Infographic summarizing the Madison office market in Q1 2026, highlighting rising vacancy rates, negative absorption, and leasing activity driven by downsizing and relocation. A large illustrated office building is centered between market statistics and leasing data.
Madison office market Q1 2026 infographic showing 16.2% vacancy, negative absorption, and leasing trends

Madison Office Market Report Q1 2026 | Vacancy, Absorption, Leasing Trends

Key Takeaways

 

Madison Office Vacancy Just Hit 16.2%
Madison’s office vacancy rose to 16.2% in the first quarter of 2026, the highest we’ve seen this cycle.
The all-time high came after the Great Recession in 2009, when we peaked at 17.3%.
That headline number gets attention, but the real story is what impact it has on every negotiation.
Prior to Covid, Madison office landlords had real leverage. Vacancy bottomed out at just 7.8% in 2017 and it was still under 10% at the end of 2019.
If You Signed Your Lease Prior to 2020, You’re Probably Overpaying
Most office leases are five years or more so many Madison area companies signed their leases in a very different market.
Today, landlords are underwriting deals more aggressively just to keep occupancy up. Tenants are getting:
  • More free rent
If You Own Office, Brace for Impact
Not all pockets of the market and classes of buildings are distressed, but most landlords will have a struggle on their hands when a tenant comes up for renewal or a space needs to get backfilled.
Well-located, well-capitalized buildings with nice amenities are still competing—and in many cases, winning. But with so many available spaces, Tenants tend to have multiple options to cause landlords to compete for them.
Some owners have adjusted to the new reality, but most seem to be holding onto pricing or terms that may not be attainable in this market.
If you have debt, pay close attention to your loan maturity and try to prepare well in advance. It may take a year or two to get back to stabilization.
 
If You’re Lending on Office, Underwriting Assumptions Should be Scrutinized
The overall market is at 16.2% vacancy, but certain submarkets and classes of space are much higher. At the same time, there may be little to no current vacancy in the subject building. So setting the appropriate vacancy allowance isn’t easy.
Perhaps the bigger question is: what should you assume when leases are set to expire in the near term?
Backfilling space is taking longer, costing more, and often resetting rents after concessions. That puts pressure on cash flow in a way we haven’t seen in several years.
Some assets will work through it. Some won’t—at least not without new capital or a different strategy.
Madison’s Office Market Will Get Better
If vacancy is going to rise further, I don’t think it peaks much higher. We have seen a slowing of the rise in the last 18 months.
This weakness won’t last indefinitely. Vacancy will eventually come down; whether through positive absorption, removal of inventory via demolitions and conversion, or just time.
If you want to see where the opportunities are – by submarket, building type, or lease profile, please reach out to me or members of the Oakbrook team.

 

This analysis is based on Oakbrook market research, CoStar data, REDI market reports, and local transaction tracking through Q1 2026. Vacancy, absorption, and leasing trends reflect the Madison office market as of the end of the first quarter of 2026. Figures may be revised as source databases are updated.  Commentary reflects our interpretation of how those conditions are affecting tenants, owners, lenders, and investors.

Frequently Asked Questions

Q: What is the Madison office vacancy rate in Q1 2026?
A: Madison office vacancy reached 16.2% in Q1 2026, the highest level in the current cycle. Oakbrook Commercial

Q: Are office tenants in Madison gaining leverage?
A: Yes. Higher vacancy has increased tenant leverage in many negotiations, including face rates, free rent, tenant improvement packages, and flexibility on options. Oakbrook Commercial

Q: What does this mean for Madison office building owners?
A: Owners may face more pressure on renewals, backfilling space, concessions, and loan maturity planning, especially in weaker submarkets or less competitive buildings. Oakbrook Commercial

Q: Is the Madison office market recovering yet?
A: The article’s view is that conditions may improve over time, but current vacancy and leasing dynamics still reflect pressure rather than a full recovery. Oakbrook Commercial

 

About Chris Caulum

  Infographic summarizing the Madison office market in Q1 2026, highlighting rising vacancy rates, negative absorption, and leasing activity driven by downsizing and relocation. A large illustrated office building is centered between market statistics and leasing data. 

 Chris Caulum, SIOR, CCIM
 Commercial Real Estate Advisor | Oakbrook Corporation

Chris Caulum advises owners, occupiers, investors, and developers on industrial and office real estate across Greater Madison and Dane County. His work includes sales, leasing, acquisitions, dispositions, site selection, and market strategy.

Chris tracks local leasing, sales, vacancy, construction, and user demand to help clients make better real estate decisions.

Want the full Madison office report with submarket and building-type breakdowns? Contact Chris at ccaulum@oakbrookcorp.com or 608.443.1040.

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