The occupancy rate for industrial property in metropolitan Milwaukee grew between 1993 and 1994, strengthening a market that was already tight, according to a survey conducted by the James T. Barry Co.
Demand for industrial space has created the best market in years for both sales and leases, said James T. Barry Jr., company president. The survey found a 2.5 percent vacancy rate as of Sept. 30, compared with a 4.3 percent rate as of Sept. 30, 1993.
Once the survey includes “available” space-space that isn’t vacant but is on the market-the 1994 rate rises to about 6 percent, Barry said. That’s still very tight, he said.
“We started to get some indications that the market was turning last year,” said Barry.
The market measured includes Milwaukee County, and parts of Waukesha County, Ozaukee County and Washington County.
The survey, which Barry conducted in the Milwaukee area for the Society of Industrial and Office Realtors, found a substantial shortage of buildings with less than 20,000 square feet; a moderate shortage of buildings with less than 100,000 square feet, and a balanced market for buildings with more than 100,000 square feet.
Space of 50,000 square feet and less is particularly in demand, especially in suburban office parks.
Prime industrial net lease rates were $5.05 per square foot for less than 5,000 square feet; $3.80 per square foot for 5,000 to 19,999 square feet; $2.80 to $3.80 a square foot for 20,000 to 39,999 square feet; $2.30 to $2.80 a square foot for 40,000 to 59,999 square feet; $2.05 to $2.50 a square foot for 60,000 to 99,999 square feet, and $1.05 to $1.75 a square foot for 100,000 square feet or more.
The vacancy rate for Milwaukee area industrial space gets even tighter when a few large, vacant buildings-such as the former Crown Cork & Seal building in Glendale-are removed from the inventory, Barry said.
“Because the demand for the big boys is so soft . . . they suffer from functional obsolescence,” Barry said.
Modern industrial users want buildings with space on one level, he said. They also avoid buildings whose ceilings are too low or whose columns are too close together, Barry said.
“The market is no longer dominated by heavy manufacturing, but rather by ease of distribution,” Barry said.
As examples, he cited the Target Stores distribution center that opened in Oconomowoc earlier this year, and a distribution center Sysco Corp. is developing in Jackson.
“There will be more, believe me,” Barry said. Those industrial buildings that are obsolete will either be demolished or converted into other uses, Barry said.
The level of speculative development for new industrial buildings is very low, Barry said. But speculative building could increase by next spring if lenders relax their requirements for financing such developments, he said.
Hot industrial markets in southeastern Wisconsin include Waukesha County, Kenosha and Washington County, Barry said.
Soft markets include Franklin and Oak Creek, he said. That area is hurt by competition from Wispark Corp.’s new GrandView Business Park on Interstate 94 in Racine County, and the developing Westridge business park on I-43 in New Berlin, Barry said.
