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1 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International Research & Forecast Report Second Quarter 2018 Copyright © 2018 Colliers International Idaho ---PAGE BREAK--- 2 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International G.C. / N. End / NW 17,392 Downtown Boise 123,156 Southeast 122,130 Southwest 21,131 Caldwell 2,239 Karcher 3,625 Downtown Nampa 7,109 South Nampa 4,435 West Bench 57,279 Eagle -12,521 Meridian -10,157 Airport 69,140 Central Bench 84,179 Idaho Center 37,013 Office DEVELOPMENT AND GROWTH EXPECTED TO CONTINUE Ada Canyon VACANCY ASKING RATE $ ABSORPTION SUBMARKET ABSORPTION SF I Q1-Q2 Nationwide, office occupancy rates have remained near cyclical peak for ten successive quarters and absorption has been on a modest decline for 2 years. ---PAGE BREAK--- 3 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International Q2 OFFICE TRENDS Economic growth in 2018 is expected to be the strongest in three years. With unemployment at historic lows (3.8% in May) and the available pool of works shrinking- job growth is slowing, particularly in the office using sectors. The Treasure Valley joins the ranks of other high-growth cities like Portland and Austin, which are experiencing steady cyclical low vacancies below 10%. The Boise area is hovering between 8%-9% average vacancy. Micron is building a new 157,000 square foot office building that will be able to accommodate nearly 1,200 employees and plans to include a two-story fitness center. Construction began in February and is scheduled for completion by the end of the year. Ten Mile Crossing opened the Paylocity building in June adding 127,000 square feet of office space to the Meridian submarket. Look for another 250,000 square feet to be added over the next couple of years. Retailers, restaurants and entertainment will follow the new office complex. $1803 Ada Co. Avg. I $1736 $1273 $2584 $2166 $1328 $2008 $1251 Canyon Co. Avg. I $1361 $1104 $1717 $1583 $1713 $1759 FULL SERVICE ASKING RATES VACANCY RATES PERCENT(%) 0 2 4 6 8 10 12 14 16 18 20 22 24 Airport Central Bench DT Boise Eagle Meridian G.C./N. End/NW Southeast Southwest West Bench DT Nampa Idaho Center Karcher Northside Nampa South Nampa Caldwell 9.16% 10.44% 9.59% 9.79% 5.25% 8.86% 8.30% 7.95% 10.59% 2.76% 9.77% 5.27% 0.00% 6.01% 9.24% Q3 Q2 VACANCY RATE Q4 Q1 ---PAGE BREAK--- 4 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International SUBMARKET FS AVERAGE ASKING RATE TOTAL SF IN SUBMARKET TOTAL AVAILABLE SF VACANCY VACANCY CHANGE Q1-Q2 ABSORPTION Q1-Q2 Airport - 367,906 33,690 9.16% -18.79% 69,140 Central Bench $12.51 2,576,385 269,034 10.44% -3.27% 84,179 Downtown $25.84 6,975,103 668,857 9.59% -1.77% 123,156 Eagle $17.13 843,713 82,623 9.79% 1.48% (12,521) Meridian $20.08 3,596,205 188,866 5.25% -0.13% (10,157) G.C. & N. End & N.W. $15.83 839,158 74,375 8.86% -2.07% 17,392 Southeast Boise $17.59 1,639,085 136,013 8.30% -7.45% 122,130 Southwest Boise $21.66 1,041,867 82,851 7.95% -2.03% 21,131 West Bench $17.17 3,765,104 398,646 10.59% -1.52% 57,279 ADA COUNTY TOTAL $17.36 21,644,526 1,934,955 8.94% 0.45% 471,729 Downtown Nampa - 588,571 16,229 2.76% -1.21% 7,109 Idaho Center $18.03 531,618 51,938 9.77% -6.96% 37,013 Karcher $12.73 344,403 18,159 5.27% -1.05% 3,625 Northside Nampa - 196,919 - 0.00% 0.00% - South Nampa $11.04 511,853 30,758 6.01% -0.87% 4,435 Caldwell $13.28 500,116 46,195 9.24% -0.45% 2,239 CANYON COUNTY TOTAL $13.61 2,673,480 163,279 6.11% -2.12% 54,421 TREASURE VALLEY TOTAL $14.97 24,318,006 2,098,234 8.63% 0.21% 526,150 Office MARKET STATISTICS Ada Canyon 4 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International ---PAGE BREAK--- 5 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International RETAILERS THAT ADAPT GAIN IN ROBUST ECONOMY Ada Canyon VACANCY ASKING RATE $ ABSORPTION PERCENT(%) 0 2 4 6 8 10 12 14 16 18 20 Airport Central Bench DT Boise Eagle Meridian Garden City Northwest Northend Southeast Southwest West Bench DT Nampa Idaho Center Karcher South Nampa Caldwell 0.91% 7.95% 4.14% 5.46% 1.77% 4.92% 10.34% 9.32% 2.84% 2.80% 9.98% 4.95% 15.09% 4.49% 8.93% 9.08% VACANCY RATES Q3 Q2 VACANCY RATE Q4 Q1 Retail The economic expansion is now at 109 months and, as of June, is the second-longest in U.S. history, moving past the heady 1960s. This expansion has been marked by its moderation as much as its length. Real GDP has grown less than 20% so far in this cycle and jobs by just 13%. For perspective, during the 1960s expansion, GDP grew 53% and jobs by 33%. While the retail sector remains strong, it is still in the middle of a metamorphosis due to changing shopping habits and internet proliferation. Research indicates consumers are more concerned with finding the right product, rather than the most products. ---PAGE BREAK--- 6 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International Q2 RETAIL TRENDS A new 63,000 square foot Albertsons on Broadway is set to open in June. The new store is twice the size of the former one just recently demolished. Downtown Boise is still booming for the hotel industry. The latest addition, The Hilton Garden Inn is set to open sometime in the third quarter at 13th and Front Street, adding 175 new rooms to Downtown Boise. In addition, there is a proposed hotel to be built (Homes 2 Suites by Hilton) on Front Street between 5th and 6th. Panera Bread is set to open a 5,000 square foot restaurant this summer at 11th and Street; it will also be the first restaurant in the downtown core with a drive-thru. In May, The Village at Meridian announced the addition of a second theater to it’s Eagle Road campus. Movie theaters are an excellent example of the changes occurring in retail—high-end cinemas and dollar/discount theaters are looking to expand but mid-range venues are struggling to stay afloat. The City of Boise has been investing in cultural landmarks lately; the expansion of the Idaho Historical Museum is almost complete and expected to open late summer. In June the City also released initial concepts of the new Downtown Library branch. Plans include a café and retail space near the entrance of the Library. $1904 Canyon Co. Avg. I $1241 $1324 $1632 $1664 $997 $1090 $1497 $1275 $800 $2889 $1245 $1390 Ada Co. Avg. I $1533 $1153 $1262 $1300 ASKING RATES Central Bench 9,044 Downtown Nampa -22,292 Eagle 2,970 Idaho Center -89,907 Southwest -2,075 South Nampa -9,082 Southeast -529 Garden City 7,244 Northend -10,259 West Bench -118,461 Karcher -82,302 Caldwell -45,160 Northwest -33,440 Airport -1,510 Downtown Boise 21,955 Meridian 22,342 SUBMARKET ABSORPTION SF I Q1-Q2 ---PAGE BREAK--- 7 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International MARKET NNN AVERAGE ASKING RATE TOTAL SF IN SUBMARKET TOTAL AVAILABLE SF VACANCY VACANCY CHANGE Q1-Q2 ABSORPTION Q1-Q2 Airport - 165,517 1,510 0.91% 0.91% (1,510) Central Bench $9.97 1,477,031 117,444 7.95% -0.61% 9,044 Downtown Boise $16.32 1,669,238 69,173 4.14% 0.66% 21,955 Eagle $13.90 946,026 51,613 5.46% -0.31% 2,970 Meridian $16.64 3,616,321 64,048 1.77% -0.62% 22,342 Garden City $8.00 752,910 37,059 4.92% -0.96% 7,244 Northwest Boise $13.00 815,858 84,391 10.34% 4.10% (33,440) Northend $28.89 179,980 16,777 9.32% 5.70% (10,259) Southeast Boise $19.04 1,252,620 35,589 2.84% 0.04% (529) Southwest Boise $14.97 1,724,473 48,365 2.80% 0.12% (2,075) West Bench $11.53 2,990,700 298,344 9.98% 3.96% (118,461) Ada County Total $15.33 15,653,674 809,313 4.67% -5.30% (87,719) Downtown Nampa $10.90 828,628 41,034 4.95% 2.69% (22,292) Idaho Center $12.75 1,410,717 212,823 15.09% 6.37% (89,907) Karcher $13.24 2,662,981 119,616 4.49% 3.09% (82,302) South Nampa $12.62 716,417 63,977 8.93% 1.27% (9,082) Caldwell $12.45 973,324 88,376 9.08% 4.64% (45,160) Canyon County Total $12.41 6,665,638 525,826 7.89% 3.69% (248,743) TREASURE VALLEY TOTAL $13.37 22,319,312 1,335,139 5.98% -1.91% (336,462) Retail MARKET STATISTICS Ada Canyon ---PAGE BREAK--- 8 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International GROWTH UNDETERRED BY STRESSES WITH STRONG 2018 OUTLOOK Industrial Ada Canyon VACANCY ASKING RATE $ ABSORPTION Southeast 4,123 Southwest 75,257 West Bench 1,031 Meridian 107,125 Downtown Nampa 16,000 Airport 82,393 Central Bench 35,486 Idaho Center -38,031 Caldwell -10,749 Northside Nampa 155,482 G.C. / N. End / NW 49,119 Karcher 25,202 South Nampa 3,000 SUBMARKET ABSORPTION SF I Q1-Q2 Investor demand for industrial properties continues to surpass all other property types. Industrial investment volume so far in 2018 is 11% higher than the same period a year ago, while overall demand for commercial real estate fell. ---PAGE BREAK--- 9 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International Q2 INDUSTRIAL TRENDS Nationwide, product under construction remained very high at 231 million square feet, the second greatest quarterly level on record. Whereas in the Treasure Valley, the shortage of skilled workers continues to push construction prices to record levels, which is causing a compound stress on adding much needed space. The U.S. industrial sector continues to perform exceptionally well, with robust net absorption, rent growth, construction and occupancy, all fueled by the continued growth of e-commerce and a solid U.S. economy. Industrial vacancy rates remain at an all-time low. The low supply has been a hurdle for the industry and asking rates are beginning to creep up to meet the high demand. Van Auker is currently developing two buildings in the Treasure Valley. A 45,000 square foot building in Meridian off of Eagle and Franklin and a 90,000 square foot building off of Norco Way in Nampa. It’s possible that an Amazon warehouse could be coming to Nampa, as a conditional use permit has been submitted by the developer. If approved by planning and zoning the retail giant could add 850,000 square feet of Industrial space to the submarket and thousands of Jobs in Nampa. Rail traffic is robust as year-to-date volumes are up more than This is reflective of the cost of truck transportation rising and rail becoming an increasingly attractive option. In previous cycles, higher asking rates ultimately reduced demand. However, in this cycle the importance of securing well-placed, modern distribution centers because of e-commerce, coupled with higher transportation costs, have rendered rising asking rates less pertinent. Eventually, asking rents will increase to a level where demand will be impacted, but the market is not there yet. $0.62 $0.41 $0.38 $0.78 Canyon Co. Avg. I $0.43 $0.25 Ada Co. Avg. I $0.55 $0.46 $0.50 $0.56 $0.53 $0.52 ASKING RATES VACANCY RATES PERCENT(%) 0 2 4 6 8 10 12 Airport Central Bench DT Boise Eagle Meridian G.C./N.End/NW Southeast Southwest West Bench DT Nampa Idaho Center Karcher Northside Nampa South Nampa Caldwell 6.26% 0.21% 0.00% 0.00% 1.99% 0.97% 0.00% 6.17% 0.37% 0.00% 4.59% 0.03% 0.79% 0.00% 2.30% Q4 Q3 Q1 Q2 VACANCY RATE ---PAGE BREAK--- 10 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International SUBMARKETS TOTAL SF AVAILABLE SF VACANCY VACANCY CHANGE Q1-Q2 ABSORPTION AVG. NNN ASKING RATE Airport 4,354,592 272,692 6.26% -1.89% 82,393 $0.41 Central Bench 2,645,085 5,600 0.21% -1.34% 35,486 $0.50 Downtown Boise 1,000,748 - 0.00% 0.00% - Eagle 351,896 - 0.00% 0.00% - Meridian 4,155,439 82,544 1.99% -2.58% 107,125 $0.53 G.C. / N.End / NW 2,191,634 21,340 0.97% -2.24% 49,119 $0.56 Southeast 5,904,914 - 0.00% -0.07% 4,123 Southwest 1,941,561 119,744 6.17% -3.88% 75,257 $0.52 West Bench 7,459,815 27,740 0.37% -0.01% 1,031 $0.78 ADA COUNTY TOTAL 30,005,684 529,660 1.77% -1.20% 360,534 $0.55 Downtown Nampa 470,293 - 0.00% -3.40% 16,000 Idaho Center 2,040,907 93,582 4.59% 1.86% (38,031) $0.38 Karcher 2,051,079 655 0.03% -1.23% 25,202 $0.46 Northside Nampa 6,149,775 48,560 0.79% -2.53% 155,482 $0.25 South Nampa 817,751 - 0.00% -0.37% 3,000 Caldwell 5,011,252 115,249 2.30% 0.21% (10,749) $0.62 CANYON COUNTY TOTAL 16,541,057 258,046 1.56% -0.91% 150,904 $0.43 TREASURE VALLEY 46,546,741 787,706 1.69% -1.75% 673,091 $0.49 Industrial MARKET STATISTICS Ada Canyon ---PAGE BREAK--- 11 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International Submarkets 20 20 55 55 44 20 S Pleasant Valley Rd Eagle Rd 36th St S Orchard St Eagle Rd Chinden Blvd W Victory Rd Idaho St 19th St Black Cat Rd Can Ada Rd Can Ada Rd McDermott Rd Ustick Rd Victory Rd Kings Rd Roosevelt Ave 10th Ave S Northside Blvd 22nd Ave 1st St S 11th Ave Garrity Blvd Railroad St Cirrus Dr Midway Rd Homedale Rd Midland Blvd Laster Ln Madison Rd 11th Ave N 17th Ave N 9th St S S Indiana Ave Deer Flat Rd Deer Flat Rd Marble Front Rd N Kcid Rd Look Rd Farmway Rd Ustick Rd Farmer Rd S Federal Way Capitol Blvd Broadway Ave Main St Reserve St 16th St 3rd St W Gowen Rd Shaw Mountain Rd Taft St Chinden Blvd Wagner Rd St St 8 9 10 11 12 13 19 1 2 3 4 5 14 16 17 18 Star River Rd 7 State St 6 15 Fort St Fort St McDermott Rd Ada County Submarkets Canyon County Submarkets Northwest North End Southwest Airport Central Bench Downtown Boise Downtown Peripheral Garden City Southeast West Bench Eagle Meridian Idaho Center Northside Downtown Nampa South Nampa Karcher Middleton Caldwell 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 ---PAGE BREAK--- 12 Idaho Research & Forecast Market Report I Q2 2018 I Colliers International George Iliff I Managing Owner Jim Shipman, JD, MBA I President & Chief Operating Officer MARKET CONTACT: Melanie Nielsen Director of Marketing & PR +1 [PHONE REDACTED] [EMAIL REDACTED] Nick Fry, MBA Research Coordinator +1 [PHONE REDACTED] [EMAIL REDACTED] Copyright © 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International 755 W. Front Street, Suite 300 Boise, Idaho 83702 +1 [PHONE REDACTED] www.colliersboise.com Graphics by Sara Smart-Wise INVESTMENT BROKERAGE SERVICES Clay Anderson, MBA, CPA Lew Goldman Lew Manglos, MBA, CCIM, SIOR OFFICE BROKERAGE SERVICES Jamie Anderson Scott Feighner Oliver Maron Scott Raeber, MBA, CCIM Steve Winger RETAIL BROKERAGE SERVICES Brook Blakeslee David Cadwell Mike Christensen Mallisa Jackson INDUSTRIAL BROKERAGE SERVICES Steve Foster Michael McNeight Devin Ogden, MBA, CCIM Jake Tucker LAND BROKERAGE SERVICES Jimmy Roumanis John Starr CANYON COUNTY BROKERAGE SERVICES Lincoln Hagood Bryant Jones Mike Peña EASTERN IDAHO BROKERAGE SERVICES Don Zebe Jared Zebe PROPERTY MANAGEMENT SERVICES Lisa Cochran Nicole Di Antonio Patty Gordon Kelly Schnebly Nikki Schneider Diana Watson Rachel Wood