Buoyancy in Boise.Idaho's unlimited recreation, low cost of living, highly educated work-force and untouched consumer market are drawing people and businesses to the area, particularly the state capital.
"Boise is an interesting town," said Mike Attiani, CPM, director of asset services for Colliers International, in Boise. "We're somewhat isolated, [hundreds of miles] from Salt Lake City, Seattle and Portland, Ore. We're pretty self-sufficient here. We can't depend on regional support to drive the market."
That isolation, and the ability to penetrate an untapped market, might be influencing businesses and retailers to establish a presence in the area and fill commercial real estate vacancies--albeit at a much slower pace since the recession hit, said Heidi Mickelson, managing director for Sperry Van Ness, with offices in Boise and Sun Valley, Idaho.
BIG BUSINESS IN BOISE
"I think the Boise market is finally seeing some improvement. It was hit pretty hard by the recession," she said. "Now, there are some positive signs of recovery. New construction is in the works and already commencing, and we just haven't seen that in the last several years."
Home to a number of corporate headquarters--Boise Cascade, Morrison Knudsen and Micron Technology, to name a few--the Boise office market has remained stable in recent months, with total vacancy at 14.1 percent in January, according to a monthly newsletter, Market Review, February 2012, produced by Boise-based Thornton Oliver Keller Commercial Real Estate.
Still, the Boise market is driven mostly by small-to mid-sized employers, Attiani said. According to Clark Krause, executive director of the Boise Valley Economic Partnership, several smaller companies throughout the valley are seeing job growth.
"There are significant signs of good things happening in Boise, from construction to job creation," he said.
The largest cities in Idaho--Boise, Nampa and Meridian, all in the "Treasure Valley"--have experienced the most activity. In January, a fully-occupied, 18,000 square-foot medical office building was completed in Nampa, bringing the city's office rate to its lowest vacancy rate of 13.4 percent since late 2007, according to Thornton Oliver Keller statistics.
South Meridian and Downtown also saw substantial decreases in vacancy early in the year as a result of multiple leases over 5,000 square feet being signed in January. Further, enough demand exists for the development of a new high-rise office building in downtown, experts said.
Construction on 8[th] and Main, an 18-story Class A building in downtown Boise, will start in Mid-2012, according to Colliers Idaho's "Year End Real Estate Market Review" for Boise and Nampa. The report indicated that heightened interest in the development spurred the addition of three stories to the original plan. Also, multiple office tenants, including anchor tenant Zions Bank, have already committed to leasing 100,000 square feet beginning in early 2014.
"There is an appetite for additional space: We're certainly not out of the woods, but the trend is positive," Attiani said.
An appetite exists for retail opportunities, too. In fact, several national retailers that previously have not had a presence in Boise are entering the market. DSW, Nordstrom Rack and Performance Bicycle recently signed leases, Mickelson said.
"We're pretty excited to see some new retail tenants coming to town!" She said. "I think the fact that national retailers are choosing to come to Boise is indicative that everybody believes the market is turning the corner."
The first Boise Whole Foods is also under construction downtown, according to the Colliers Idaho 2011 Year-End Real Estate Market Review. It is projected to open in early 2013. According to the report, grocery stores "remain at the forefront of the retail market for the Treasure Valley. Aside from Whole Foods, Rosauers and Fred Meyer, among other grocers, have announced or begun developing new stores.
VACANCY RATES DECLINING
In February, downtown and north Boise had reached their lowest vacancy levels since early 2009, 10.2 percent and 20.5 percent respectively, according to information from the Market Review, February 2012, by Thornton Oliver and Keller. However, vacancy in central Boise has "continued to climb since mid-2010 and currently has 35 months of supply."
Mickelson said for the overall commercial market to truly turn, employment numbers must consistently improve and at larger increments than recent months.
"There are companies coming along and positive things are beginning to happen, but we still really need a major employer to enter the market or expand for drastic improvement to occur."
Attiani said he is optimistic the hard work and creative management strategies he and his colleagues have relied on throughout the economic downturn--from slashing expenses, to negotiating tax assessment reductions, to bundling the team's property portfolio for insurance purposes despite all owners being disparate--are beginning to pay of as the horizon brightens.
"I think the last few years have been really difficult, but we were able to survive it well," he said. "The last few months have been positive. I think we're starting to see the benefit of our labor."
KRISTIN GUNDERSON HUNT IS A CONTRIBUTING WRITER FOR JPM[R]. IF YOU HAVE QUESTIONS REGARDING THIS ARTICLE OR YOU ARE AN IREM MEMBER INTERESTED IN WRITING FOR JPM[R], PLEASE E-MAIL MARIANA TOSCAS AT MTOSCAS@IREM.ORG.