BOMA panel: the recovery of Boise office space

In Downtown Boise, office life has made a big comeback. That was the message at the May 19 lunchtime meeting of the Idaho branch of the Building Owners and Managers Association (BOMA). The event hosted a panel whose topic was the state of Downtown Boise office space, returning workers and parking.

The panel was moderated by Chase Erkins, a principal at the commercial real estate firm of Lee & Associates. The panel participants were Matt Edmond, the director of parking and mobility for the Capital City Development Corp, Boise’s urban renewal agency; Wes Jost, Zions Bank’s senior director of real estate; Karena Gilbert, an associate at Collier’s Boise office, specializing in office leases and sales and Coby Barlow, a property and operations manager at the Boise office of Oppenheimer Development.

Parking

Edmond, who is in charge of Boise’s public parking garages, reported that: “from a parking perspective, it looks like we’re more or less recovered…April of 2022 was (around) 99% (recovery), both in revenue and visits for short-term parkers compared to April 2019. For contract parkers, (it was) something similar.”

Edmond stated around 2,100 new parking spaces were coming online in the next three years, but that downtown was losing around 750 surface spaces, for a gain of around 1,350. He added: “Construction costs and interest rates and other things could bring that number down,” noting the cost of adding a parking space in a parking structure had almost doubled. “We were right around $20,000 (per space)…(now) we’re probably looking at $40,000…That’s one of the many of the things causing our rents to rise in multifamily and residential.”

Workers return to downtown

Barlow remarked: “Most of the tenants are back…We haven’t seen the square footages reduced, because everybody still has their desk…As these longer leases come up (for renewal), I think we’ll start to see some of the bigger companies get more efficient in their space.”

Gilbert concurred: “The lights are on, but not as many bodies on the space. But I would say most are coming back.” Regarding how many people are coming back to the office, Gilbert said: “That’s a very fluid number right now.”

Gilbert commented on how changing work models affected leasing style and space usage: “When you look at sublet, some leases (are) coming back as business owners say, ‘You know, we’re not sure we’re gonna come back to the office, so can you sublease the space for us?’ Some of those are calling us back, saying ‘Actually, we might be coming back to work.’”

Rents up, vacancy down

“We have seen (in) downtown overall an increase in the rates. It is interesting because new projects (are) coming online. You ask: ‘Is it going to fill?’” Gilbert said of her experiences with clients filling up office spaces, even during the height of the pandemic.

She added: “A lot of it is just local expansion…That’s combined with people coming in from out of state…The vacancy has gone down, and that’s driven some of the rates up. Plus (there is) new product coming online that is coming in at a higher rate…Across the valley, vacancy’s been tight; it’s still under that 5%.”

Costs are up too

Jost commented on how more than just rents going up: “One of the things that we’re seeing is that developers want to build, but the cost of everything is higher, not just the interest rate…I think things are just going to get a little bit more expensive. I think the ability to do an 11th and Idaho may be impacted by where the rates are because they have moved. If you look at construction rates, (developers) have lost a good 100 basis points…If you tack on construction and other costs, 100 basis points on your rate is is meaningful. So that acts as a natural brake.”