WESTERN SNAPSHOT, AUGUST 2008

Boise, Idaho, Office Market

There is good news in Boise’s eclectic commercial market, but a reeducation process is in order for investors. On the plus side, Boise continues to stand out among U.S. cities in ways that bode well for its continued growth. Boise’s central business district (CBD), in particular, has been a bright spot, absorbing new supply aggressively — making it well poised for future opportunities.

Economic growth estimates have been revised downward in many markets, and Idaho is no exception. The Idaho Business Review cited that May 2008 Boise building permits numbered 1,190, down from 1,615 in May 2007. Despite slower growth, Boise has managed to maintain its vitality.

Boise’s place on the real estate radar has been fueled through continued national media exposure — in March 2008, Forbes selected Boise as No. 2 in the country in its “Best Places for Business and Careers,” and last month’s issue of Kiplinger Personal Finance ranked Boise as No. 4 nationally in its “Best Cities to Live, Work and Play.” In June, Southern California-based Lee & Associates made a statement about the city with its acquisition of commercial brokerage firm The Winder Company, its first foray into what they consider to be the lucrative Northwest.

Investors and market analysts have noticed a divide between sellers’ perceptions and market realities, a phenomenon worsened be the decreased availability of capital to finance deals. The majority of buyers and sellers do not appear to have come to grips with this. Local buyers are sitting on the sidelines waiting for great deals to appear, and sellers still have expectations of higher values for their assets.

Caution describes Boise’s commercial environment. Specialty projects continue to move forward —  medical space, owner-user development, etc. — but speculative office development has been very limited in the past 6 months or more. Lower loan-to-value ratios on lending commitments have some bearing on this trend. First quarter 2008 reports for Ada County suggest a 9 percent overall vacancy, with 7 percent in the Boise CBD and 9.3 percent in suburban districts. Integra Realty Resources reported that Boise’s CBD was in the top 10 of the 55+ markets surveyed for low CBD vacancy rates. Microsoft recently leased 34,000 square feet downtown and was surprised at how limited the downtown options were, according to Bill Beck, owner of Boise’s Tenant Realty Advisors.

With the indirect impact of a soft housing market and the marketplace’s economic fears regarding recession and growing unemployment, it has been relatively common to see reduced-rate flyers. Full-service rents in the greater Boise market trend roughly from $14 to $24 per square foot per year, depending on age, location and quality of location. But, overall, the perception is one of continued nominal rental rate increases and continued escalation in values at least keeping pace with overall inflation.

During the past 20 years, Boise has weathered economic slowdowns relatively well. Boise’s Capital City Development Corporation (CCDC), Boise’s urban-development agency, has demonstrated its proactive thinking with its recent adoption of a sustainable-development policy, giving priority to projects that make efficient use of natural resources and energy to position the city even more positively for the future given new environmental concerns.

Jackson Cooper is principal and owner of Jackson Cooper Inc., an independently owned and operated office of Sperry Van Ness Commercial Real Estate Advisors.

Sources: Idaho Business Review; Brad Knipe, managing director of Integra Realty Resources Inc.; Colliers Office Report; and the Capital City Development Corporation.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.