We have seen nine consecutive quarters of vacancy decline. Retail vacancy is currently 8.4 percent, the lowest since 2007.
Unanchored vacancy has declined even more sharply, from more than 25 percent in 2009 to 17.9 percent today. Retail absorption is 682,000 square feet year-to-date, and is projected to end the year at the highest level since 2007.
Many will remember that 2007 was a banner year for the Boise market due to Treasure Valley Marketplace’s opening in Nampa. Retail lease rates appeared to have bottomed out for Class A space in 2010 and for the overall market in 2011, but since then have shown an uptick. New construction for 2012 is at its highest level since 2008, due primarily to the development occurring at The Village at Meridian on the northeast corner of Eagle and Fairview, and Whole Foods/Walgreens on Broadway between Front and Myrtle in downtown Boise.
In the second quarter of 2012, the office leasing market had the highest transaction volume in more than three years. Lease rates are beginning to tick up, with actual rates increasing at a faster pace than asking rates. Office vacancy has continued to decline for the past two years and is currently at its lowest point since 2008. Multi-tenant vacancy has declined even more significantly, from more than 21 percent to 17.8 percent today. Sale activity is up for a third year in a row – up 25 percent from 2011.
Absorption for the office market is on track to be the highest since 2005. New construction in the office market has already surpassed 2011 totals with the largest project completed being the Ventana Medical Office Building in Nampa. West Boise has seen significant improvement as second-generation space is absorbed along the Emerald Corridor. Meridian also continues to be a destination of choice for many tenants, especially near the Eagle and Overland intersection. Downtown activity has slowed this year, mostly due to limited inventory on the market.
The industrial market has continued to improve, but not at the same pace as office or retail. Vacancy continues to decline from its high of 12.4 percent to the current 9.6 percent. Activity on the east side of the valley has picked up significantly in 2012. This is an area which was especially hurt by the recession. More 50 percent of the entire market’s absorption – 260,000 square feet – has been occupied in southeast Boise, southwest Boise and the area surrounding the Boise Airport.
Four of the five largest deals have occurred on the east side of the valley: Dixon Container, GTS Drywall, Bon Aire and D&A Glass have occupied space in this area within the past nine months.
Canyon County continues to be a softer market than Ada County. Nearly 40 percent of the vacant space is in Canyon County, but only 20 percent of the transactions are occurring there. Industrial continues to be a tenant/buyer market, though not as much as seen in recent years.
In general, all segments of the commercial real estate market are improving. We anticipate these positive trends continuing into 2013.
A third-generation real estate broker and fifth-generation Idahoan, Michael Ballantyne, CCIM, is the managing partner of Thornton Oliver Keller Commercial Real Estate. He has 20 years of experience specializing in land and investment brokerage. Thornton Oliver Keller manages nearly 5 million square feet of office, industrial, retail and other facilities throughout southern Idaho. Michael can be reached at (208) 378-4600.