Southeastern Wisconsin’s office, industrial and retail real estate markets posted strong results to finish 2015 with lower vacancy rates and continued positive space absorption, according to the latest report from Xceligent and the Commercial Association of Realtors Wisconsin.
Industrial
The industrial sector continues to lead the region’s commercial real estate market. The region’s industrial space vacancy rate was 4.6 percent in the fourth quarter, down from 5.0 percent a year ago. The region absorbed 651,398 square feet of industrial space in the fourth quarter, the 24th consecutive quarter of positive absorption for the region’s industrial market, according to the Xceligent data.
For all of 2015, the region absorbed 5.9 million square feet of industrial space.
Milwaukee County absorbed 465,286 square feet of industrial space during the fourth quarter and its industrial space vacancy rate is now at 5.5 percent. Waukesha County had negative absorption of 202,133 square feet of space during the quarter, but its vacancy rate remains low at 3.6 percent.
Walworth County has the lowest industrial space vacancy rate in the region at 1.4 percent, but had negative fourth quarter absorption of 11,350 square feet of space. Racine County and Ozaukee County had the highest industrial space vacancy rates during the quarter, at 6.5 percent.
The strong industrial market is resulting in significant development of industrial space in the region.
“New product is finally hitting the market, with nearly 1.9 million square feet of speculative buildings being delivered through spring 2016 and an additional 1 million square feet of product on the drawing board,” according to a recent report from The Boerke Co. “The market is reacting positively to new product. Metro Milwaukee is the second best performing like kind (industrial real estate) market nationally within the Cushman & Wakefield network.”
Office
The metro Milwaukee office market had a vacancy rate of 18.4 percent and absorbed 239,914 square feet of office space during the fourth quarter. A year ago, the region’s office market had a 19.2 percent vacancy rate. The region only absorbed 1,954 square feet of office space during the fourth quarter, but absorbed 239,914 square feet of office space during all of 2015, according to the Xceligent data.
“The small amount of absorption does not represent the large changes within individual buildings and submarkets that have occurred over the past year,” NAI MLG Commercial’s fourth quarter office market report said. “A number of large block users have given back space as they reposition or leave the Milwaukee office market. Fortunately, some of their vacancies have quickly been backfilled by firms either expanding or relocating operations.”
The downtown east class A submarket continues to be one of the best performers in the region, with a fourth quarter vacancy rate of 9.0 percent. That market had negative absorption of 43,185 square feet of space during the fourth quarter, but had positive absorption of 34,724 square feet of space for all of 2015.
Retail
The region’s retail market had a 7.8 percent vacancy rate in the fourth quarter, down from 8.6 percent a year ago, according to the Xceligent data. The Milwaukee area absorbed 622,061 square feet of retail space during the fourth quarter and nearly 1.7 million square feet of space during all of 2015. The addition of several new Meijer and Costco stores in the region was a major contributor to the retail space absorption in the region in 2015.
