– MARKET NARRATIVE –

It’s safe to say that industrial values have peaked, but have generally held strong.  Despite more uncertainty in the overall commercial real estate market, both from a valuation and capital markets & liquidity standpoint, the industrial vacancy rate in Southeast Wisconsin remained stable at 3.6% in Quarter 2 of 2023.  We are anticipating this percentage to inch up slightly in Q3 with some negative absorption we have seen over the past couple of months.  Although the unemployment rate remains low (2.5% WI / 3.6% nationally), we are seeing businesses tightening their belts., including with their excess real estate.  We noted the Manufacturing PMI® was 46.4% in July 2023, reflecting some negativity among local manufacturers (anything above 50% is positive sentiment).

During Q3 2023, we were all pleased to see inflation wind down to 3.18%, mostly supported by high energy and food costs as interest rates climb above 7%.  These factors have resulted in more tepid business and consumer demand. 

We believe the industrial real estate market for non-investment industrial real estate is getting back to equilibrium as supply is starting to meet industrial user demand, with values sustaining at historic highs for the time being.  On a similar note, higher interest rates have made investment real estate and new construction even more challenging to pencil out over recent months, with declining transaction volumes and values starting to compress.  

PARADIGM is your expert resource to help strategize next steps in this constantly changing industrial real estate market.

CLICK HERE for a more detailed Q2 2023 Industrial Real Estate Report for SE Wisconsin.

Data Source: CARW/Catylist