MADISON STREET BEAT–Q1 & Q2 2020: The Madison area experienced strong demand for office space in early 2020, driven by significant growth in office using employment with demand for space outpacing delivery of new projects. Demand tapered off in Q2 and remains uncertain after months of a government-mandated shutdown. With the ongoing pandemic disruption, it is likely that these conditions will not only continue but accelerate as employers and landlords adjust to the new reality.
For the immediate future, we believe the new workplace normal will be a hybrid of in-office and remote work. Eventually, many midsize to larger companies will look to reduce workplace density by expanding office space and refitting existing spaces to respect social distancing. That involves things such as smaller conference rooms, more space in open office areas and designated pathways so people move in just one direction.
After a strong year of investment activity in 2019, Madison office sales volume has slowed down considerably during the first 2 quarters of 2020 and has almost come to a complete halt in Q2. COVID-19 has created a climate of uncertainty and the majority of decision making with regards to CRE investing has largely been put on hold. While all markets have been impacted by the pandemic, tech-led companies are fairing the best and may be at the head of the line when The U.S. economy recovers, though its uncertain when and at what pace that will occur.
