Economy in Review

Madison, Wisconsin has a diverse economy with a mix of government, education, healthcare, and technology sectors. The city has a low unemployment rate and a high median household income. According to the Bureau of Labor Statistics, the unemployment rate in Madison was below the national average at the end of 2020. The city's economy has remained resilient despite the challenges posed by the COVID-19 pandemic.

The city's economy is driven by the University of Wisconsin-Madison, which is one of the largest employers in the area. The university attracts a large number of students and researchers, which has led to a strong demand for rental housing in the city. Additionally, Madison has a thriving technology sector with several startups and established companies located in the area.

Multifamily Market

The multifamily market in Madison has remained strong despite the pandemic. According to data from the U.S. Census Bureau, the vacancy rate for rental units in Madison was below the national average at the end of 2020. The demand for rental housing in the city is driven by the large student population and young professionals who are attracted to the city's vibrant culture and job opportunities.

Office Market

The office market in Madison has been impacted by the pandemic as many companies have shifted to remote work. However, there is still demand for office space in certain areas of the city, particularly in downtown Madison. The city's strong technology sector has also led to an increase in demand for office space from startups and established companies.

Industrial Market

The industrial market in Madison has remained stable despite the pandemic. The city has a strong manufacturing sector with several companies located in the area. Additionally, there is demand for industrial space from logistics and distribution companies due to the city's central location in the Midwest.

Retail Market

The retail market in Madison has been impacted by the pandemic as many businesses have had to close or reduce their operations. However, there is still demand for retail space in certain areas of the city, particularly in downtown Madison and in areas with high foot traffic. The city's strong tourism industry has also led to an increase in demand for retail space from businesses catering to tourists.

Self-Storage Market

The self-storage market in Madison has remained strong despite the pandemic. According to data from the U.S. Census Bureau, the occupancy rate for self-storage units in Madison was above the national average at the end of 2020. The demand for self-storage units in the city is driven by the large student population and young professionals who often live in smaller apartments and need additional storage space.

Hospitality Market

The hospitality market in Madison has been impacted by the pandemic as travel restrictions and social distancing measures have reduced demand for hotel rooms and other hospitality services. However, there is still demand for hospitality services in certain areas of the city, particularly in downtown Madison and near popular tourist attractions. The city's strong tourism industry is expected to rebound once travel restrictions are lifted and the pandemic subsides.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Madison, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Madison

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Madison. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Madison

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Madison. Click to get a free insurance quote for your property — no obligation.