MILWAUKEE—Gladstone Commercial Corp. has just executed an early renewal and 12-year lease extension with Valspar Specialty Paints, LLC, for all 125,692 square feet at the company's industrial property located in a large industrial park in Menomonee Falls, WI, a Milwaukee suburb. The submarket has tightened up considerably, which means staying put is frequently the best option, especially for companies like Valspar, which considers the building at N92 W14701 Anthony Ave. a mission-critical facility.

"We bought the building in 2006 in a sale-leaseback deal," Matt Tucker, managing director of McLean, VA-based Gladstone, tells GlobeSt.com. The deal left the occupier responsible for all maintenance, repairs and upkeep. The lease would not have expired until next year, but Gladstone wanted to settle the property's long-term future. 

Each of the parties got something it wanted. The net lease arrangment remains, but the landlord also agreed to put up some money for building improvements. And the tenant agreed to add The Valspar Corp., its corporate parent, as a guarantor. Valspar, an S&P BBB rated company, develops, manufactures and distributes a range of coatings, paints and related products worldwide.

"That was part of the overall negotiations, which included the tenant improvement plan," adds Tucker. "We are always looking for the best credit support we can achieve, and it's usually from the parent company."

Most of the markets in Wisconsin have low vacancy rates, but western suburbs like Menomonee Falls have done particularly well. According to Colliers International, in the second quarter the rate for Waukesha and Washington counties was just 3.3%.               

"That means that there aren't that many options out there for existing tenants," says Tucker, "other than new build-to-suits. So existing buildings can compete very well."      

Things could start changing soon. Colliers reported that three speculative developments were under way in the second quarter totaling 360,423 square feet of new product. In addition, developers will deliver two more projects totaling 365,000 in 2016. "Based on internal research and active deals in this sub-market, we project over half of this space will be under lease prior to the completion of construction."