The vacancy rate for southeastern Wisconsin industrial real estate market rose from 7.7 percent in the third quarter of 2009 to 8.2 percent at the end of the year, according to Milwaukee-based The Dickman Company Inc.‘s Southeastern Wisconsin 2009 Industrial Market Report.
The region’s industrial space vacancy rate was 7.1 percent in the first quarter of 2009.
Of the southeastern Wisconsin counties:
- Milwaukee County has the highest industrial space vacancy rate at 10.9 percent. The county’s vacant space increased by 21.11 percent.
- Ozaukee County has a vacancy rate of 9.7 percent.
- Kenosha County has a vacancy rate of 9.1 percent. It was the only county that decreased during the year, from 10.0 percent in the first quarter. Speculative development in the county slowed down in 2009.
- Walworth County has a vacancy rate of 8.3 percent.
- Washington County has a vacancy rate of 7.6 percent.
- Racine County has a vacancy rate of 7.1 percent.
- Waukesha County has a vacancy rate of 5.9 percent.
- Sheboygan County has a vacancy rate of 2.8 percent.
The company said that the actual availability rate (space occupied but available, plus vacant space) increased from 9.8 percent in the third quarter to 10.4 percent in the four quarter.
“The gap between the vacant and availability percentages suggests there is some slack in the marketplace that could increase the vacancy rate if the available, but occupied space is not leased in 2010,” the company said in a news release.
The Dickman Company surveyed its customers and colleagues and asked them what the biggest challenge is facing the commercial real estate market today. Most, 53 percent, said “financing/refinancing.”
“We have seen an influx of properties placed on the market because the property owner’s lender was unwilling to refinance the existing loan,” the report says. “Similarly, new buyers experience greater scrutiny from lending sources in procuring financing for a new project.”
The market is a tenant’s market, the Dickman report says.
“Many tenants are taking advantage of the market by signing long leases at rental rates not available a few years ago,” the report says. “Landlords are also offering more free rent and higher tenant improvement packages.”
The decline in industrial property values in the region appears to have hit bottom, according to The Dickman Company.
“In the past several months we have seen a drop in values, which we believe will be the last significant drop as the market seems to have stabilized,” the report says. “As long as a large influx of quality existing product does not enter the market, values should hold at this level and slowly rise over the next two to four years. We do not anticipate any large increases in values until new construction commences. New construction is more expensive than existing product, and will help raise the values for the entire market. As new deals get completed and existing projects get absorbed, new development will commence.”
