters build ing in Avon, Ohio, a western suburb of Cleveland, at the end of 2021. The 231,000-square-foot space features floor-to-ceiling windows that let in wide swaths of light, an on-site fit ness facility, private meeting rooms and plenty of collaboration space. The building is also surrounded by green space, walking paths and out door work areas that give employees the chance to leave their indoor spac es and work in nature, all of which makes for happier, healthier and more productive workers. The building has earned the Silver LEED certification.
Duff, senior vice president in the Cleveland office of JLL, said that Bendix chose its new space in part to boost its odds of attracting the best employees. When job applicants must decide which new position to take, the quality of the offices in which they will be working, and the amenities that they offer, play a key role, Duff said.
Bendix’s new Cleveland-area headquarters a model of the postpandemic office space
OFFICE
Finally,projects.employees can take advan tage of outdoor eating spaces adja cent to the company cafeteria, giving them the chance to spend more time in nature during their workdays.
To encourage brainstorming, the headquarters features several col laboration spaces. These areas, too, are bathed in natural light, with Urbin saying that employees are already using them frequently to work togeth er on
“Companies are trying to give their workers flexibility,” Urbin said. “But at the same time, they are also trying to get people back into their offices. Some companies are looking at a re duction in their office square footage. Others are looking at space reloca tions. It really is all over the board.”
At Bendix’s new headquarters, em ployees have been steadily flowing back to the office, Duff said. And the company is already using its new space as a way to attract the greatest
And both amenities – the fitness and wellness centers – are available to not only workers but to their family Bendixmembers.had a goal, too, to reduce its carbon footprint with its new headquarters space. The company achieved this, earning its LEED cer tification while doing so. The large windows of the new headquarters allow natural light to bathe working areas, another plus for employees. There’s also a composting program and community garden for employees at the headquarters space.
Workspaces that promote collabo ration matter, too. When employees work from home, the fresh ideas that spring from collaborating with their peers often disappear. New office space, then, must feature collabo ration areas that foster teamwork, brainstorming and creativity.
Urbin says that there is still uncertainty in the office sector, with some workers coming into the office two days a week and working three days remotely. Other companies are requesting that their workers come into their offices more frequently.
As in other markets, Class-A office space is attracting more new leases than are older, less-amenitized build ings, Urbin said. The flight to quality is real here.
Midwest Real Estate News | July/August 2022 | www.rejournals.com26 both the mental and physical health of Urbinworkers.points to the walking paths that wander around the headquarters building as a good example. Employ ees can use the paths during their breaks for both physical exercise and a mental recharge. The office space also features a fitness center with showers and lockers. A wellness clinic is attached to this space.
“There is a war for talent out there,” Urbin said. “It’s important for com panies to offer amenities that can improve the health of their employ ees. And companies must clearly communicate what they are doing for their employees. It can be through increased benefits, a better working space or diversity and inclusion ini tiatives. All of these will become more prevalent as we design space and move ahead post-COVID.”
“When people have heads-down work, they can do that from home,” Urbin said. “That is not what is driv ing people to the office today. Now it is about connection and connecting with people on their teams. Compa nies like Bendix are highly innovative. It was a challenge for them to make remote working successful. They did it. Now they are offering this new space to encourage their employees to get back to working with each other. This space supports agile work and connection.”
Are people coming back to the office, not just at this Bendix headquarters building but across the Cleveland market?
OFFICE
“Theirtalent. parking lot is half full now, when before it was almost empty,” Duff said. “I see people on the trails and on the patio. Trucks are coming in and out on a regular basis. Employ ees are enjoying the space. I spoke with one of the senior engineers there, and he said that this was the most employee-friendly environment he has ever worked in. It is very easy for Bendix to bring in a new potential employee and showcase what they have. It’s a great recruiting space.”
Specialty financer Mitsubishi HC Capital America will occupy 17,641 square feet of the building, while Relievant Medsystems, a medical device company, will occupy 12,754 square feet of the 107,000-squarefoot building. Recently, Spell Capital also signed a lease at the building for 7,867 square feet while Employ er Solutions Group signed one for 12,754 square feet.
A good example? In Edina, Minne sota, a suburb of Minneapolis, City Center Realty Partners (CCRP) re cently completed a multi-million-dol lar renovation of one of the three buildings in The E office campus. The campus was the former headquar ters of Regis Corporation.
I live in downtown Minneapolis. Not too long ago, when I got in my car I’d have my own personal freeway. Now I am starting to see the traffic jams of people getting out and about. I don’t like traffic jams, but it is a good sign that people are going back to their offices. I think we are starting to come out of the worst of this office cycle.”
HGA’s Minneapolis office led the design efforts for the renovation pro cess, while brokerage firm Newmark has led the leasing.
The E in Edina, Minnesota, is relying on high-end amenities to help its tenants attract and retain the best workers.
OFFICE
“We are seeing all kinds of activity at this building,” Anderson said. “As I look across the office market here as a whole, I am seeing more people out looking for office space.
The goal at Edina’s The E: Rely on top amenities to bring employees back to the office
The renovations have paid off. CCRP, which owns the 11-acre office complex in a joint venture with Con trarian Capital Management, said that the renovated building, located at 7201 Metro Blvd. in Edina, is now 50% leased. That’s quick, consid ering that the renovations weren’t completed until late in 2021.
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Anderson said that the success of this first building is evidence that the office market can return to an active state. The key is to give workers and companies the amenities and ser vices they need to be successful.
t remains a challenging time for the office sector, with many companies still not sure when, or if, they will bring their em ployees back to their cubicles and conference rooms on a full-time basis. That doesn’t mean, though, that developers haven’t been busy transforming outdated office build ings into modern space that will help companies attract and retain employees when they are ready to bring their workers back.
The E also offers a strong location. It not only comes with easy freeway access but is located near a regional bike trail. Employees, then, can bike to work if they’d like or enjoy a bike ride on their breaks.
I
Two childcare facilities are also locat ed adjacent to the property, a bonus for workers who need daycare.
“Theresystem.are so many reasons why our team will be motivated and produc tive at the E. We love the collabora tive spaces, creative design, 360-de gree views, the shared e-bike fleet, convenient location and the fully equipped fitness center with lockers and showers,” said Jim Teal, presi dent and chief operating officer at Mitsubishi HC Capital America, Ven dor Services, in a written statement.
By Dan Rafter, Editor
Eric Anderson, executive vice pres ident with CCRP, said that the goal was to create a boutique office expe rience at a reasonable price point. As Anderson said, CCRP wanted to bring that urban chic feel into the suburbs.
“Moreover, we were impressed with City Center’s personal touch, and how welcomed they made us feel. We are excited to be one of the first tenants and look forward to working in such an inspiring and modern Chrisspace.”Geyen, chief financial officer with Relievant Medsystems, said his company, too, was searching for an office space that offered an ameni ties package that would boost the productivity and health of employ “Itees.was essential to find a location that would provide an exceptional environment for our employees to work and collaborate with options to expand,” Geyen said in a written statement. The E meets all those needs for us.”
The renovations that CCRP complet ed were not minor, costing $7.5 mil lion. The goal was to modernize the property with an urban design and top Thisamenities.iskeyfor office owners today: Companies are looking for office spaces that are modern and that feature several amenities. The hope is that these amenities will help companies convince their workers to happily return to the office, at least on a part-time basis.
“You need to provide something that tenants can use to attract their employees back to the office,” Anderson said. “In addition to the hospitality-style amenities, we have unique touches at this building. We have a restaurant group on the site that is essentially a personal chef for the building. We had a local artist who designed murals for the lobby. We have sculptural LED lights that look like works of art.”
New amenities at The E include an on-site fitness center, training and conference rooms and a patio bar. The E also features several ameni ties designed to boost the mental and physical health of workers. At the Edina building, this includes a fleet of shared electric bicycles; chef-prepared meal program from The Wandering Kitchen, which offers personalized menus for tenants; abundant natural light on all floors; and a touchless entry and elevator
How has this changed what renters are looking for in an apartment unit? Guenther: A lot of people in our Detroit market work in the financial or auto industries. Many of them are working remotely if they have one of these white-collar positions. They are looking for larger spaces that accommodate a small office or nook where they can get comfortable to do that remote work. But at the same time, they want some of the lifestyle things they grew accus tomed to when they grew accustomed to living in the urban cores.
L
Location is everything? Nope. Now it’s lifestyle is everything By Dan Rafter, Editor Village Green’s Orleans Landing in Detroit is one example of a multifamily project that offers high-quality amenities to its renters.
Just ask Matt Guenther, vice president with Detroit-based apartment compa ny Village Green. He’s seen just how focused renters are today on lifestyle rather than location. Blame – or credit – the COVID-19 pandemic, of course, but today’s renters are more interested in finding a multifamily building filled with the right amenities than they are worried about how close this building might be to their jobs. And with so many people still working from home? This might not change anytime soon. We recently spoke with Guenther about the changing priorities of renters. Here’s some of what he had to say.
Guenther: Today, people who want to live downtown can do it if they want be cause they are not as tied to where their jobs are located. They might work 50 miles from the city. But they might also be working from home. They can now find a unit in a cool urban environment and not worry about a long commute to and from their job each day. There is so much that is undecided because we still don’t know how prevalent workfrom-home will be in the future. Will it stay around longer? Will there be a shift back to people in the office? We’re not sure Whenyet.we are talking to prospects today, people are looking for apart ments in downtown Detroit but also at a suburb 30 miles away. Where people will consider living is so broad now. The commute doesn’t matter as much. People can rent in different suburbs all over the metropolitan area. They are weighing their options.
MULTIFAMILY
ocation, location, location. That’s long been the mantra of residential real estate. But in today’s multifamily market? Lifestyle, lifestyle, lifestyle might be more accurate.
Guenther: There is a heavy focus on the amenity packages. Developers with new products are watching what is coming down the pipeline, making sure others aren’t winning the amenities war. Fitness centers have always been important. Now there is a true demand for top-of-the-line fitness centers with top equipment, virtual and on-demand training, separate yoga rooms and spin Thenrooms.there are the outdoor areas, even in the Midwest where we don’t have the greatest weather. People want firepits and gazebos. They want beefed-up dog parks. The renters moving from the urban areas to the suburbs want the actual building to provide some of the amenities that they received from living in an urban area. Building owners un derstand this and are adding amenities that make the renters’ lives as easy and convenient as possible.
Guenther: There is still such a healthy demand right now. The market was strong throughout COVID and I think it might even be stronger today. All our properties are averaging occupancies in the high-90-percent range. We have also seen almost historic rent increases during the last five years. The demand still seems to be there.
If lifestyle matters so much today, how important are amenities?
I know it’s not easy to predict, but do you think demand for apartment prop erties will continue to increase during the next several months?
Are you seeing more suburbs creating their own walkable downtowns to meet this Guenther:demand? We are. They are at least focusing on picking their main street and making that area walkable. It does depend on the particular suburb, though, if there is a lot of multifamily housing in that area. What many of the suburbs are doing is building a sort of urban product in their centers. They are offering residents a place to grab a coffee in the morning, walk their dog, eat at a restaurant and visit a bar, all right there within walking distance.
Some suburbs have grabbed onto that idea, creating small urban areas in their suburban communities. Is this rise in popularity of suburban multifamily a long-term trend? Guenther: I do think it is a longer-term trend. At some point, it will flip back to the urban areas. As we exit the pan demic, eventually employers will push people to get back to the office more than they are now. We will see that rent trend shifting back to the urban cores. But I don’t think this will happen to the detriment of the suburbs. There will al ways be a demand for suburban living. The suburbs have seen monthly rent increases near 10% on a year-over-year basis. In urban areas, we’ve seen the more typical 3% to 4% increases. As rents continue to escalate in the sub urbs, will urban living become more of a value to renters? Will renters be interested in the excitement of living downtown, especially when monthly rents aren’t increasing by as much? We’ll see. Downtown areas were in demand by apartment renters before the pan demic. Do you think demand for urban living will rise again?
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How have the priorities of renters changed since the start of the pan Mattdemic?Guenther: Renters are moving away from “location is everything” to more of a “lifestyle is everything” mindset. Historically, downtown living arrangements appealed to renters be cause they liked the idea of walking or taking a short bus or train ride to work. Now more of these renters are choosing to move to the suburbs because they no longer need to factor in commute times, and this is a choice that is saving them between $500 to $600 a month in Conversely,rent.
those currently living in the suburbs who have always wanted to live in a downtown environment but couldn’t make the move because they’d be too far from work are now signing leases in downtown areas purely for the lifestyle experience.
The suburbs nearest the city centers are really seeing an increase in demand today. Renters can grab an uber or drive downtown in 15 or 20 minutes if they want to see a baseball game or concert or eat at one of the downtown restaurants. But at the same time, they are living out of the hustle and bustle of the downtown.
Services Provided: AREA’s Property Management team is determined to establish the premiere provider of commercial real estate services in Kansas City, while building strong relationships with clients and tenants. We feel the best way to achieve our goal is through common sense leadership; focus on real estate, not policy and procedure; employ and develop the best people in the industry; and provide an environment where our employees and clients can enjoy success. AREA Property Management is currently managing 2 million square feet in the Kansas City Metro, providing Lease Administration, Building Maintenance and Consulting Services. Notable Properties Managed: Plaza Vista (Welsh Plaza), 4800Main (Former BOT), Centerpoint Industrial Park.
Company Profile: What really sets us apart is our People. Integrity, Passion, Knowledge, and Experience are a way of everyday life for us at Kessinger Hunter. Each group responds to our clients’ needs, and they work together to utilize the resources that come with more than 140 years of experience and 200 associates. We manage over 26,000,000 square feet of property and have developed in excess of 14,000,000 square feet of projects.
Services Provided: Full-service property and asset management services, financial analysis and reporting; budget preparation and expense reconciliations; lease administration; construction management; preventative maintenance and consulting services.
AREA REAL ESTATE ADVISORS
Key Contacts: Bob Chapman, Chief Executive Officer; bchapman@centerpoint.com; Nate Rexroth, Executive Vice President, Asset Management; nrexroth@centerpoint.com Services Provided: CenterPoint Properties is an innovator in the investment, development and management of industrial real estate and multimodal transportation infrastructure. CenterPoint acquires, develops, redevelops, manages, leases and sells state-of-the-art warehouse, distribution and manufacturing facilities near major transportation nodes. Our experts focus on rail and port-proximate distribution infrastructure assets.
4800 Main Street, Suite 400 Kansas City, MO 64112 P: 816.895.4800 Website: openarea.com
MID-AMERICA REAL ESTATE-MICHIGAN, INC. 38500 Woodward Avenue, Suite 100 Bloomfield Hills, MI 48304 P: 248.855.6800 Website: MidAmericaGrp.com Key Contacts: Brad Lefkowitz, Director of Property Management, blefkowitz@midamericagrp.com; Daniel Stern, President, dstern@midamericagrp.com Services Provided: Mid-America provides strategic consulting services that maximize net operating income, net cash flow, and accelerate property appreciation. As a full-service firm, we provide property and construction management, leasing, due diligence, and market analysis under one roof. Additionally, we offer MA Building Services, a self-performing porter and maintenance company offering our clients cost savings and improved accountability for related services.
Notable Properties Managed: Washington Corners, Naperville, IL; Ironwood Office Park, Glendale, WI; Wood River Condominiums, West Bend, WI; Seven 10 West Luxury Apartments, Chicago, IL; MDJD Aesthetic MOB, Rockford, IL, Ascension Health MOB Milwaukee, WI.
Key Contact: Ray Balfanz, President/Partner, ray@outlookmgmt.com
2021
CENTERPOINT PROPERTIES 1808 Swift Drive Oak Brook, IL 60523 P: 630.586.8000 Website: centerpoint.com
Company Profile: Outlook Management Group, LLC AMO provides comprehensive property and asset management services for all asset classes in multiple states and markets in the Midwest.
ASSET/PROPERTY MANAGEMENT FIRMS
Key Contacts: Doug Grossenbacher, EVP, Director of Property Management, dgrossenbacher@openarea.com
Company Profile: CenterPoint Properties continuously reimagines what’s possible by creating ingenious solutions to the most complex industrial property, logistics and supply chain problems. With an agile team, substantial access to capital and industry-leading expertise, we provide our customers with a competitive edge and ensure their success — no matter how great the challenge. portfolio are more than 16,000 apartment units.
ANNUAL RESOURCE GUIDE marketplace
Company Profile: Mid-America is the leader in retail real estate services in the Midwest, based on transaction volume and property under management on a regional basis. Our exclusive focus on retail real estate, combined with cutting-edge technology and unsurpassed service, distinguishes Mid-America within the industry and provides clients with a competitive edge. The total consideration value of leasing and investment sales transactions facilitated in 2021 was $2.4 billion. With offices in Illinois, Michigan, Minnesota and Wisconsin, Mid-America manages and leases over 42 million square feet of retail space, and represents more than 270 retailers.
Company Profile: AREA Real Estate Advisors is a full-suite commercial real estate firm in Kansas City. AREA is the hometown team that plays in the big leagues. Our size and scope allow us to be nimble and apply a team-driven approach while providing best-in-class service. At AREA, we deal in real estate, but our business is relationships. We are committed to meaningful partnerships with our clients to ensure that their goals are achieved. Our goal is to exceed our clients’ expectations.
OUTLOOK MANAGEMENT GROUP, LLC AMO S74 W16853 Janesville Road Muskego, WI 53150 P: 414.369.3511 | F: 414.435.0251 Website: outlookmgmt.com
KESSINGER HUNTER & COMPANY, LC 2600 Grand Boulevard, Suite 700 Kansas City, MO 64108 P: 816.842.2690 | F: 816.421.5659 Website: kessingerhunter.com Key Contact: John DeHardt Services Provided: Kessinger Hunter & Company, LC is a full-service, commercial real estate firm. Full service includes management, brokerage, development, accounting, and consulting services throughout the United States and globally.
Provided: Our staff of innovative and creative professionals offer a wide range of real estate services including project and development services, brokerage, commercial and multi-family property management, real estate consulting and investment acquisition.
THE LUND COMPANY 450 Regency Parkway, Suite 200 Omaha, NE 68114 P: 402.393.8811 | F: 402.393.2402 Website: lundco.com
30 | Midwest Real Estate News | July/August 2022 | www.rejournals.com CENTERPOINTDEVELOPERSPROPERTIES 1808 Swift Drive Oak Brook, IL 60523 P: 630.586.8000 Website: centerpoint.com Key Contacts: Bob Chapman, Chief Executive Officer, bchapman@centerpoint.com; Michael Murphy, Chief Development Officer, mmurphy@centerpoint.com Services Provided: CenterPoint Properties is an innovator in the investment, development and management of industrial real estate and multimodal transportation infrastructure. CenterPoint acquires, develops, redevelops, manages, leases and sells state-of-the-art warehouse, distribution and manufacturing facilities near major transportation nodes. Our experts focus on rail and portproximate distribution infrastructure assets. Company Profile: CenterPoint Properties continuously reimagines what’s possible by creating ingenious solutions to the most complex industrial property, logistics and supply chain problems. With an agile team, substantial access to capital and industry-leading expertise, we provide our customers with a competitive edge and ensure their success — no matter how great the challenge. CONOR COMMERCIAL REAL ESTATE 9500 W. Bryn Mawr Avenue, Suite Rosemont,200 IL 60018 P: 847.692.8700 | F: 847.292.4313 Website: conor.com Key Contacts: David J. Friedman, President, dfriedman@conor.com; Brian Quigley, Executive Vice President, bquigley@conor.com Services Provided: Conor Commercial identifies and implements the most suitable commercial real estate strategy to yield increased returns for each real estate opportunity. With offices and seasoned real estate professionals strategically located throughout the country, the firm provides the experience and resources needed to develop and stabilize real estate developments that maximize positive returns to investors and partners. Company Profile: Conor Commercial Real Estate is the integrated real estate development firm of The McShane Companies headquartered in suburban Chicago, Illinois with regional offices located in Dallas, Houston, Irvine and Phoenix. The firm is active on a local, regional and national basis in the development of master-planned industrial and office parks, multifamily properties, medical office developments and built-to-suit projects for lease or purchase. CRG 35 E. Wacker Drive, Ste. 1300 Chicago, IL 60601 P: 2199312-658-0747InnerbeltBusiness Drive St. Louis, MO 63114 P: 314-429-5100 Key Contacts: Shawn Clark, President clarks@realcrg.com; Chris McKee, Chief Development Officer, mckeec@realcrg.com Website: www.realcrg.com Services Provided: Development, Site Selection, Site Planning & Cost Analysis, Engagement & Entitlements, Incentive Discovery & Negotiation, Financing, Development Management, Leasing & Administration, Asset Management and Investment Management. Company Profile: CRG is a privately held national real estate development and investment firm that has developed more than 10,000 acres of land and delivered over 210 million square feet of commercial, industrial, institutional and multifamily assets exceeding $13 billion in value. CRG leverages a powerful North American platform with local market expertise and offices in Atlanta, Chicago, Seattle, Southern California, St. Louis, Philadelphia and Phoenix. CRG’s philosophy of developing for the future and anticipating the enhanced needs of next-generation users led to the creation of its industrial brand, The Cubes, and its multifamily brand, Chapter. For more information, visit CRG’s website at www.realcrg.com.
FINANCE & INVESTMENT FIRMS ASSOCIATED BANK 45 South 7th Street, Suite 2900 Minneapolis, MN 55402 P: 612.359.4414 Website: associatedbank.com/cre
Provided: Our clients include professional developers of income producing commercial real estate, including multi-family properties, retail, office, storage, student housing, and industrial.
ALSTON CONSTRUCTION COMPANY 1900 Butterfield Road, Suite 1020 Downers Grove, IL 60515 P: 630.437.5810 Website: alstonco.com
Company Profile: The Lund Company markets and manages over eight million square feet of commercial properties valued at over $1 billion. Also, included in our management portfolio are more than 16,000 apartment units.
Key Contact: Paul Schmidt, Executive Vice President / Head of Commercial Real Estate, Paul.Schmidt@associatedbank.com Services
BELLWETHER ENTERPRISE (BWE) 1375 E. 9th Street, Suite 2400 Cleveland, OH 44114 Website: BWE.com Key Contacts: Ned Huffman, CEO; DJ Effler, President Services Provided: As an independent partner of Enterprise Community Partners, Inc., we support its mission of creating and preserving affordable housing in thriving communities. With an unwavering commitment to regional expertise and unmatched customer service, we are making an impact beyond the bottom line. With offices throughout the country, we provide a wide variety of loan products from Life Insurance Companies and Pension Funds, Freddie Mac Optigo™ seller/servicer, Fannie Mae DUS Lender (Multifamily affordable and Market Rate Housing Lender), FHA, USDA and CMBS to name a few. We are Capital on a Mission! Company Profile: BWE is a national, full-service commercial and multifamily mortgage banking company that puts people and communities first. We provide flexible, competitive financing solutions with streamlined underwriting and enhanced loan servicing for Market Rate, Affordable Housing, Workforce Housing, Manufactured Housing Communities, Seniors Housing, Senior Communities, and Long-term Care Facilities.
Key Contacts: Jason Fisher, CEO, jfisher@lundco.com; Tanya Shapiro, President, tanya.shapiro@lundco.com Services
Company Profile: Commercial Real Estates offices are located in Chicago, Milwaukee, Madison, Green Bay, Cincinnati, Indianapolis, Minneapolis, Detroit, St. Louis, Dallas and Houston. Associated BancCorp has total assets of $35 billion and is one of the top 50 financial services holding companies in the United States.
COLLIERS SECURITIES 90 South Seventh Street, Suite 4300 Minneapolis, MN 55402 P: 612.376.4000 Website: colliers.com (find us under services) Key Contacts: Jeff Jacobson, EVP | COO; Jeff.Jacobson@colliers.com; Dave Mullen, SVP | Director of Public Finance; David.Mullen@colliers.com Services Provided: Colliers Securities is a full-service investment bank and registered securities broker-dealer offering a wide array of products and services to meet the needs of individuals and institutional investors nationwide. Services: Public Finance | Individual Investors (bonds, stocks, managed money and insurance products) | Institutional Investors | Investment Banking Company Profile: Over 40 years of experience specializing in investment and capital-raising strategies to meet long-term objectives. Our business has been built on the strength of our longstanding relationships and ability to find innovative financing solutions for our treasured clients and valued industry friends. Member SIPC/FINRA Service Territory: Nationwide M&T REALTY CAPITAL CORPORATION Chicago, IL P: 312.203.5410 Website: mtrcc.com Key Contacts: Monty Childs, Managing Director, mchilds@mtb.com
Service Territory: We originate, close and service loans for multifamily and commercial real estate properties throughout the country
Services Provided: Multifaceted Affordable Housing Specialists. Debt financing and loan servicing. Fannie Mae DUS® lender, Freddie Mac Optigo® Lender, FHA/HUD Healthcare & Multifamily lender. Correspondent with life companies and CMBS lenders. Bridge loan program for qualified borrowers. Company Profile: M&T Realty Capital Corporation® is a wholly-owned subsidiary of M&T Bank—one of the 20 largest US-headquartered commercial bank holding companies. Full-service mortgage banking company that provides competitive financing nationwide for commercial real estate. In 2021, M&T Realty Capital originated $5.1 billion in loans, and currently services a portfolio of more than $24.4 billion. Please review our M&T Insurance Agency, Inc. real estate and construction insurance offerings on page 44. Service Territory: Nationwide CONSTRUCTION/PROJECT MANAGEMENT
Key Contact: Greg Kolinski, Director of Business Development, gkolinski@alstonco.com
Services Provided: Alston offers a diverse background of design-build experience, general contracting and construction management of industrial, commercial, healthcare, retail, and municipal projects. Company Profile: Alston Construction’s success begins and ends with our approach to planning, scheduling, and choosing the right team. We have been adhering to an open and collaborative approach since our founding more than 35 years ago. Notable/Recent Projects: 1.5M SF Distribution Center for General Mills. John Pennycuff Memorial Apartments 7-story, 88-units. Call Center with open offices with full-service café, gymnasium, and fitness center for Medline Industries. Freestanding Medical Office Building with 33 exam rooms, rehabilitation gym, and support service/diagnostic space for CHI Health and NexCore Group and a 1.4 million SF build-to-suit distribution center for Medline Industries in Grayslake.
construction. We are your
Notable/Recent Projects: Clarius Park Joliet Building #2, Joliet, IL - 906,517 sf speculative industrial facility for Clarius Partners. Commerce Park Chicago Building B, Chicago, IL - 602,545 sf speculative multi-tenant industrial facility for NorthPoint Development. Halsted Delivery Station, Chicago, IL112.000 sf package delivery station on a 17-acre redevelopment site for Prologis.
MERIDIAN DESIGN BUILD 9550 W. Higgins Road, Suite 400 Rosemont, IL 60018 P: 847.374.9200 | F: 847.374.9222 Website: meridiandb.com
Key Contacts: Bob Clark, Executive Chairman & Founder, clarkb@claycorp.com; Kevin McKenna, President - Construction Group, mckennak@claycorp.com Services Provided: Clayco is a full-service turnkey real estate, architecture, engineering, design-build and construction firm. Company Profile: Clayco specializes in “the art and science of building”, by providing fast track, turnkey design build solutions in North America for commercial, institutional, industrial and residential building types. Clayco looks “beyond these walls” focusing on helping our clients fulfill their mission. Projects: St. Louis – Centene Campus, 100 Above the Park, Benson Hill, Delmar Devine Chicago - Willis Tower Transformation Project, Macy’s Flagship Redevelopment, Fulton East, Upshore Chapter National – Blue Origin, Dominion, Centene East Coast HQ, Amazon E Commerce, Penn State. CONSTRUCTION COMPANY Northwestern Highway, Suite 400 MI 48034 Contacts: Andrew Gutman, President, gutman@farbman.com; John Line, Executive Vice President of Property Management and Construction, line@farbman.com Provided: Huntington Construction offers General Contractor, Construction Management, Owner/ User representation options for all commercial real estate throughout the Midwest. Specializes in ground up construction and tenant improvement work as well as specialized full service, one-stop shop for all of your construction needs. Profile: Huntington Construction is a recognized leader in the commercial construction industry serving as a General Contractor and Construction Manager. Huntington has over 30 years of experience in all areas of commercial construction and specializes in tenant improvement work for office, industrial, retail, medical office and medical office as well as design build and ground up construction. Projects: Huntington is involved in hundreds of construction projects each year including office, retail, industrial and specialty projects such as restaurants, dispensaries, conference centers, social halls, etc. Huntington does both ground up construction and building and tenant work.
MCSHANE CONSTRUCTION COMPANY 9500 West Bryn Mawr Avenue Ste. 200 Rosemont, IL 60018 P: 847.292.4300 | F: 847.292.4310 Website: www.mcshaneconstruction.com
Website:
Deanna Pegoraro, Vice President, dpegoraro@summitdb.com; Jon Silvers, Business Development, jsilvers@summitdb.com Services Provided: Summit Design + Build, LLC is a provider of full service general contracting, construction management and design/ build construction services for the commercial, industrial, multifamily residential, office/tenant interiors, hospitality and institutional markets. Company
Company Profile: Headquartered in Rosemont, Illinois with regional offices in Auburn, Alabama, Irvine, California, Phoenix, Arizona, Madison, Wisconsin and Nashville, Tennessee, McShane Construction Company provides comprehensive construction services on a local, regional and national basis for a wide variety of market segments. The firm is recognized as one of the Chicago area’s most diversified and active contracting organizations with a reputation built on honesty, integrity and dependability. Notable/Recent Projects: Abt Electronics – the construction of a 430,000-square-foot addition to Abt Electronics’ warehouse and showroom facility in Glenview, Illinois, including two three-story office blocks and 407,000 square feet of warehouse space. Industry Center at Melrose Park – the new construction and interior buildouts of three speculative industrial buildings totaling 652,000 square feet in Melrose Park, Illinois.
Notable/Recently Completed Projects: 2032 N Clybourn (Adaptive 1436 Randolph 718 (Coworking
Southfield,
P: 248.353.0500 Website: farbman.com Key
Company
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Main (Multifamily), 1400 Monroe (Multifamily), 113 E Oak (Retail), Prenuvo (Medical TI), New Buffalo Retreat (Luxury Private Residence), 448 N LaSalle – WeWork
9525 W. Bryn Mawr Avenue, Suite 810 Rosemont, IL 60018 P: 630.737.1500 | F: 630.737.1600 Website: peakconstruction.com
28400
HUNTINGTON
SUMMIT DESIGN + BUILD, LLC 1036 W. Fulton Market, Suite 500 Chicago, IL 60607 P: 312.229.4630 | F: 312.229.1147 Website: summitdb.com
Reuse Apartments),
Notable/Recent Projects: Peak’s recent Midwest projects include Scannell Properties’ DuPage Business Center Phase II in West Chicago, Elgin Distribution Center, and Strongsville Commerce Center in Ohio, NorthPoint Development’s Bristol Building I and Janko Group’s Bristol Business Park, both in Wisconsin, as well as various tenant improvements throughout Chicagoland and Wisconsin.
Services
LAMP INCORPORATED 460 North Grove Ave. Elgin, IL 60120 P: 847.741.7220 | F: 847.741.9677 Website: lampinc.net
Key Contacts: Michael P. Sullivan, Jr., CEO & Founder, msullivan@peakconstruction.com; John Reilly, President, jreilly@peakconstruction.com
Company Profile: With a team of in-house professional project managers, Meridian has extensive experience coordinating the design and construction of new buildings, tenant improvements, and additions/ renovations from 15,000 square feet to 1,000,000+ square feet. Meridian Design Build has been a Member of the U.S. Green Building Council since 2007.
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Company Profile: Brinkmann Constructors is an employee-owned construction company focusing on finding the best right answer to save clients money and time. From our offices in St. Louis, Denver, Kansas City and Richmond, Va., Brinkmann works nationwide on construction projects in the senior living, multifamily/ student housing, warehouse/distribution, retail/mixed use, office, healthcare, and hospitality/ entertainment markets.
(Adaptive Reuse Hotel), Eli’s Cheesecake (Industrial),
Key Contacts: Brian Satterthwaite, President, bsatterthwaite@brinkmannconstructors.com; Thomas Oberle, EVP, toberle@brinkmannconstructors.com; Rebecca Randolph, Senior Director of Client Relations & Marketing, RRandolph@brinkmannconstructors.com Services Provided: General contracting services including design-build, design-assist, and construction management.
Services Provided: Peak Construction Corporation offers design/build and construction management services through a strategically developed culture, highly regarded for dynamic problem-solving abilities and a network of alliances that allow Peak to bring in experts and partners from a wide spectrum of fields and roles. Company Profile: Peak Construction Corporation is a privately-held, well-capitalized design/build general contractor. For 25 years Peak has delivered industrial, hospitality, office, healthcare, retail, multi-family and specialty construction projects on-time and on-budget.
www.rejournals.com | July/August 2022 | Midwest Real Estate News | 31
Key Contact: Ian Lamp, President, ilamp@lampinc.net Services Provided: Design/Build, General Construction, and Construction Management services for additions, build outs, renovations, and new facilities for office, industrial, logistic, technology, and commercial buildings. Company Profile: Lamp Incorporated has been providing professional construction services for over 80 years. Our commitment of exemplary service to our clients creates projects that are completed early and with exceptional value.
CLAYCO, INC. 35 E. Wacker Drive, Ste. 1300 Chicago, IL 60601 P: 312.658.0747 Website: www.claycorp.com
Key Contacts: Adam Miller, President, amiller@summitdb.com; Profile: been
Key Contacts: Mat Dougherty, PE, President, mdougherty@mcshane.com Services
Located in Chicago’s Fulton Market and with regional offices in Tampa, FL, Austin, TX and North Carolina, Summit Design + Build has
PEAK CONSTRUCTION CORPORATION
BRINKMANN CONSTRUCTORS 16650 Chesterfield Grove Road, Suite 100 Chesterfield, MO 63005 636.537.9700 BrinkmannConstructors.com
Key Contacts: Paul Chuma, President; Howard Green, Executive Vice President Services Provided: Meridian Design Build provides construction and design/ build construction services on a national basis with a primary focus on industrial, office, medical office, retail and food and beverage work.
Notable/Recent
Notable/Recent Projects: Expo at Forest Park – St. Louis, MO – Transit-oriented development with 2 buildings totaling 457,100 SF with 287 apartment units, retail and parking; Raymore Commerce Center 3 – Raymore, MO – 1 million SF design/build warehouse part of a larger industrial logistics park planned; 3000 Huron – Denver, CO – 354,000 SF mid-rise apartment building in downtown Denver with 300 units; Woodleigh Chase – Fairfax, VA - Three building, 618,000 SF senior living community with 262 units.
Provided: McShane Construction Company offers more than 35 years of experience providing design-build, design-assist and general construction services on a national basis. The firm’s diverse expertise includes build-to-suit and speculative warehouse, distribution and manufacturing facilities, as well as multifamily, commercial and institutional developments.
Notable/Recent Projects: Mitutoyo America Corporation North American Headquarters, Aurora, IL. 96,000 SF warehouse addition; 63,000 SF, three-story office addition, which includes high tech showroom, two story atrium, corporate offices/conference room, cafeteria, and locker rooms.
Notable/Recent
involved in the design and construction of over 400 buildings and spaces totaling more than 10 million square feet over the firm’s 17 year history.
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