Down 3 Places 2008 Rank: 41 2007 Rank: 38 Milwaukee

Tenants and Investors Targeting

Properties in Downtown Milwaukee
Employment Trends

T
he Milwaukee office market is expected to face a year of mixed
performance in 2008 as employers trim payrolls and developers Nonfarm Office-Using
3%
accelerate deliveries of new space. The employment outlook is mixed;
office-using jobs associated with the local manufacturing industries will

Year-over-Year Change
decline this year, though losses will be largely offset by solid gains in the 2%
educational and health services sector, stimulating demand for medical
office space. Much of the demand for office space will be centered in the 1%
Downtown Milwaukee submarket, as a growing number of companies are
moving their headquarters into the city center. Manpower and Infinity, for 0%
example, both recently signed large leases for space downtown, signaling
that Milwaukee’s office rebirth will begin in the city’s core. As such, owners -1%
in some submarkets, including Brookfield and North Suburban, will increase 04 05 06 07 08**
concessions to attract and maintain their current tenant base. In West
Waukesha County, however, conditions will remain tight, providing area Office Supply and Demand
owners significant leverage when negotiating new leases. 2.0 Completions Absorption 20%
Vacancy
After slowing considerably in 2007, investment activity for local office

Square Feet (millions)

1.5 18%
assets has reached a sustainable pace. Much of the market’s appeal comes

Vacancy Rate
from initial yields in the high-7 percent range, a healthy premium over the
national average. Additionally, tenancies in the market have remained 1.0 16%
somewhat steady over the past several years due to builders’ general
reluctance to bring speculative office space to the metro. Institutional 0.5 14%
investors will maintain their focus on higher-quality assets that are priced
below replacement costs, particularly those with long-term leases in place. 0.0 12%
Given the metro’s relatively low prices and significant supply of Class B 04 05 06 07 08**
office product, large buyers can expand their portfolios quickly. Local buyers
will compete for Class B listings with institutions and syndicators in the Rent Trends
coming year, which should support some gains in valuations. Asking Rent Effective Rent
$20

2008 Market Outlook

Rent per Square Foot

$18
◆ 2008 NOPI Rank: 41, Down 3 Places. Forecasts for net job losses kept
Milwaukee near the bottom of this year’s ranking. $16

◆ Employment Forecast: Employers will trim 600 positions from payrolls $14
in 2008, a 0.1 percent decrease. Office users are expected to eliminate 200
jobs by year end, also a decline of 0.1 percent.
$12
04 05 06 07 08**
◆ Construction Forecast: Office construction will accelerate to 900,000
square feet in 2008, boosting stock by 3.1 percent. Last year, only 136,000
square feet of competitive office space came online. Sales Trends
$110
◆ Vacancy Forecast: The combination of job losses and accelerated con-
Median Price per Square Foot

struction activity will push vacancy up 70 basis points to 14.3 percent

this year. In 2007, vacancy improved 60 basis points. $105

◆ Rent Forecast: Asking rents will reach $19.52 per square foot by year- $100
end 2008, while effective rents advance to $16.02 per square foot, both
gains of 2.8 percent. $95

◆ Investment Forecast: Investors may want to consider infill properties in

$90
Downtown Milwaukee, where the metro’s revitalization will be 03 04 05 06 07*
centered and the redevelopment of brownfields makes new construction
costly to developers. * Estimate ** Forecast

Market Forecast Employment: 0.1% ▼ Construction: 562% ▲ Vacancy: 70 bps ▲ Asking Rents: 2.8% ▲

2008 Annual Report page 29