More commercial real estate in the metro Milwaukee area is sitting empty, based on the latest quarterly report from the
Commercial Association of Realtors Wisconsin.
The area’s office space vacancy rate has risen to 17.7%, according to CARW’s report for the fourth quarter of 2023, which is up from about 16.6% in the second quarter of 2023.
The area’s industrial real estate market saw its vacancy rate rise to 5.4% in the fourth quarter, up from about 3.2% a year ago.
The region’s industrial market clearly
remains much healthier than its office market. The southeastern Wisconsin industrial real estate market absorbed more than 1.3 million square feet of space in 2023. It's vacancy rate has risen because construction of new supply has outpaced the demand for industrial space to be absorbed.
Meanwhile, the metro Milwaukee office market had negative absorption of 529,458 square feet of space in 2023, according to the report.
The downtown Milwaukee area has a 17.8% office space vacancy rate and had negative absorption of 43,810 square feet of office space in 2023.
The suburbs have an office space vacancy rate of 17.6% and had negative absorption of 485,648 square feet of office space in 2023, and there is little new office space under construction in the market. There is only 205,428 square feet of new office space currently under construction in the metro Milwaukee area.
The Third Ward/Walker’s Point submarket had positive absorption of 161,942 square feet of office space in 2023, the most of any submarket in the region for the year. The Pewaukee submarket had the second highest level of office space absorption for the year, at 25,395 square feet.
More on the industrial market
While the southeastern Wisconsin industrial market absorbed more than 1.3 million square feet of space in 2023, it had negative absorption of 233,942 square feet of space in the fourth quarter.
The region’s industrial market is still adding a significant amount of supply. More than 4.1 million square feet of industrial space is currently under construction in the region, according to the CARW report. Of that, 1.45 million square feet of space is under construction in Kenosha County, 1.2 million is under construction in Washington County, 521,261 square feet in Milwaukee County and 457,618 square feet in Waukesha County.
Kenosha County has an industrial space vacancy rate of 14.3%, the highest in the region, by far. The lowest vacancy rate is in Walworth County at 0.4%.
Milwaukee County had negative absorption of 1 million square feet of industrial space, the biggest loss of any county in the region in 2023. Kenosha County absorbed the most space at 766,535, followed by Racine County at 754,298.
“The industrial market ended 2023 on a positive note, with increased sales and leasing activity,” said
Travis Tiede, managing director for
Newmark. “This trend is expected to continue into 2024, particularly in the capital market sector, as buyers and sellers align their expectations and lending institutions better understand market dynamics. Despite this overall positive performance, the vacancy rate has slightly increased. This can be attributed to the completion of new speculative projects, the availability of new sub-lease options, and multiple large manufacturers moving or consolidating operations. However, there is still a high demand for stand-alone owner-occupied properties, leading to a backlog of interested buyers and making it a bit like a game of checkers. As a result, the newly available second-generation spaces are likely to be quickly occupied until construction costs become more favorable.”
