A report by Chris Caulum, vice president of commercial brokerage at Oakbrook Corp., shows that the Madison industrial market remains strong. Vacancy ticked up slightly to 2.3%, and quarterly absorption closed out the year at 587,000 square feet.
The city’s industrial building market grew by almost 1.5 million square feet in 2023 and now has over 60.5 million square feet in total. Absorption for the year was a positive 1.45 million square feet. A mix of speculative and owner-occupied buildings were completed in the fourth quarter, the largest of which is a 158,000-square-foot Emmi Roth cheese production facility in Stoughton.
Just one Class A speculative warehouse has available space; all others have been fully leased, and most within six to 12 months of completion.
More Class A warehouses will break ground in 2024 and 2025, although the velocity seems to be slowing in the wake of higher interest rates. While there is still some pent up demand from owner-occupants to purchase industrial buildings, prices for existing buildings will begin to moderate.
Almost all lenders are requiring significant cash deposits to go along with loans, they are scrutinizing all new relationships, and their underwriting criteria has tightened considerably in terms of what asset types they are open to lending on, minimum debt service coverage ratio, vacancy assumptions, and reserves for replacement.These more stringent requirements result in lower recognized net operating income, which in turn reduces the maximum loan amount.
Editor’s note: A previous version of this story has been updated to include the report’s author, Chris Caulum.
