Dickman2012 Report

Southeastern Wisconsin
2011 Industrial Market Report

Year-End Statistics & Market Report
Published February 2012

626 E. Wisconsin Avenue, Suite 1020
Milwaukee, Wisconsin 53202
Phone: (414) 271-6100
Fax: (414) 271-5125
Info@dickmanrealestate.com
www.dickmanrealestate.com

Page 1


TABLE OF CONTENTS

I. Market Trends & Forecast ………………………………………………………………….......... Page 3
Includes: 2011 Recap, 2012 Forecast

II. 2010 vs 2011 Vacancy Rates vs. Absorption......…………………………………………....…… Page 5
Includes: Current Inventory, Q4 2010 vs. Q4 2011 Vacancy Rates & Absorption

III. 2011 Quarterly Vacancy Rates..............................……………………………………………… Page 6
Includes: Current Inventory, 2011 Vacancy Rates

IV. 2011 Market Statistics..........……………………………………………………………………… Page 7
Includes: 2010 vs. 2011 Vacancy by County Comparison, Quarterly Absorption
vs. Vacancy, & Quarterly Vacancy vs. Asking Lease Rates

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626 E. Wisconsin Ave, Suite 1020
Phone: (414) 271-6100
Fax: (414) 271-5125

This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.


Milwaukee Industrial Market: All Signs Positive
2011 Recap. Southeastern Wisconsin continued to over the next twelve months and perhaps a resurgence of
experience positive quarterly absorption for a consecutive sixth speculative projects. Zilber Property Group announced
quarter with nearly 270,218 square feet absorbed in the 4th July 2011 their most recent industrial speculative building at
quarter 2011 and 3,073,242 square feet absorbed in 2011. As LakeView Corporate Park in Pleasant Prairie. The 60,256
a result of the positive absorption the vacancy rate has dropped square foot single or multi-tenant facility is expected to be
to 7.5% in the 4th quarter 2011 from 8.4% in the 4th quarter completed by the end of this year.
2010. (Source: Xceligent/CARW). HSA Commercial Inc recently
signed a 63,838 square foot lease 2011 Recap
Milwaukee and Waukesha counties were responsible for the at its park in Mount Pleasant Compared to 2010:
positive absorption throughout 2011 accounting for nearly creating the potential for a new
73% of the 3,073,242 square feet absorbed during the period. building to satisfy demand in 2012. Vacancy
Kenosha and Racine counties both experienced positive
absorption of 33,955 square feet and 533,945 square feet Since the second quarter 2011,
respectively. While impressive, this data is less substantial than we have observed a significant
previous quarters that we have analyzed. Traditionally, Racine increase in the velocity of property DOWN
and Kenosha counties compete for tenants that are crossing sales and completed lease
over from the Illinois border and will likely be the sites of the transactions for industrial product Net Absorption
next speculative or build-to-suit developments in Southeastern throughout the Southeastern
Wisconsin. Wisconsin region. Below is a
sample of what we have seen over
POSITIVE
Leasing and sales activity was substantial over the last two the past several months.
quarters of 2011, and we expect these positive trends to carry Lease Rates
over into 2012. We have noted that quality industrial space is
being depleted in many of the more popular submarkets south
of I-94 and west of I-45. Natural tensions between quality
supply and increasing demand are causing a stabilization of STABLE
lease rates that we have not seen for years (please refer to
Figure 3 on Page 7). Scan the barcode Transactions
We believe this pent up demand and dwindling supply of quality to learn more about
product will result in a number of build-to-suit projects Available Dickman
INCHING UP
Properties
Sample Completed Sale & Lease Transactions
Building Address City Building Size Building Price Price/SF User or Investment
1 6101 N. 64th Street Milwaukee 374,736 SF $3,300,000 $8.80/SF Investment
2 1230 Cheyenne Avenue Grafton 86,000 SF $2,400,000 $27.90/SF Investment
3 1900 W. Cornell Street Milwaukee 243,056 SF $4,365,000 $17.81/SF User
4 11000 W. Heather Avenue Milwaukee 82,907 SF $3,450,000 $41.61/SF User
5 11225 W. Heather Avenue Milwaukee 95,500 SF $3,750,000 $39.26/SF Investment
6 690 W. Oakland Avenue Port Washington 182,000 SF $2,150,000 $11.81/SF User
7 N89 W14700 Patrita Drive Men. Falls 160,000 SF $5,300,000 $33.12/SF User
8 607 E. Polk Street Milwaukee 141,234 SF $3,750,000 $26.55/SF User - Teardown
9 6575-6693 N. Sidney Pl Glendale 104,400 SF $3,635,000 $34.81/SF Investment

Phone: (414) 271-6100
Fax: (414) 271-5125
Page 3



2012 Forecast. The industrial real estate market for 2012 packages for tenants will also continue to become less
looks positive. We observed numerous indicators such as aggressive. Previously, it was common to receive several
decreased vacancy and lease rate and pricing stabilization months of free rent corresponding to the term of the lease. In
across the industrial sector the industrial market, free rent is still prevalent but to a lesser
over the past year. Despite the degree. Landlords prefer to give free rent in lieu of a lower
2012 Forecast positive news, absorption in Q4 lease rate in an effort to hold the line on property values.
Compared to 2011: 2011 was 270,218 square feet
compared to 1,150,904 square Based on the available data and our experience in the
Vacancy feet in Q3 2011. We expect this marketplace we anticipate the year will have a strong volume
lower rate of positive absorption of sales and leasing activity for industrial product. While
to continue well into 2012. The challenges will remain in the Milwaukee marketplace the
rate of deal velocity has slowed shifting supply and demand curves will have a notable impact
INCHING DOWN
for a variety of factors, including on pricing and potential new development in the short term.
uncertainty locally (recalls),
Net Absorption
nationally (2012 Presidential
election), and internationally
(oil prices, Euro zone, Middle
East). Coupled with this
POSITIVE uncertainty is an unavailability The Industrial TOP 10 of 2011
of quality product in many In no order of importance!
Lease Rates submarkets. Companies that
are geographically driven will
Here are some highlights of the industrial real estate
find fewer options, conflicting
market from 2011:
with the general expectation
STABLE among users for a “great deal”.
1. Highest Vacancy Rate: 12.2% in Ozaukee County
Product inventory remains
Transactions high for warehouse and flex 2. Lowest Vacancy Rate: 3.6% in Racine County
space, but generally low for 3. Highest YTD Absorption: 1,297,083 Sq. Ft. in
manufacturing facilities in the Milwaukee County
region. 4. Lowest YTD Absorption: -301,500 Sq. Ft. in
INCHING UP
Sheboygan County
Banks will continue to play 5. Milwaukee – the European manufacturing
a part of the industrial real estate market as they dispose destination? We continue to see European firms
of troubled properties. The properties sold by banks have take advantage of the attractive real estate pricing
played a dampening effect on sales comparables, as the and labor pool in southeast Wisconsin.
ultimate sale price is more correlated to the bank’s position 6. Progress on the Kenosha Chrysler Plant – After
in the property than its true “market value”. On the lending much uncertainty, it appears the City of Kenosha
side, we have found banks more eager to participate in will be taking over ownership of the property,
user-based transactions, often coupled with SBA financing or potentially for re-development.
other incentive packages from the government. 7. Only 11.5 Acres left (out of 56.5 Acres) in the
Menomonee Valley.
Leasing has played an important part in the industrial 8. Cap rates sank to their lowest levels in years
real estate market recovery for southeastern Wisconsin. providing some relief to industrial investors.
Ultimately stabilized lease rates can equate to a more stable 9. All 2011 regional manufacturing indices registered
property value. Part of the problem we saw over the past growth, but new orders contracting.
several years was higher vacancy and plummeting lease 10. Positive absorption of 400,000 SF+ every quarter
rates. Creditors utilize these factors to determine property
for 15+ months.
value. With lease rates stabilizing in our region, property
values will experience a similar result in 2012. Leasing

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2010 vs. 2011 Vacancy & Absorption

County/Submarket Inventory Total Vacancy Vacancy Absorption Absorption
(SF) Vacant Q4 2010 Q4 2011 YTD 2010 YTD 2011
(SF) (%) (%) (SF) (SF)
Milwaukee Downtown 12,040,175 1,615,925 12.5% 13.4% -72,565 -110,811
North Central 10,759,078 1,124,848 13.8% 10.5% 26,574 382,731
North Shore 7,604,171 993,990 15.0% 12.8% -97,426 192,647
Northwest 18,593,846 1,527,422 10.6% 8.2% 86,975 434,679
South 23,587,477 1,964,487 10.2% 7.9% 13,155 509,834
South Central 10,288,571 1,240,743 11.9% 12.1% 63,120 -19,052
West 12,408,380 1,171,276 9.7% 9.4% 78,700 161,800
Milwaukee Total 95,281,698 9,638,691 11.5% 10.0% 98,533 1,297,083
Waukesha Northeast 20,972,233 1,093,520 6.0% 5.2% -46,711 364,983
Northwest 17,789,574 823,643 7.2% 4.6% 136,434 503,658
Southeast 14,834,449 883,714 5.5% 5.7% 17,124 49,883
Southwest 15,796,684 729,493 4.5% 4.6% 41,751 29,967
Waukesha Total 69,392,940 3,530,370 5.8% 5.0% 148,598 948.491
Ozaukee 12,865,672 1,563,826 13.1% 12.2% 5,230 118,439
Racine 28,565,269 1,040,091 4.9% 3.6% 684,586 533,945
Sheboygan 12,760,606 826,314 4.1% 6.5% 0 -301,500
Kenosha 21,007,862 2,262,457 10.7% 10.7% 215,607 33,955
Walworth 8,789,087 377,886 7.3% 4.3% 6,680 261,617
Washington 19,345,294 1,073,246 6.0% 5.3% 265,453 181,212
Grand Total 268,008,428 20,312,881 8.4% 7.5% 1,424,687 3,073,242
Data Source: Xceligent

Terminology
Inventory - The total square feet of all single and multi-tenant industrial properties above 10,000 square feet.
Vacant SF - Space that is available and not currently occupied.
Vacancy Rate - Percentage of space in the market that is not currently occupied
(Vacant square feet divided by inventory).
Absorption - The rate at which rentable space is filled. Net absorption is equal to the amount occupied at the end of
the period minus the amount occupied at the beginning of the period, taking into consideration space vacated during the
period.

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Fax: (414) 271-5125
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2011 Quarterly Vacancy Rates

County/Submarket Inventory Total Vacancy Vacancy Vacancy Vacancy
(SF) Vacant Q1 (%) Q2 (%) Q3 (%) Q4 (%)
(SF)
Milwaukee Downtown 12,040,175 1,615,925 12.5% 12.6% 13.1% 13.4%
North Central 10,759,078 1,124,848 12.4% 11.9% 11.3% 10.5%
North Shore 7,604,171 993,990 12.1% 12.9% 12.9% 12.8%
Northwest 18,593,846 1,527,422 9.0% 8.7% 8.6% 8.2%
South 23,587,477 1,964,487 8.6% 8.6% 8.1% 7.9%
South Central 10,288,571 1,240,743 12.0% 12.4% 12.3% 12.1%
West 12,408,380 1,171,276 9.4% 9.1% 6.7% 9.4%
Milwaukee Total 9,638,691 12,527,649 10.4% 10.3% 9.9% 10.0%
Waukesha Northeast 1,093,520 1,520,864 5.7% 5.7% 5.3% 6.0%
Northwest 823,643 1,407,622 6.0% 5.2% 4.6% 7.2%
Southeast 883,714 1,169,083 4.9% 4.9% 5.6% 5.5%
Southwest 729,493 1,150,923 5.2% 5.2% 4.6% 4.5%
Waukesha Total 3,530,370 5,248,492 5.5% 6.4% 5.3% 5.0%
Ozaukee 1,563,826 1,746,344 14.1% 14.1% 12.5% 12.2%
Racine 1,040,091 1,943,595 3.6% 3.6% 4.1% 3.6%
Sheboygan 826,314 1,106,003 6.5% 6.5% 6.5% 6.5%
Kenosha 2,262,457 2,603,463 10.8% 10.7% 10.6% 10.7%
Walworth 377,886 476,643 6.7% 6.6% 6.4% 4.3%
Washington 1,073,246 1,306,955 6.5% 6.5% 5.5% 5.3%
Grand Total 268,008,428 20,312,881 8.0% 7.9% 7.6% 7.5%
Data Source: Xceligent

Terminology
Inventory - The total square feet of all single and multi-tenant industrial properties above 10,000 square feet.
Vacant SF - Space that is available and not currently occupied.
Vacancy Rate - Percentage of space in the market that is not currently occupied
(Vacant square feet divided by inventory).

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Fax: (414) 271-5125
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Figure 1: 2010 vs. 2011 Vacancy by County Comparison
13.1%
12.2%
11.5%
10.7% 10.7%
10.0% The side by side vacancy bar chart by
8.4%
county shows a generally positive trend
7.5% 7.3%
of declining vacancy between 2010 and
6.5%
6.0%
2010
2011. Markets west of I-45 and south of
5.8% 2011

4.9%
5.3%
5.0% I-94 outperformed the other markets.
4.1% 4.3%
3.6%

Grand Total Kenosha Milwaukee Ozaukee Racine Sheboygan Walworth Washington Waukesha

Figure 2: Quarterly Absorption vs. Vacancy
1,600,000 8.6%

1,400,000 8.4%

1,200,000 8.2%

The data demonstrates a generally 1,000,000 8.0%
positive trend of declining vacancy in 2011 800,000 7.8%
with positive absorption in all four quarters
600,000 7.6%
with a burst of positive absorption since
mid-2011. 400,000 7.4%

200,000 7.2%

0 7.0%
2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4
Absorption Square Feet 1,424,687 1,430,370 245,853 1,150,904 270,218
Vacancy Rate (%) 8.4% 8.0% 7.9% 7.6% 7.5%

Figure 3: Quarterly Vacancy vs. Asking Lease Rates
8.5% $5.50

8.3%

8.1% $5.00

The data demonstrates how vacancy
7.9%
rates have steadily declined since Q4
7.7% $4.50 2010 while asking lease rates have held
Total Vacancy Rate
Asking Direct Lease Rate
relatively steady. Despite stabilized asking
7.5% rates, modest landlord incentives such
as free rent, lower base rent, and tenant
7.3% $4.00
improvement packages continued in 2011.
7.1%

6.9% $3.50
2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4
Total Vacancy Rate 8.4% 8.0% 7.9% 7.6% 7.5%
Asking Direct Lease Rate $4.99 $4.96 $4.93 $4.90 $4.91

Data Source: Xceligent Milwaukee Industrial Market Report Q4 2011
Phone: (414) 271-6100
Fax: (414) 271-5125
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626 E. Wisconsin Avenue, Suite 1020
Phone: (414) 271-6100
Fax: (414) 271-5125
Info@dickmanrealestate.com

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