Local commercial real estate professionals say the troubled 100 East office building in downtown Milwaukee could be handed over to a new owner who will invest heavily in repositioning the building to better compete for …
Local commercial real estate professionals say the troubled 100 East office building in downtown Milwaukee could be handed over to a new owner who will invest heavily in repositioning the building to better compete for tenants. News broke yesterday of the 465,960-square-foot building at 100 E. Wisconsin Ave. was in redemption… Now his work is in the hands of the receiver. But even before lenders filed a foreclosure claim this spring, there were signs of problems with the building. According to industry sources, the building employs about 55%. This figure has dropped from 83% a few years ago due to loss of tenants like Michael Best & Friedrich and PricewaterhouseCoopers to new Class A office buildings in the city center. In addition, there is an additional 25,000 square feet of space in the building that is occupied but available for sublease. Johnson Financial Group vacates this seat at the end of the year when moves to Cathedral Square– said Chris Allen, National Director of Analytics for REDIComps and Catylist. Morningstar Credit Ratings LLC in 2018 placed a $ 51.9 million loan for the 100 East building. on his watchlist due to the fall in occupancy. When the building was completed in 1988, it was considered the main Class A building in downtown Milwaukee, according to Gard Pecor, senior market analyst at CoStar Group Inc. But that all changed with new office buildings including 833 East Michigan, BMO Tower and Huron. Construction. BizTimes recently investigated how these buildings reshaped the landscape of Class A office space in Milwaukee… Pecor said the floor slabs in the 100 East building are small by today’s standards, at less than 20,000 square feet per floor. They also have an unusual shape, as the elevator platforms are located in the center of the building. These and other factors put 100 East and other older Class A office buildings at a disadvantage compared to newer ones, which boast larger, more efficient floor tiles and modern amenities. Even before the COVID-19 pandemic, industry professionals braced for a rise in downtown Class A office vacancies as a result of new product launches, said Andrew Jensen, director of Cushman & Wakefield | Burke. Jensen says it could actually be worse. “This (100 East) is the first real victim of the downtown financial crisis,” he said. Another positive side is that Milwaukee has a lower sublease volume than other markets. Subleasing may indicate that companies are cutting or dumping excess space. Looks like the headquarters of Johnson Controls Inc. is also being reborn. Kenosha-based Bear Development enters into a contract for the purchase of the complex and its redevelopment for various purposes. Importantly for office brokers, this is preventing 420,000 square feet of office space from being brought to market as JCI prepares to relocate operations to Glendale. “The market is pretty darn good and that (100 East foreclosures) is really the only consequence,” Jensen said. Both Jensen and Pecor said 100 East could receive significant reinvestment. They assume that lenders will transfer the building to a new group of owners at a discount. The new owners could then invest in improving the building and making it more attractive to tenants. Pecor said 100 East could follow the model Two fifty… Located at 250 E. Wisconsin Ave. in the city center, the 20-story office building changed hands in 2015 and its new owners spent millions to improve it. Pecor noted that buildings that are undergoing significant renovation, including Two-Fifty, The Avenue and The 42, have generally been well received by office users. Two-Fifty has acquired many new tenants, including in Kansas City. Local HNTB Office… Factory Office Suites at 42 fully leased… Avenue there are only 13,000 square feet of vacant office space left it became available in a short time. “We continue to see tenants gravitating not even to new office space, but to some of the refurbished (buildings),” Pecor said.