By Jim Larkin, Kyle Fink and Dylan Brown, Colliers
After several years of outsized growth, southeastern Wisconsin’s industrial market entered a more balanced phase to begin 2026. While headline metrics such as vacancy and absorption have shifted from their pandemic-era peaks, the underlying fundamentals remain intact. Based on what we are experiencing across active deals and client conversations, this is less of a slowdown and more of a recalibration, one that ultimately supports long-term stability across the region.
After many years on an unprecedented pace, the market is settling down into a more disciplined environment where decisions are more thoughtful, and fundamentals are driving activity again. From our perspective, that’s a positive shift that positions southeastern Wisconsin for long-term stability.
Year-end 2025 data points to a market that is adjusting, not retreating. Vacancy rates increased modestly, rising to approximately 7.8 percent across southeastern Wisconsin. At first glance, that shift may appear significant given how tight conditions had become. This shift is largely driven by new big box supply entering the market rather than weakening demand. With more than 3 million square feet delivered in 2025 — most started during peak market conditions — an increase in vacancy is a natural outcome.
Today’s tenants
What matters more is how that space is being absorbed. Leasing activity continues, but the pace has become more measured. Tenants are more selective, underwriting timelines have lengthened and decisions are being made with greater scrutiny. The days of immediate backfill have given way to a more disciplined environment, which, in our view, reflects a healthier and more sustainable market.
That same theme is evident in absorption. Southeastern Wisconsin recorded approximately 1.5 million square feet of net absorption in 2025. While that figure is below the peak levels seen in prior years, it remains firmly positive and consistent with what we are seeing in active requirements across the market.
Occupiers are still expanding, but they are doing so more intentionally. Many companies that scaled quickly during the pandemic are now focused on optimizing their footprints, while new demand continues to come from logistics, light manufacturing and regional distribution users.
Southeastern Wisconsin continues to attract users because of its access to key transportation corridors, including I-94, I-43 and the I-39/90 system. That connectivity allows companies to efficiently serve both the Chicago and Milwaukee metros while still benefiting from Wisconsin’s cost structure, a combination that continues to support long-term tenant demand.
At the same time, rental rate growth has begun to level off after several years of rapid escalation. Landlords are still achieving rents well above pre-2020 benchmarks, but the pace of increases has slowed as supply and demand move back into balance.
In today’s market, quality is increasingly the differentiator. Modern Class A facilities with strong clear heights, efficient layouts and proximity to major transportation routes continue to outperform, often commanding premium pricing. Older Class B and C properties remain competitive, but in many cases require updates or concessions to attract tenants.
We are also beginning to see the reintroduction of limited concessions in certain situations, particularly for larger blocks of space or second-generation buildings. This is not a reversal of the market, but rather a normalization after a period where landlords held nearly all of the leverage.
Developer, investor activity
On the development side, build-to-suit activity continues to lead. Many users today have highly specific operational requirements that existing inventory simply cannot accommodate. As a result, companies are choosing to design and develop facilities tailored to their needs rather than compromise. This trend is especially evident in submarkets such as Kenosha, Racine and along the I-94 corridor, where available land, labor access and proximity to Illinois continue to drive activity.
Speculative development, while still present, has become more disciplined. Developers are underwriting projects with greater caution as higher interest rates and longer lease-up timelines reshape the risk environment. This shift should ultimately benefit the market by preventing oversupply and aligning new development more closely with actual demand.
Capital markets have followed a similar pattern of adjustment. Transaction volume slowed in 2025 as buyers and sellers worked to align on pricing in a higher interest rate environment. Cap rates have expanded modestly, particularly for secondary assets, but investor interest in industrial remains strong. Both institutional and private capital continue to target well-located properties with stable tenancy, reinforcing the sector’s position as one of the most resilient asset classes.
As we move through 2026, the southeastern Wisconsin industrial market is best defined by balance. Vacancy may continue to fluctuate as new supply delivers, and leasing velocity may remain measured, but the fundamentals that have driven this market’s success are still firmly in place.
From our perspective, this is a necessary reset. The pace of the past several years was not sustainable, and what we are seeing now is a return to a more normalized environment where decisions are more thoughtful, development is more strategic and long-term fundamentals are back at the forefront.
For owners, occupiers and investors alike, that is a positive shift and one that positions southeastern Wisconsin for continued stability and growth in the years ahead.
Jim Larkin is a partner, Kyle Fink is a vice president and Dylan Brown is an advisor with Colliers. This article originally appeared in the May 2026 issue of Heartland Real Estate Business magazine.