Flex Space Feasibility Study in Wisconsin

Wisconsin lessor lending: high concentration, modest loan size

Wisconsin is tenth of 51 states in the lessor class that holds flex space, with 53 loans and $35.3 million approved between FY2017 and FY2026. The class is only 18 of 39 among Wisconsin's financed classes, but the location quotient of 1.66x shows the state taking a far larger share of these loans than the national share. The median loan of $350,000 is 0.58x the median for this class nationally, and that gap in size is what distinguishes Wisconsin: investors here borrow in smaller bites. Half of all loans fall between $211,000 and $735,000.

The classification and the FY2024 change

Flex space cannot be told apart from office or retail lessors in this data, because those uses and banquet hall rental share one NAICS code. Readers should also know that this lessor class nearly stops from FY2024, a program change that dominates the yearly record: 13 loans and $12.3 million in FY2021, 9 loans in FY2022, 6 in FY2023, then 1 loan and $479,300 in FY2024, none in FY2025 and 1 loan and $150,000 in FY2026. The later years say nothing about whether Wisconsin investors want flex buildings; they tell us how SBA treats such loans. A study should lean on the years before the change.

The file has 52 SBA 7(a) loans and 1 SBA 504 loan, with 9.4% franchised. CCFBank National Association is the only 7(a) lender to reach the 5-loan line, at 8 loans and $6.5 million, and the rest of the lending is scattered. County counts are flat: Dane, Juneau, La Crosse and Waukesha show 4 each, Milwaukee, Polk and Rock 3 each. That flatness means no single metro defines the market, so any local claim needs local evidence. Cancellation is 9.6% as a floor and also 9.6% as a ceiling. Charge-off is the sharper figure: 3.0% of disbursed FY2017 to FY2021 loans, again 3.0% inside five years, on a cohort of 33 loans. The cohort barely clears the 30-loan line, so a single loss moves the rate by several points.

What a Wisconsin study must test

Start with the building: clear height, dock doors, office share and parking, all of which decide whether it is flex at all. Demand must be shown by submarket vacancy, rent and tenant mix, which the loan file cannot supply. Cost should include deferred maintenance, since a small median suggests many older buildings. Coverage must be tested on in-place leases and on a vacancy case at the largest tenant. The valuation work should treat the building as an investment and name the debt its income can bear.