Company Bets on Suburban-Style Offices

Aerial photo of Parkland Center. Image from Founders 3.

A national real estate investment group is betting that a suburban-style office building on Milwaukee’s northwest side — just one of many it now owns — will benefit from what the company believes is a post-pandemic shift to suburban living.

Workspace Property Trust paid $1.13 billion late last month for a multi-state, 53-building portfolio of suburban office buildings as part of a strategy to become “the preeminent national suburban office and light industrial company in the U.S.” It now owns 200 buildings with a combined 18 million square feet of space.

“We are thrilled to expand our footprint and double-down on the suburban office segment with the acquisition of this well-maintained portfolio of predominantly blue-chip, single tenant, net lease buildings in high growth suburban markets all across the US,” said Workspace chairman and CEO Thomas A. Rizk in a statement announcing the acquisition.

The Milwaukee building doesn’t exactly fit that description. The metro area isn’t viewed as a high-growth market, nor is the building a single-tenant operation. Nor is it located in a suburb, though the Park Place business park is suburban-like. But the building is almost entirely leased and recently renovated.

In 2018, Fidelity Information Services leased 124,550 square feet of space in the building. Starting in 2019, Equiniti leased 116,000 square feet. Global Industrial, a supply company, also leases space in the building. The building was constructed in 1990 according to city assessment records, with recent renovations made to the lobby and first floor.

And while Workspace is betting big on the future of the suburban office market, the Park Place business park is showing mixed signals on how soon that could pay off.

New York City-based Sovereign Partners sold the 12-story One Park Plaza building and Liberty 1 building (11414 W. Park Pl.) last month to an affiliate of New Jersey investor Lawrence Solomon.

A 29,297-square-foot building leased to the U.S. military for use as a recruiting office sold for $3.85 million in late March. Located at 11050 W. Liberty Dr., the property was sold by Massachusetts-based Office Properties Income Trust after having paying $6.78 million for it in 2011. It was acquired by Government Investment Partners, which focuses on properties leased to the federal government.

Sale prices in the office park have reflected the occupancy rates and remaining lease durations of the underlying properties. And while firms like Sovereign managed to attract new tenants, other organizations, such as HNTB and Alliance for Strong Families and Communities, relocated to downtown offices and Schenck and others moved to other suburban business parks.

The City of Milwaukee created a tax incremental financing district in 2017 to support a new building for A.O. Smith Group, repave a portion of W. Good Hope Rd. and provide grants for businesses such as restaurants to locate in the area, but as of 2021 property values had fallen by $21 million since the district was created.

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