Q4 2023: Madison Office Market Report
Madison tenants are gravitating toward smaller, higher-quality office spaces, weakening demand in the market. Despite shrinking space needs, vacancies have largely stabilized, hovering between 5.5 and 6.0 percent since the second quarter of 2021, thanks to a lack of spec supply additions and the ceasefire of companies making office closure announcements that contributed to the spike in vacancies seen in 2021.
New construction presents little concern to the market. Currently, only 360,000 square feet of space is under construction, representing just 0.9 percent of the total inventory in the market. While development has leaned toward owner-occupied and build-to-suit developments in recent years, a small increase in spec projects has been observed.
The relative stability of Madison’s office market has proven advantageous to property owners in the area, who have more leverage since the onset of the pandemic with setting lease rates compared to the national average. The delta in annual rent growth reached its widest point in the first quarter of 2022, when Madison’s rate of growth of 3.8 percent outpaced the national average by 230 basis points. The current annual rent growth of 1.4 percent continues to outpace the nation, but that delta has considerably shrunk.
New construction presents little concern to the market. Currently, only 360,000 square feet of space is under construction, representing just 0.9 percent of the total inventory in the market. While development has leaned toward owner-occupied and build-to-suit developments in recent years, a small increase in spec projects has been observed.
The relative stability of Madison’s office market has proven advantageous to property owners in the area, who have more leverage since the onset of the pandemic with setting lease rates compared to the national average. The delta in annual rent growth reached its widest point in the first quarter of 2022, when Madison’s rate of growth of 3.8 percent outpaced the national average by 230 basis points. The current annual rent growth of 1.4 percent continues to outpace the nation, but that delta has considerably shrunk.