Multi-state retailers are taking an earlier look at Boise

Teya Vitu//May 30, 2017

Multi-state retailers are taking an earlier look at Boise

Teya Vitu//May 30, 2017

A clerk talks to a customer outside the Lolli and Pops candy store in Town Square Mall May 18. Photo by Patrick Sweeney
A clerk talks to a customer outside the Lolli and Pops candy store in Town Square Mall May 18. Photo by Patrick Sweeney

Lolli and Pops and other emerging multi-state retailers have found a sweet deal in Boise.

The San Francisco-based candy and chocolate purveyor is an early player in a new dynamic in retail expansion:  Opening a store in the Treasure Valley early in their history, and, in some cases, coming to Boise before Portland or Seattle.

Until the past year or two, national retailers routinely did not find Idaho until they had stores operating in 40 states, sometimes even 47 or 48 states. Idaho was the 46th state for Panera Bread.  Boise waited more than 20 years for Trader Joe’s once the southern California grocer decided to expand out of state.

“We’ve been west, east, north, even south, and finally we are ‘in’ the Rocky Mountains as we open stores in both Idaho and Colorado,” Trader Joe’s notes on its website timeline.

Chick-fil-A was founded in 1967 in Georgia but didn’t find Boise until November 2010, nor Washington until 2015 and Oregon until 2016, employing the same rationale: “The Pacific Northwest is about as far from Atlanta as it gets. That’s the only reason.”

Idaho was the 48th state to get an ABC Supply Co. store, the nation’s largest wholesale distributor of roofing supplies. CVS Pharmacy is in 49 states and only arrived in Idaho in 2016.

On the other hand, Lolli and Pops, established in 2012, opened its 27th store at Boise Towne Square in July 2016. Idaho was the company’s 12th state. Less than a year later, the company now has 38 stores in 17 states.

“We wouldn’t have done it first but it was a natural extension to do infill in the Boise market,” said David Friedman, vice president of real estate and store development at Lolli and Pops. “We are doing really well in Seattle, Portland and Denver. Where can we duplicate that effort? The psychography of Boise is similar, the lifestyle that is there.”

Several other newer, multi-state retailers have expanded to the Treasure Valley in their early years.

Holly Chetwood
Holly Chetwood

“Boise is just on everybody’s radar,” said Holly Chetwood, retail brokerage specialist at Thornton Oliver Keller, a Boise commercial real estate firm. “It’s on the national radar and the retailer radar. We started to see that a couple years ago.”

The 2008-09 recession and its recovery was a curious dividing line for Boise. Several factors favorably came into play in the early 2010s that all added up to the Treasure Valley becoming a retail darling.

Population growth, cheap and available commercial real estate, the Village at Meridian, magazine accolades, and low wages suddenly became a magnet, especially for the new generation of entrepreneurs founding their multi-state retail companies in the new millennium.

Meridian has landed on national “fastest-growing city” lists for years, capped off with the 2013 opening of The Village at Meridian, a lifestyle shopping center.

“When (Metropolitan Statistical Areas) hit the 600,000 population mark, they start to get on tenant’s radar screens for expansion,” said LeAnn Hume, senior retail and investment specialist director at Cushman & Wakefield Pacific’s Boise commercial real estate office. “With the success of The Village attracting big name tenants, it becomes appealing to other retailers who may have previously seen Idaho as ‘too small’.”

Boise MSA crossed 600,000 in 2009, right at the depths of the economic turmoil. Even before then, Boise was positioned to join Seattle, Portland, Denver and Salt Lake City as an equal player for retail expansion – even with a far smaller population.

Boise is nearly the smallest population center with a Lolli and Pops store other than Springfield, Mo., but sales volumes in Boise match those of larger Lolli and Pops cities.

“It’s a smaller market, lower volume,” Friedman said. “Considering it’s doing average volume in a smaller market, we’re very happy. We projected it to do lower and we’re doing better.”

The Village at Meridian put the Treasure Valley on the retail map

Population growth, media accolades and The Village at Meridian all played a role in multi-state retailers taking a closer look at Boise. Photo by Teya Vitu.
Population growth, media accolades and The Village at Meridian all played a role in multi-state retailers taking a closer look at Boise. Photo by Teya Vitu.

The 1 million-square-foot Village at Meridian changed the retail landscape in the Treasure Valley when it opened in 2013.

The Village not only enchanted shoppers, diners, moviegoers and people strolling around the fountain, but the retail/office complex at Idaho’s busiest intersection also caught the attention of the retail world.

“The Village was very important in putting Boise on the map,” said Holly Chetwood, retail brokerage specialist at Thornton Oliver Keller, a Boise commercial real estate firm. “One thing we have seen as a result is the arterials that feed into The Village have improved. Fairview was dead before. Now you’re seeing revitalization with CarMax.”

The Village is a top performing store for a number of tenants, said Ramona Merrill, the intermountain vice president of marketing for El Segundo, Calif.,- based CenterCal properties, which developed, owns and operates The Village at Meridian.

Ramona Merrill
Ramona Merrill

“When they see a developer investing $300 million, that gets people’s attention,” Merrill said.

Elsewhere, shopping centers and malls are closing in droves.

“They are calling it a retail ice age,” Merrill said. “So many are closing. That makes them sit up and take notice (of The Village’s success). They took a risk in coming to a market our size.”

Back when The Village was built, that section of Meridian was still corn fields. Across Eagle Road, fields remain. Even with 30 years of booming population growth, the Boise metro is only the 81st largest metropolitan statistical area, according to the U.S. Census Bureau.

“Successful developers are putting more interest into things that are counterintuitive,” Merrill said.

The Village and the suburbs also benefit on the retail front as retailers scoping out the Treasure Valley often can’t get downtown Boise to pencil out.

“Initially, everybody wants a downtown flagship but we have a hard time fulfilling parking requirements,” Chetwood said. “Now the flagship goes to Meridian and Eagle and downtown is secondary.”

Lolli and Pops, the San Francisco candy and chocolate shop, looked at both The Village and Boise Towne Square before committing to the latter – because the Village already had a niche candy store, said David Friedman, vice president of real estate and store development at Lolli and Pops.

“You have a couple really good venues to shop that do well in sales per square foot: Boise Towne Square and The Village at Meridian,” Friedman said. “They are really good places for companies to expand. It’s a good market for retail. It’s not over-retailed.”

Garden City-based Gyro Shack, founded in Boise in 2009, is expanding in reverse, after opening its out-of-state franchise in May in Everett, Wash. Gyro Shack is among the many newer multi-state eateries expanding to other states.

“In the last two-three years there was a ramp up in franchising, start-up retail and innovative business,” Gyro Shack CEO Doug Miller said.

Population, inexpensive real estate, and available labor have made Boise a national retail draw

Inexpensive real estate and labor have put the Treasure Valley in the retail spotlight in the last few years.

“The reason you see so many restaurants is because of our wages,” said Jeffrey Hall, principal at Northwest Commercial Advisors in Meridian. “They make way more money here than in Seattle and Portland. Restaurants have thin margins. Here they can actually make money. They just want to be here. Our tip wages is very low, $3.35 (per hour).”

Jeffrey Hall
Jeffrey Hall

The federal minimum wage for employees who get tips is $2.13 per hour. Utah and Wyoming both follow the $2.13 minimum, but Washington requires tipped workers to be paid $11 per hour, Oregon $9.75, Nevada $8.25 and Montana $8.15, according to the U.S. Department of Labor.

Las Vegas-based Capriotti’s Sandwich Shop is scouting the Boise region to place a restaurant, likely before Oregon or Washington.

“Both are very expensive and pretty tight (with available real estate),” said David Bloom, Capriotti’s Sandwich Shop chief development officer. “Boise has really good sites. You can find them and they are available.”

Garden City-based The Gyro Shack is expanding into Oregon and Washington – but avoiding Seattle and Portland for now.

“It’s the real estate, frankly,” Gyro Shack CEO Doug Miller said. “When you look at real estate in Seattle and Boise, there’s a big difference. “

Aubrielle Holly, market research coordinator at Colliers International in Boise, analyzed commercial real estate rates in Boise, Portland and Seattle. She determined downtown Boise retail lease rates run about $18.76 per square foot.

“Seattle is running in the $25-$35 range, with a few rates in the downtown as high as $40,” Holly said. “Portland looks to be in the $20-$30 range.”

Boise has hit a retail market sweet spot.

“We reached the population threshold but we’re not at the high cost of entry of other metros,” said Seth Brink, vice president of operations at The Gyro Shack.

Though based in Meridian, Hall represents national retail tenants across the western states.

“The cost of other states is pushing retail out,” Hall said. “A Subway taking up 1,700 square feet pays $40,000 for a year in Boise. I’m negotiating a lease for the same space in L.A. County for $150,000.

“Newer multi-state companies are unable to get opportunities in other states,” Hall continued. “They can’t find space. I can take those retailers and bring them to Boise, find them a home and find them a lease that is reasonable. In those markets, it’s very difficult to find space and a fair price point.”

Hall has seen the shift at the International Council of Shopping Center’s RECon Global Retail Real Estate Convention in Las Vegas, the world’s largest retail real estate convention.

“There is always a map for these retailers,” Hall said. “Before, we used to see the East Coast, California, South, Arizona, Texas. But we are starting to see them push into the Northwest. A lot of that has to do with the connecting of the dots. Companies like Panera can make the move here because they have the distribution to connect the dots through Salt Lake City and Portland. Boise is much more accessible now.”

Multi-state retailer that gave Boise an early look

Just a few years ago, Idaho was the the 40th-odd state to get national retailers. That has changed in the last few years. Newer multi-state retailers commit to the Treasure Valley early on and sometimes even before opening in Oregon and Washington.

Other multi-state chains that expanded to Idaho early include:

Habit Burger (in 10 states now)

Native Grill & Wings (seven states)

Tropical Smoothie  (nothing in Oregon, only three in Washington)

Eureka! (21 restaurants in five states)

Westside Pizza (29 pizzerias in three states – and moved the corporate office from Washington to Boise)

Zoup! which was in 17 states when it committed to Idaho

Black Bear Diner expanded to Idaho as one of eight states,

Tru by Hilton is building a hotel in Meridian just one year after the brand was announced

Alfa Romeo opened a car dealership in Boise before Portland.