CHICAGO, MILWAUKEE—A seven-building industrial portfolio in the Milwaukee region, totaling 228,561 square feet, has just hit the market, presenting another chance for investors looking for the higher yields available from properties outside the primary metro areas. S.R. Sales, a leading independent supplier of original replacement parts for industrial, agricultural, automotive and other industries, leases the entire portfolio.
Avison Young principals Erik Foster and Mike Wilson, who are both based in the firm's Chicago office and members of the company's national industrial capital markets group, are representing the ownership, AIC Ventures, a real estate investment firm based in Austin, TX.
“Milwaukee is one of a number of solid, secondary markets throughout the country that offer higher yields,” Foster tells GlobeSt.com. Industrial markets such as Milwaukee, Nashville, and Cincinnati, among others, have solid population growth, good transportation links, as well as cheaper labor and lower construction costs than big markets like Chicago.
These metros have also seen plunging vacancy rates and now generate interest from institutional investors. Foster estimates that properties in good secondary markets will have cap rates between 75 and 200 bps higher than similar assets in the top primary markets.
One of the big selling points of this portfolio, located in the suburbs of Pewaukee and Brookfield, is its importance to S.R. Sales. “They have built their operations around these locations,” says Foster. The company has long-term agreements with suppliers such as Cummins Engine, Ingersoll Rand, Polaris Industries, The Toro Co. and many other large manufacturers, and supplies thousands of replacement parts to more than 300 entities.
And Milwaukee itself is also an attraction. “There has been significant rent growth in core and non-core industrial assets throughout the Milwaukee area,” according to Foster. The market, which has outperformed many others nationally, experienced positive absorption for the past six years. The location also provides proximity to industrial transportation hubs such as Chicago, Minneapolis, along with access to other US population centers.
And the decision of Foxconn to locate a massive facility in SE WI should keep demand for space in the region quite robust, Foster adds. That firm should attract an array of suppliers that will “end up taking a lot of ancillary space.”
The S.R. Sales portfolio includes:
- N31 W22386 Green Rd., Pewaukee, WI — a 71,782-sf building
- N31 W22350 Green Rd., Pewaukee, WI — a 64,721-sf building
- 4300 N. 127th St., Brookfield, WI — a 16,320-sf building
- 4320 N. 127th St., Brookfield, WI – a 16,320-sf building
- 4330-4340 N. 127th St., Brookfield, WI — a 18,178-sf building
- 4330 N. 126th St., Brookfield, WI — a 22,330-sf building
- 4340 N. 126th St., Brookfield, WI — a 18,820-sf building
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
