The state of Wisconsin is getting ready to declutter its Madison office space.
Since 2012 the state has been developing what it calls the Madison Master Plan, a once-in-a-generation reshuffling of state offices involving thousands of workers. The process will kick into high gear once the new, massive Hill Farms state office building is completed on Madison’s West Side in 2018.
The plan reduces by 15 the number of state leases in privately owned buildings scattered throughout Madison, saving taxpayers more than $3 million a year in rent, maintenance and energy costs, according to the Department of Administration.
In moving and consolidating 29 offices, the state will occupy 86,000 less square feet of office space. It also will reduce its leased office space by 178,637 square feet — about 17 percent of its total leased space in Madison, excluding the university. That includes nearly 103,422 square feet Downtown.
The move creates a sizable hole in the Madison commercial real estate market — the lost square footage equals about as much as the market has absorbed annually between 2011 and 2015, according to Craig Stanley, founder of Madison-based commercial real estate broker Broadwing Advisors.
However, the impact will be mitigated if the market continues to rebound as it has over the past six months, he said. In the first quarter of this year, the Madison market filled nearly 150,000 square feet more of office space, according to the latest market report from Xceligent, which tracks commercial real estate in more than three dozen U.S. cities.
“In my 15 years here, there’s probably no better time for the state to do this,” Stanley said. “Is it painful in the short-term, like when Alliant moved out of Downtown? I think it is. But with the strength of the office market today, the overall impact is minimized.”
For Madison residents, the most notable move might be the relocation of the city’s two Division of Motor Vehicles offices on the West Side — one at the current Hill Farms office building and the other in a leased space on Odana Road — to a consolidated, yet-to-be-determined location.
DOT officials say the new location will offer ample free parking, be open on Saturdays and be similar to the largest DMV centers in the state, including Madison’s East Side location.
The state is still completing a request-for-proposals process before finalizing a lease somewhere on the West Side.
Officials describe the master plan as similar to “defragging” a computer’s hard drive, a process that involves reorganizing a computer’s scattered electronic files so that it runs faster and more efficiently.
A major reorganization of state office space doesn’t happen very often, but a planned replacement of the Hill Farms building on Madison’s West Side provided the impetus, Cindy Torstveit, administrator of DOA’s Division of Facilities Management, said in an interview.
“We knew we had to do something for the Hill Farms building,” Torstveit said. “We started talking about, ‘How can we defrag?’”
Last summer and fall the State Building Commission and the Legislature’s budget committee gave the final approvals for the $150 million Hill Farms building and an accompanying $36 million parking structure between Sheboygan and University avenues near Hilldale Shopping Center.
It also involves selling 18.3 acres of state-owned land, including a parcel on Badger Road, for $13 million for private redevelopment.
The Hill Farms project broke ground with no fanfare shortly after the final paperwork was signed with developer Smith Gilbane in December.
About 4,000 state workers will be affected by the moves, DOA spokeswoman Laurel Patrick said. Half of them will end up in the new Hill Farms building.
Some of the moves began last year, including the Secretary of State’s office moving from a leased office on Mifflin Street to sharing an office with the State Treasurer in the basement of the State Capitol.
The moves are timed to coincide with leases expiring, Patrick said.
The relocations are designed to increase efficiency among and between departments, Torstveit said.
For example, the Department of Children & Families will go from occupying seven separate offices in two parts of the city with four leases to one owned by the state, the GEF 3 building Downtown.
“They won’t need seven kitchenettes,” Torstveit said. “They won’t need seven conference rooms all of the same size.”
Meanwhile the Department of Public Instruction will be relocated from the GEF 3 building to the GEF 1 building alongside the Department of Workforce Development, which Torstveit said would make it easier for both to collaborate on joint projects such as youth apprenticeship programs.
The current, nearly 60-year-old Hill Farms building hosts the Department of Transportation’s headquarters in about 287,000 square feet of space.
The new Hill Farms building will house DOT and the departments of Employee Trust Funds, Safety and Professional Services, and Financial Institutions; DOA’s hearings and appeals and facilities management divisions; the Public Service Commission; the Wisconsin Employment Relations Commission; the Higher Educational Aids Board; and the Educational Approval Board.
The plan calls for moving the new Ethics and Elections commissions out of a leased Downtown building where the Government Accountability Board is located into the Department of Revenue building on Rimrock Road when the current lease expires in December 2018.
Downtown impact unclear
Madison Mayor Paul Soglin said he would have preferred the state consolidate more of its offices Downtown, in keeping with the role of the capital as the seat of state government, “but given that there’s already significant state space at the Hill Farms, I understand why that makes sense.”
Susan Springman, a commercial real estate broker with Mullins Group, said her company is coping with the loss of the state as its tenant in some of its Downtown buildings.
“It will change the landscape, but we don’t know what the impact will be until we know what the impact will be,” Springman said. “The good news is the Downtown is pretty healthy right now.”
Rep. Joe Sanfelippo, R-West Allis, a chief critic of the state’s decision to build the Hill Farms building in Madison, said the consolidation process and reduction of leased office space has been a good thing.
But it hasn’t ended his interest in moving state offices out of Madison.
Sanfelippo authored a budget amendment last year that would have required the state to explore options outside Dane and Milwaukee counties before renewing leases in those areas. Gov. Scott Walker vetoed the provision.
Sanfelippo said he plans to reintroduce the proposal in the next legislative session as both stand-alone legislation and in the budget.
He said a department such as Children & Families should move to Milwaukee where a large proportion of its clientele lives.
“There should be a fair competitive process for these agency headquarters around the state and not just have it limited to one small area,” Sanfelippo said. “By limiting it strictly to Madison you’re driving the cost up on yourself.”
In his veto message, Walker said the provision was unnecessary because DOA could already do what was being proposed. He also said he was “directing the department to further evaluate these processes and to consider opportunities where leases could be made in counties outside of Dane or Milwaukee.”
Patrick, the DOA spokeswoman, said the state considered options outside of Madison for the Hill Farms building, but it made more sense to build on land the state already owned.
She noted the pending consolidation of DWD’s unemployment call centers in Menomonee Falls, which in August will close an office on Madison’s West Side, saving $271,000 a year in rent and operating costs.
Patrick said the state plans to develop a similar master planning process to the one used to consolidate office space in Madison as it looks at its other office locations across the state.
She said the state is also looking at future consolidations in Madison as leases expire, such as for the large Corrections building on East Washington Avenue, which is leased through 2021.
“We clearly are looking at all options outside of Madison,” Patrick said. “Wherever we are led, we will go.”
‘It will change the landscape, but we don’t know what the impact will be until we know what the impact will be. The good news is the Downtown is pretty healthy right now.’ Susan Springman
commercial real estate
broker with Mullins Group