Industrial users fleeing Illinois continue to find relief across Wisconsin border

kenosha-industrialby Declan Harty

Tom Boyle converts farms into industrial parks for a living.

Well, that’s just part of it. Boyle, a principal with Transwestern, has become an expert on helping businesses relocate from Illinois to the southeast Wisconsin market, which has evolved into a beacon of relief for companies hoping to operate in Chicago without the Illinois burdens.

“If you are a larger employer in the state of Illinois currently, you’re troubled by what’s happening in Springfield,” Boyle said. “Kenosha is really the only release valve for Cook, northern Cook and Lake County.”

Businesses looking to bolster their industrial presences are finding refuge across Illinois state borders. Southeast Wisconsin provides businesses proximity to multiple major markets, better highway access, lower taxes, increased available land and custom-designed spaces fitting their exact needs, Boyle said.

Spiked interest in the region triggered a jump in new leasing volume to 1 million square feet in 2016 – up from 106,782 square feet in 2015, according to a fourth quarter market report from Colliers International. Southeast Wisconsin has seen a bump in its vacancy rate, which hit 6.06 percent in 2016, up 151 basis points from the start of year and the highest since Q4 2012.

The jump likely stems from the completions of various construction projects, while new availabilities also enter the market. Notably, southeast Wisconsin ranks at No. 4 among Chicagoland submarkets with 1,432,123 square feet under construction for industrial properties, only trailing the I-80 Joliet corridor, far south suburbs and the I-55 corridor.

With I-94 access nearby, Southeast Wisconsin continues to see interest from businesses, particularly heading into the new year. But the relocations started years ago.

“The migration has been tepid but constant over the last 10 years,” Boyle said. “I think the demand for property and facilities in Kenosha and Racine Counties in Wisconsin will continue to grow rapidly.”

In 2009, Uline, a shipping and packaging distributor, moved its headquarters to Pleasant Prairie, Wisconsin (located in Kenosha County) from Northern Illinois, where it was founded and based since 1980. Since then, Amazon has opened a 1-million-square-foot fulfillment center in Kenosha and other businesses like Snap-On Tools and Jockey have expanded their footprints in the market.

“Many companies before Uline (moved to Wisconsin), but that move definitely caught the attention of people in Chicagoland,” said Heather Wessling Grosz, vice president of economic development for KABA, or the Kenosha Area Business Alliance.

Lower taxes, manufacturing and agriculture tax credits and a sense of stability are just a few of the reasons why Wessling Grosz believes Wisconsin has grown to become a haven for some businesses to base their operations.

“I think the companies have a greater level of confidence in our business climate, and that’s part of the reason why they come to Wisconsin,” she said.

KABA detailed the differences between Illinois and Wisconsin in 2015 in a case study, which was conducted by a third-party analysis from public accounting and consulting firm Baker Tilly Virchow Krause, LLP.

The study concluded that an example Illinois manufacturer, with about 350 employees and $100 million in annual revenue, would have paid $1.49 million in total taxes in Illinois for the year. In Wisconsin, that same company would have paid $753,545, factoring in the same breakdown of taxes.

Southeast Wisconsin continues to see the upside of the incoming business. Wessling Grosz said the influx has resulted in between 8,000 to 9,000 jobs in the market, with a growing talent pool developing in the wings. Work ranges from transportation and distribution companies to manufacturing work, which is something the community welcomes, she said.

As the market grows, businesses are only expected to continue to flock to the Badger state, said Bob Smietana, chief executive officer of HSA Commercial.

Southeast Wisconsin’s recent emergence is coming as companies begin to differentiate Wisconsin from Northern Illinois, where the difference between Kenosha and Lake Counties is barely noticeable. Smietana said many research firms don’t differentiate southeast Wisconsin from the Chicagoland area, causing many to believe they might carry the same benefits and problems.

“It’s becoming a very vibrant market, and is obviously continuing to grow with these very large companies making very large investments,” said Smietana, who noted that HSA Commercial has been working with properties in southeast Wisconsin for the last decade.

The growth in southeast Wisconsin and northwest Indiana, which ranked at No. 8 for total net absorption in the fourth quarter of 2016, is causing many like Smietana to grow concerned about the potential exodus from Illinois.

“It’s heartbreaking to me to hear major companies and users of industrial space basically shying away from more investment in Illinois,” he said. “As a lifelong Illinois resident, we need to be mindful and competitive that we don’t want to lose business over the borders.”

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