Although reluctant to predict how large it will grow its stake, CenterPoint has become the biggest industrial player in the submarket with its recent $75-million acquisition, giving the Chicago market's largest industrial property owner 5 million sf. See: CenterPoint Expands Brewtown Holdings.

At 300 million sf, the southeast Wisconsin submarket, which includes the lakefront cities of Milwaukee, Racine and Kenosha, is "on the magnitude of Atlanta," Gates says.

HSA Commercial Real Estate's second-quarter industrial market report pegs the Southeast Wisconsin vacancy rate at 15.86%. However, CenterPoint chief investment officer Paul T. Ahern pegs it 5.1%, down from 5.6% in the first quarter.

"It's a very stable market," Ahern says in an earnings conference call. He notes 70% of the properties are owned by users, and cites a diverse economy for keeping the submarket buoyant. In addition, Ahern credits "a very good brokerage community with strong relationships."

CenterPoint's southeast Wisconsin vacancy rate rivals the north and northwest suburbs of Chicago, where land is selling at more than $7 per sf, some of it to buyers who are tearing down existing properties for redevelopment, Ahern says. CenterPoint may do some building in Wisconsin, officials say, but it will be build-to-suits for current tenants.

On the other hand, CenterPoint sees its greatest leasing challenges now in the central DuPage County submarket, he adds. "That market has not really seen a good recovery," Ahern says. "It's probably the slowest market we have."

Meanwhile, rental rates are not much different in Kenosha, Racine and Milwaukee counties as they are in Lake County, just south of the state line, president and chief operating officer Michael M. Mullen says. "I don't think there's any discernible difference in cap rates," he adds.

However, crossing the state line gives tenants a wider choice in buildings, as the inventory is nearly five times as large as the more populous Lake County.

Instant Insights /

REIT Sees Much to Like in Southeast Wisconsin

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