Is there a spec office rebirth?
Spec office projects might not be coming back to Madison in droves, but there's ample support for the right projects.
A rendering of Urban Land Interests' $115 million Anchor Bank redevelopment for the southwest quadrant of the Capitol Square. The project includes 130,000 square feet of spec office space.
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From the pages of In Business magazine.
When the Great Recession hit during the tail end of 2007 and continued well into 2009, construction and development projects largely ground to a halt.
With the housing bubble popped, municipalities were reluctant to grant approval for new building projects, lenders were holding tight to funds they’d normally invest as new regulations hit banks and credit unions hard, and builders just weren’t building. Speculative office projects became a casualty of the environment, even if they largely weren’t to blame for causing the economic downturn.
However, within the past 18 months, more and more residential developments, particularly multifamily projects, have begun springing up around Madison again. Trailing behind are commercial developments, which are poised for a comeback of their own. Just don’t expect a new commercial boom, say local developers. The support for new spec office projects is there, as long as it’s the right kind of project.
Bringing back spec
One of the biggest barriers to new spec office development in Madison is that there isn’t much, if any, undeveloped available land within 3 miles of the Isthmus, says Bradley Hutter, president/CEO of MIG Commercial Real Estate. “There is a fair amount of redevelopment opportunity, but it’s always more expensive to acquire and clean up a site already built on.”
That’s one of the reasons Hutter says MIG is so excited about its upcoming project at Landmark Oaks, which sits above its current Central Beltline Campus. “This is the site at the termination of Landmark Place, on the former Jackson-Williams homestead, overlooking the entire City of Madison,” Hutter says.
It comprises nearly seven acres of commercially zoned land centrally located directly off of Todd Drive. “It’s 5 minutes to downtown, and 10 minutes to Middleton, Verona, Stoughton, or Sun Prairie. With spec office, the key words will always be location, location, location.”
Hutter says the size of the building was reconsidered due to the dearth of available office space in the Madison market. MIG is planning to break ground in the spring of what could be a 60,000 to 120,000-square-foot development.
In addition, Hutter says MIG is in the design phase of a project called Parmenter Place in Middleton, which originally was intended to just be multifamily and retail, but is getting a significant spec office component added on, as well. The office component will be no less than 40,000 additional square feet and may evolve to nearly 80,000 square feet of space.
One major spec office project that’s embracing the redevelopment route is the Anchor Bank project on the Capitol Square, which is helmed by Urban Land Interests. The Anchor Bank project totals 130,000 square feet of unleased spec office space.
Mark Binkowski, a development associate with Urban Land Interests, says local demand for new office space has reached a point where new projects practically had to start back up if anyone wanted to keep businesses in the area.
“Our vacancy rates are at a point now where we’re comfortable and confident in bringing new office space into the market,” Binkowski explains. “What we’re seeing with the way this market has changed is a lot of the individuals who are coming to this area for jobs with organizations like Epic, or UW Health and UW–Madison, are staying in Madison and starting businesses here.”
An example would be Zendesk, which is one of Urban Land Interests newer tenants. The company began with four employees and 1,000 square feet in a basement space. When its San Francisco-based CEO came to Madison, Binkowski says he was so impressed with the quality of life and the level of talent coming out of the UW, he decided to focus on Madison instead of opening a regional office in Boston or Austin. “They now lease 20,000 square feet in the U.S. Bank building and anticipate growing in the future,” Binkowski notes.
Binkowski also references the recently approved Judge Doyle Square project that could see the headquarters of Exact Sciences move downtown as an example of companies eager to locate in close proximity to the Capitol Square.
“These companies are looking to come downtown and there’s no new supply of office space to meet that demand,” Binkowski notes.