Economy
Madison, Wisconsin's State Capitol and home to the University of Wisconsin-Madison, has an economy historically based on government and education. The rapidly growing Dane County region has seen significant growth in biotechnology, information and health technology, agribusiness/food, and precision manufacturing. Metro Madison’s unemployment rate increased by 20 basis points (bps) year-over-year (YOY) to 2.7%, while overall employment in the region decreased by 0.4% YOY.
Market Overview
Madison's office market softened modestly during the third quarter, with overall vacancy increasing 30 bps quarter-over-quarter to 9.1%. Net absorption totaled negative 42,179 square feet (sf), with occupancy losses across four of the seven tracked submarkets. Northwest/Middleton led occupancy gains with 73,076 sf of positive absorption and a 150 bp QOQ decline in vacancy to 16.8%.
Year-to-date leasing activity totaled 346,453 sf, with Northwest/Middleton accounting for approximately 31% of market volume. Notable third-quarter commitments included Cyclomedia Technology’s 24,183-sf lease at 8401 Greenway Boulevard and FAC Services, LLC’s 23,380-sf lease at 525 Junction Road. An additional 12,000-sf lease at 2758 Dairy Drive contributed to activity in the Southeast submarket. These transactions reflect continued demand for midsized office space, though leasing activity has yet to produce sustained market-wide occupancy gains.
Overall asking rents averaged $22.87 per square foot (psf), down from $23.82 psf in the prior quarter, while Class A asking rents averaged $24.01 psf. The CBD maintained its pricing premium, with Class A asking rents averaging $31.40 psf.
Outlook
Madison’s office market is expected to remain uneven through year-end, with recent leasing commitments providing pockets of momentum while negative absorption weighs on recovery. Northwest/Middleton’s occupancy gains are encouraging, though elevated vacancy rate suggests that further improvement will take time. The CBD remains comparatively stable, while performance across suburban submarkets will depend on tenant retention and converting leasing activity into occupied space.
With no office construction underway in the tracked inventory, near-term vacancy trends will largely reflect changes in existing tenant occupancy. Limited new supply should help contain additional vacancy pressure, but a sustained recovery will require more consistent demand across submarkets.
