The story is an old one: Illinois end users are fleeing the state and crossing the border into Southeast Wisconsin to find more affordable warehouse and distribution center space. But a pair of brokers – one from Chicago and one from Milwaukee – dispute this narrative.
John Sharpe, principal with the Chicago office of Lee & Associates, and Terry McMahon, principal with the Milwaukee office of The Boerke Company, both say that the Southeast Wisconsin industrial market is still a strong lure for Illinois industrial users. But the region is also attracting a growing number of companies from its own state, too, end users that are targeting communities such as Racine and Kenosha, Wisconsin, for their expansion plans.
The two brokers are also working together to market the Enterprise Business Park in Sturtevant, Wisconsin. This park, owned by real investment company Ashley Capital, is already home to a 376,000-square-foot Class-A industrial building that was built in 2015. Three more industrial facilities are now planned for the business park.
Chicago Industrial Properties recently spoke with Sharpe and McMahon about the strength of this industrial market and the diversified base of tenants locating in this region.
Chicago Industrial Properties: We hear a lot about how industrial users in Illinois are increasingly crossing the border to Southeast Wisconsin. Is that still a strong trend?
Terry McMahon: I’ve seen a change in the Southeast Wisconsin market. In the past, everyone said that it was companies coming over the border from Illinois that made that market so strong. But the growth we are seeing in our properties in Southeast Wisconsin today is more local. We are seeing companies that are expanding from Milwaukee. We are seeing end users expanding from the local markets of Racine and Kenosha. We are even seeing some national tenants targeting Southeast Wisconsin. There has been no border hopping in our properties for the last 12 months. That is what we are seeing.
It is a bit starting to people to hear that. But there has been no border hopping in the 12 months. Instead, it’s been exciting local growth. As users look for industrial space, they are looking at that Kenosha-Racine corridor. They like its proximity to northern markets. It is a great place for a distribution type of operation.
CIP: Why did your two brokerages team up to work on the Enterprise Business Park in this region?
John Sharpe: You have a Chicago-based firm and a Milwaukee-based firm on this project. It is unique. We both work two different markets. But this area is where the two markets are coming together. It just made sense to work on this particular project for Ashley Capital together.
McMahon: Lee & Associates could have handled this themselves. We could have done it ourselves. We both interviewed for the assignment. The client came back and said, ‘We like both of you. Would you be willing to team up?’ We agreed, and it’s worked well. It is kind of a fortuitous situation.
CIP: What are some of the benefits of working together?
Sharpe: We represent two different markets, two different ways of looking at the project. We have two different broker bases. As these markets – the Chicago area and Southeast Wisconsin — have merged together, the two bases of brokers haven’t really talked together very much. That really doesn’t make sense. We should all be talking together. As the Chicago and Milwaukee brokers get to know each other, that will mean more deal flow in these markets.
In April we were at a trade show put on by the Racine County Economic Development Corporation. They brought in everyone with a project up and down that I-94 corridor. The event brought the brokers together from Milwaukee and Chicago to meet. It was an opportunity to come together and share news about the projects we are working on. That was the first time that both markets have gotten together to share and build relationships and, hopefully, do more transactions together.
CIP: That seems like a positive change.
McMahon: For a long time, neither side thought of Southeast Wisconsin and Northern Illinois as the same kind of market. There was always a little bit of a demarcation point. Now we are seeing that flow of business between the two areas. I’m sure that in other parts of the country, where states are close – say, in New York and New Jersey, for instance – the flow back and forth has been much easier, has been around for a long time. Now we are seeing it between Illinois and Wisconsin.
Sharpe: As we share information, we are better able to facilitate deals for our clients. There is a better understanding of the markets. There is better communication between the communities.
CIP: Why has the Southeast Wisconsin market become such a strong one for industrial users today?
McMahon: There are a lot of components that come into that. From someone coming into the market from Illinois or from a national market, when you compare logistical costs — transportation, fees, power costs, things like that — Wisconsin is a little more competitive than the Illinois market. The proximity to interstate access is one of the keys driving the growth here. If you look at markets in general, the industrial markets that have all been booming have been within eyesight of interstate systems. People didn’t pay as much attention to gasoline or diesel costs in the past. They do now. They count how many trips they take to the freeway every day.
Sharpe: Amazon and Uline are located right on the interstate exchange. The corridor between Milwaukee and Chicago is a natural market for industrial users. Companies can serve the enormous market of Chicago, but you also have Southeast Wisconsin, Milwaukee and Madison. It is a huge market if you add it up.
CIP: Speaking of Amazon and Uline, how important are these major businesses to this region’s industrial market?
Sharpe: Definitely. If you look at companies like Amazon and Uline that have set up in this area, they are bringing new jobs to the region. Those facilities have to be serviced. That brings more business to the area. You have mechanical contractors, transportation servicers. It breeds more activity. Those two are huge distribution centers. Success breeds success, and it will continue.
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