The Madison office market continued to deteriorate throughout the second quarter, according to a report by Chris Caulum, vice president of commercial brokerage at Oakbrook Corp.
Vacancy has risen to 14.4%, and availability is now 18.6%. Both are high in comparison to pre-COVID times, but Madison is in better shape than most other office markets around the Midwest and the country. For example, Milwaukee and Minneapolis-St. Paul both have numbers that are several percentage points higher.
Absorption was negative 140,600 square feet, and new construction is nonexistent. Asking rental rates are essentially unchanged.
Class A buildings saw a vacancy rate of just 9.4% on “direct” space that owners are marketing for lease, and they are still collecting rent from tenants looking to sublease. However, another 6.6% of Class A space is on the market for sublease, making the overall vacancy rate 16.0%. Including available space, the total availability rate for Class A buildings in Madison is now over 21%.
There are some silver linings, however:
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Office inventory was reduced by about 290,000 square feet;
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Leasing activity was up about 10% as compared to the first quarter;
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The downtown submarket is showing relative strength with vacancy at just 11.5% and positive absorption in the quarter; and
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Most sublease space has three or more years of term remaining, so landlords will still collect rent on that space for a long time to come.
