Region’s industrial real estate market absorbs 1.1 million square feet in Q2

Vacancy rates show improvement for area's office, industrial markets

The industrial facility at 1445 International Drive, Mount Pleasant, which was sold recently to Boston-based High Street Realty Co. as part of a 15-building portfolio deal. (Credit: Google)

Last updated on November 21st, 2019 at 02:33 pm

The southeastern Wisconsin industrial real estate market performed well during the second quarter, according to the latest market data from the Commercial Association of Realtors Wisconsin and REDIComps Research and Catylist.

The region’s industrial real estate market absorbed 1.1 million square feet of space during the quarter and has now absorbed 1.6 million square feet this year, according to the report.

The region’s industrial real estate vacancy rate fell from 3.8 percent in the first quarter to 3.5 percent in the second quarter.

“Vacancy rates remain low and there is a lack of decent newer high bay product available in the marketplace near metro Milwaukee,” said Kevin Barry, executive vice president at The Barry Company. “As such, areas just at the edge of the metro area are seeing newer developments absorb relatively quickly like Briggs and Stratton – Germantown, Amazon – Oak Creek, among several others. With interest rates still low, expect additional new speculative and end-user developments in these areas to continue.”

Completion of a new 706,000-square-foot building for Briggs & Stratton in Germantown and a new 220,000-square-foot building for Schoeneck Containers in Elkhorn boosted the region’s industrial real estate absorption numbers.

Industrial real estate vacancy rates for the second quarter by county, according to the report:

  • Milwaukee, 5.5%
  • Ozaukee, 5.3%
  • Kenosha, 4.3%
  • Racine, 3.7%
  • Washington, 2.0%
  • Waukesha, 1.6%
  • Walworth, 1.4%
  • Sheboygan, 0.1%

The region’s office market also posted positive results during the second quarter, with 55,776 square feet of absorption. The region’s office market has absorbed 113,362 square feet of space this year. Its vacancy rate was 11.9 percent during the second quarter, down from 12.0 percent during the first quarter.

The Downtown East submarket had a 7.0 percent vacancy rate during the second quarter and the Downtown West submarket had a 17.3 percent vacancy rate during the quarter.

There are nine office buildings under construction in the region totaling 1 million square feet of space, including the 25-story BMO Tower and the 11-story Huron Building in downtown Milwaukee. Once that new supply is added to the market, it could result in higher vacancy rates.

“The Milwaukee office market continues to see strong occupancy and lease rates as we hit the midway point of 2019,” said Alyssa Geisler, senior associate at CBRE. “Office leasing activity has remained robust and steady, however, with several hundred thousand square feet of Class A office space under construction downtown between BMO Tower and The Huron Building, we anticipate that vacancy rates will increase in Q4 2019.”

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Andrew Weiland is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, Weiland is a lifelong resident of the state. He lives in Muskego with his wife, Seng, and son, Zachary. He is an avid sports fan and enjoys coaching his son’s youth baseball and basketball teams.

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