December 19, 2024
At the 2024 NAIOP and CARW Market Update on December 18th, 2024, Katie Brueske, delivered an insightful presentation debunking common myths about the Milwaukee office market. While headlines have declared the office sector dead, Katie presented a different narrative—one of transformation and opportunity as the market adjusts to evolving user needs.
Myth #1: “Remote Work Has Replaced the Office Forever”
While vacancy rates are on the rise, this trend reflects tenants “rightsizing” rather than abandoning office spaces. Companies are not downsizing due to contraction but rather aligning their space requirements with hybrid work strategies.
- Increased Leasing Activity: Despite downsizing footprints, companies are leasing comparable amounts of space through more transactions.
- Economic Growth: Rising vacancy rates coexist with declining unemployment, indicating that businesses continue to grow but prioritize different spatial goals.
- Tenant-Friendly Market: Many organizations are embracing hybrid-friendly designs, investing in advanced AV capabilities, and exploring shared spaces.
Myth #2: “The Cost of Office Space Outweighs Its Value”
Contrary to this belief, tenants are increasingly recognizing the value of high-quality office spaces.
- Flight to Quality: Class A office spaces with premium amenities and strategic locations are experiencing stabilizing vacancy rates.
- Manufacturing Companies Moving Up: Many manufacturers are transitioning from flex industrial spaces to true office buildings to better meet their needs.
- Limited Large Space Availability: Milwaukee lacks large contiguous office spaces to attract marquee tenants downtown, which could potentially catalyze the development of a new A+ office tower.
Myth #3: “Buildings Left Behind Will Become Obsolete”
Brueske argued that adaptive reuse offers a viable solution for older or underutilized office spaces.
- Redevelopment Trends: Vacated office properties are often valued for their land and redeveloped into multifamily housing.
- Absorption First: Before new construction can be justified, the market must absorb existing vacancies.
- Innovative Conversions: Katie predicted an increase in adaptive reuse projects, possibly even transforming office properties into industrial spaces. She also forecasted that at least one single-tenant office building would announce plans for a multi-tenant conversion in 2025.
Predictions for 2025
Brueske closed her presentation with bold forecasts for the Milwaukee office market:
- Continued rightsizing and flight to quality.
- An uptick in companies relocating from suburban areas to downtown.
- More adaptive reuse projects, potentially including industrial conversions.
- The announcement of a multi-tenant conversion for a currently single-tenant office building.