Wisconsin Industrial Market Leaders

1285 Sunnyridge Road

Pewaukee, WI 53072

262.695.8800

www.judsonrealestate.com

Contact

Jeff Hoffman, SIOR, CCIM

262.695.8800

jhoffman@judsonrealestate.com

2014 End of Q2 Market Summary

New Construction is breaking loose in the South East Wisconsin Industrial markets. Developers have broken

ground or are in serious discussions to add 1.8 million SF of new space in SE Wisconsin over the next 12 months.

There is also an additional 1.685 million SF of new user announcements, or deals that are on the cusp of

announcement, including Uline, Stella & Chewy’s and Oberlin Filter.

Q2 2014 - The Data

931,906 SF of positive absorption occurred in Q2 with total area vacancy dropping to 6.05%. Big deal

announcements for existing space were Joy Global signing a 305,000 SF lease for a distribution center in

Oak Creek, InSinkErator signing a 160,000 SF lease for a manufacturing facility in Kenosha and Jonco

Industries purchasing a former 202,500 SF Rock Tenn plant on the North Side of Milwaukee.

Total absorption at the half way point of 2014 has been 1.65 million SF, a remarkable performance

considering a 2.9% contraction in Q1 GDP.

Waukesha County had its first negative quarter since the recession. Absorption for Waukesha County in

Q2 was -176,412 SF and vacancy has moved back up to 4%. Expect this to be short lived as the numbers

were heavily influenced by the 287,950 SF American Distribution Centers coming online. Lake Country

Manufacturing and Federal Manufacturing will be delivering ±160,000SF of new product to the market this

quarter and there are several deals in the pipeline for what remains of the existing inventory.

Q2 2014 - The Trends

The 2.9% drop in National GDP for Q1 was an aberration. There was a strong rebound in activity and

completed deals in Q2, which would not be occurring if a recession was on the horizon. General

Contractors focused on industrial work are indicating that their back log is as strong as it has been since

2007.

The flight to quality space for existing tenants in the marketplace is occurring and this trend is paving the

way for new development. The lowest cost space was winning the deal for the past 5 years, however this

trend is in transition. The image of the facility, and available amenities, have once again become key

drivers to facility selection.

Q3 2014 - The Forecast

Expect more new construction announcements in the news. Rates and pricing level will continue to

appreciate for modern product. Class B/C space will remain a commodity with little rent appreciation in the

near term.

Demand in the local investor market is coming back and cap rates are compressing into the 8 range for local

credit deals…. that is IF a local investor can find a deal to purchase.