According to a report by Chris Caulum, vice president of commercial brokerage at Oakbrook Corp., the Madison industrial market showed some strength over quarter 1, but a slight slowdown is palpable. Vacancy ticked up by 0.1 percentage point to 2.4%, and quarterly absorption started the year at a healthy +407,000 square feet.
Three new buildings were completed in the first quarter, the largest of which is a 272,500-square-foot Class A spec building near GE Healthcare on the southeast side of Madison. While no commitments are in hand, there are several 60,000-square-foot and larger users engaged, according to the listing agent.
The velocity of new construction has slowed down considerably in the Madison market, but larger markets have slowed down even more. As a result, construction costs are coming down. About 479,000 square feet of buildings are still under construction, down considerably from last year. Almost all of the remaining new construction is for owner-occupants such as Arrowhead Pharmaceuticals, FujiFilm, Event Essentials, and STIHL.
Because there are fewer new spec buildings with available space, there is a heavier mix of older buildings with lower rates bringing down average asking rental rates. Rates had peaked at $8.11 per square foot a couple of quarters ago, but the average is now down to $7.27 per square foot.
There is fairly robust activity at the larger end of the industrial market for space, but smaller user activity (5,000–20,000 square feet) has grown somewhat sparse over the last quarter. Moreover, a couple of larger sublease spaces are hitting the market, putting a bit more pressure on vacancy and rental rates.
