Metro Milwaukee’s office real estate market showed late-2024 improvement as vacancy climbed and Class A gained

Market conditions improved modestly in late 2024, but overall vacancies continued rising

Metro Milwaukee’s office real estate market posted signs of improvement in the fourth quarter of 2024, even as the region’s vacancy rate moved higher and performance diverged sharply by building class and location. Across the market, occupied office space declined on net during the quarter, but demand held up better in top-tier buildings and in many suburban submarkets.

Vacancy rose to 19.8% by the end of 2024, up from 18.6% in the third quarter and from 17.7% a year earlier. The increase reflects the long-running disconnect between hybrid work patterns and the amount of space many organizations still have under lease, alongside tenant consolidation into fewer, higher-quality locations.

Absorption stayed negative overall, with Class A outperforming older inventory

In the fourth quarter of 2024, the market recorded negative net absorption of 36,191 square feet, indicating more space was vacated than newly occupied. However, high-end Class A space showed a small net gain of roughly 5,000 square feet during the quarter, while Class B and Class C properties posted the bulk of the losses.

Suburban areas outperformed downtown in late 2024, adding about 8,000 square feet of net absorption in the quarter. Losses were concentrated in portions of the urban core and in certain Class B and C corridors, where older layouts and weaker amenity packages have faced more difficulty competing for tenants.

Rents remained stable as tenants prioritized quality and amenities

Despite elevated vacancy, rent trends were comparatively stable during the quarter, with little change in average asking rents. Market stability in rents alongside rising vacancy underscores the “flight-to-quality” dynamic: landlords in the most competitive buildings have been better positioned to hold pricing, while older buildings have relied more heavily on concessions, reconfigurations, and repositioning strategies.

Why late-2024 “improvement” can coexist with higher vacancy

Several factors can produce quarter-to-quarter improvement in market tone even when vacancies rise:

• Tenant migrations: relocations into prime buildings can lift Class A occupancy while leaving behind harder-to-lease space.

• Submarket divergence: suburbs can post gains even as downtown faces larger move-outs.

• Portfolio optimization: companies may reduce total footprint but invest in upgraded space to support hybrid schedules.

Vacancy trends and absorption in late 2024 point to a market still recalibrating, with demand concentrating in newer and better-located assets.

What to watch next

Key near-term indicators include whether leasing activity continues to concentrate in Class A space, the pace of backfilling in Class B and C properties, and how landlords respond through renovations, tenant incentives, or conversions. The central question for 2025 remains whether the region can translate selective strength into broader absorption gains—especially for older buildings that are most exposed to long-term shifts in workplace demand.