The unemployment rate in Milwaukee rose to 5.6% while job growth was only 0.9% year-over-year. Wells Fargo announced cuts of 1,000 jobs in the Milwaukee area. However, Milwaukee's urban core attracted new companies that relocated offices downtown. A controversial $123.9 million streetcar project was approved and could begin in late 2015, with supporters believing it will provide economic benefits. Two office buildings converting to residential in Downtown West significantly reduced the submarket's vacancy rate from 27.3% to 19.5%.

1. Economic news a mixed bag
Milwaukee’s unemployment rate rose 60 basis points in the most recent data
from the BLS, and now stands at 5.6 percent. Year-over-year job growth was 0.9
percent. Wells Fargo recently announced that it will close its West Parkland
Home Lending Service Facility in northwest Milwaukee in July and cut 1,000
Milwaukee-area jobs. On a more positive note, Milwaukee’s urban core has been
successful in attracting new office tenants, including marketing firm Versant,
healthcare IT company ConsortiEX, and global manufacturing company Gardner
Denver, which relocated its headquarters from Wayne, Pa to 222 E. Erie Street
in the 3rd Ward.
Total jobs vs. unemployment rate
Source: Bureau of Labor Statistics
Milwaukee streetcar a potential driver for downtown Milwaukee
A controversial $123.9 million streetcar project was approved by the Milwaukee
Common Council in February. The project, which could commence in late 2015
would rely on federal funding and local TID funding. While it has its opponents,
there is also widespread support for the project and its potential economic
benefits. Johnson Controls Inc., which is considering a 50-story 1.1 million-
square-foot build-to-suit project near the lakefront has indicated that the streetcar
project would be a positive factor in its ultimate decision. The proposed initial
route would run from the Milwaukee Intermodal Station to the lakefront through
parts of the Third Ward and DowntownEast.
Milwaukee streetcar funding sources
Source: City of Milwaukee
Office to multifamily conversions reduce Downtown West vacancy
Despite slightly negative absorption, the Downtown West vacancy rate declined
from 27.3 percent in the fourth quarter of 2014 to 19.5 percent in the first quarter
of 2015. Conversions of two specific buildings from Class B office to multifamily
were largely responsible for this. The first is the vacant former Blue Cross Blue
Shield office building, a 249,334-square-foot building at 401 W. Michigan St. The
second is the 131,660-square-foot office building at 801 W. Michigan Street,
which was more than 50 percent vacant. Developers are repositioning
functionally obsolete office buildings into alternative uses which is taking
pressure off of the downtown office market and uncovering value for obsolete
office product.
Vacancy by submarket
Source: JLL Research
19.0%
Total vacancy
-2,832
Q1 2015 net absorption (s.f.)
4.0%
12-month rent growth
358,000
Total under construction (s.f.)
46.9%
Total preleased
Office Insight
Milwaukee | Q1 2015
Repositioning reduces Downtown vacancy
$54.9
$10.0
$9.7
$18.3
$31.0
$0
$20
$40
$60
Federal: ICE
Funding
Federal: TIGER
application
Local: Cathedral
Square TID
Local: Erie
Street TID
Local: East
Michigan TID
Funding Sources
17.9% 19.5%
10.2%
28.9%
24.0%
31.3%
41.6%
21.4%
6.0%
13.3%
18.9%
0%
25%
50%
In millions of $’s
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
660,000
680,000
700,000
720,000
740,000
760,000
780,000
800,000
unemployment rate
total jobs

2. Current conditions – market and submarket Historical leasing activity (s.f.)
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate
Source: JLL Research
Direct average asking rent ($ p.s.f.)
Source: JLL Research
86,871
242,153
304,801
-2,802-50,000
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2012 2013 2014 Q1 2015
$16.71
$16.61
$17.66
$17.79
$16.00
$16.50
$17.00
$17.50
$18.00
2012 2013 2014 Q1 2015
20.3% 20.3%
19.3%
19.0%
16.5%
21.5%
2012 2013 2014 Q1 2015
Landlordleverage
Tenantleverage
Peaking
market
Falling
market
Bottoming
market
Rising
market
Non-CBD
2,196,884
2,638,546
2,313,561
385,037
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2012 2013 2014 Q1 2015
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CBD and Milwaukee market