I am sick and tired of hearing about how the downtown Boise office market is in trouble because of the cost or availability of parking. This is ridiculous. If you don’t see that downtown Boise is booming, then you just aren’t paying attention.
Vacancy rates downtown have declined to an all-time low and lease rates are at an all-time high. If you look at the major downtown office buildings, vacancy rates are under 8 percent. This is even more impressive when you consider that we’ve added three major new office buildings in the core in the past five years. Ask any tenant who is looking for downtown office space how many options they have… The answer is simply very, very few.
Technology companies like CradlePoint, Kount, Clearwater Analytics, MetaGeek and Forsta have made the commitment to be downtown. More surprisingly, major companies like Simplot, Idaho Power, Boise Cascade, NYK Lines and Packaging Corporation of America have chosen to stay in the downtown core, when moving to the suburbs would have been a cheaper option.
This is not simply a Boise phenomenon either; old line companies like General Electric, McDonald’s, Caterpillar and Weyerhaeuser are selling off their large suburban campuses and relocating downtown. Even in traditional suburban markets like Los Angeles and Las Vegas, companies and talent are flocking to the core. Believe it or not, even my home town of Detroit is seeing rapid urban revitalization.
Sure, locating in the downtown core carries a price premium over periphery or suburban areas. This is true in every decent urban area. And, there are some tenants (e.g. call centers) who don’t need to be in the downtown core and hence the premium makes no sense. More and more though, we are seeing tenants like Kount who are choosing to relocate into the core from periphery locations. Ryan Woodings, Founder of MetaGeek, recently was quoted as saying “Downtown Boise is where everything is. When you have a lunch meeting, or get coffee with a client, it’s always downtown.”
Why will employers pay a premium to be in an urban area? The answer is simple: That is where many of the best and brightest employees are. It’s no secret that the unemployment rate in the Treasure Valley for qualified workers is virtually zero. To hire the best and the brightest, companies need to be located in an area where the smart young employees want to live, work, and play.
In metropolitan areas around the world, talented people are flocking to the vibrancy of the downtown core. Much of that has to do with the tastes of the millennial generation, adults 34 and younger, many of whom continue to express a preference for walkable neighborhoods with bike lanes, public transit and a mix of recreational amenities. “Probably for the first time in history, instead of people moving where jobs are,” says Tom Murphy, a senior fellow at the Urban Land Institute, “jobs are moving where the talent is.”
We who work in real estate have the mistaken perception that facility costs are the major cost component for most companies. In almost every instance, this is simply not true. Good managers understand the economic benefits of hiring and retaining the best employees far outweigh and the cost savings associated with locating your office in a less expensive, less desirable area.
I travel to urban areas around the world and, other than the major gateway cities (e.g. San Francisco), I believe Boise’s downtown core stacks up well against any I’ve seen, even Portland and Austin. In fact, last week I was in Salt Lake City touring office properties. In Salt Lake, tenants are willing to pay a substantial rent premium to be located in the core, yet, in my opinion, Downtown Salt Lake has nowhere near the vibrancy of Boise’s urban center.
Downtown Boise is becoming more walkable, bikable and livable. These will all serve to lessen the issues around parking. As we see more housing built in and around the downtown, the parking woes will lessen. A parking expert once told me “Everyone with a car has a parking problem. If you work in New York City you have a parking problem if you can’t park within five blocks of your office. If you work in Meridian, Idaho, you have a parking problem if you can’t park right in front of your office door.” Alright, if this is true, then we have a parking problem.
Sure we have some challenges in downtown Boise, lack of public transit and lack of accessible green space being two of the larger ones. The good news is that we have a mayor, City Council and urban renewal agency, the Capital City Development Corp., that understand the importance of a vibrant downtown core and are working on these issues. As Ed McMahon, senior fellow at the Urban Land Institute, once said: “Travel teaches you many things, not the least of which is that downtowns matter. Downtowns are the heart and soul of our communities.”
In summary, if you believe companies are trying to move out of downtown Boise due to the inconvenience of parking, you simply are not paying attention. We have built three major office buildings, five large hotels, and hundreds of housing units in the past few years. In addition, Boise State University chose to relocate its Department of Computer Science School here, St. Luke’s Health System is spending hundreds of millions on expansion and the Simplot Foundation built JUMP. As downtown Boise gains more critical mass, this growth will continue. Pay attention.
Scott Schoenherr is a Partner at Rafanelli & Nahas. He is on the management committee of the local chapter of The Urban Land Institute and a former President of the Downtown Boise Association.