WESTERN SNAPSHOT, FEBRUARY 2008

Boise, Idaho Industrial Market

MacMillan

The Boise industrial market continues to prosper, but not without some challenges. Vacancy rates remain low but are up slightly, from around 5.5 percent in first quarter 2007 to 5.75 to 6 percent in fourth quarter, due to an increase in speculative builds and a slowing housing market. Absorption for the year will finish around 400,000 square feet with a total of 25.15 million square feet in the market. Rental rates are averaging $0.45 per square foot NNN for larger warehouse and distribution centers, while new small and medium spaces are able to garner $0.55 to $0.60 per square foot NNN.

As with most of the nation, the Boise Valley has experienced a correction in the housing market, which is having its effect on industrial users tied directly to that sector. One national tenant providing building materials recently put half of a 40,000-square-foot warehouse out for sublease while another is looking to consolidate 37,000 square feet into 25,000 square feet or less. Both companies are posturing for a turn in the next 12 to 18 months, but hedging their bets until such time.

Although the tempo set in 2006 was not maintained in 2007, the industrial market in Boise continues to grow, and there have been some benefits to a softer housing market. Unimproved agriculturally-zoned land on the west side of the valley that would have sold for upwards of $80,000 to $100,000 per acre 14 months ago can now be found around $20,000 to $35,000 per acre.

Developers that were unable to justify putting up new business parks and speculative buildings are now entering the market looking to capture tenants with Idaho on their radar. In late 2007, The Brighton Corporation finished two 32,000-square-foot warehouses just west of the Boise airport and is scheduled to bring on an additional 140,000 square feet over five buildings on the east end of the valley towards second quarter 2008. Van Auker Companies continues to drive the market, having recently completed a 65,000 square feet spec building in Nampa and a 62,000-square-foot build-to-suit in west Boise, with plans to deliver another 214,000 square feet in east Boise next to the Shop Ko distribution center starting in spring 2008. Both Brighton and Van Auker are looking to the future by installing EFSR sprinkler systems and 28-foot ceilings.

Farther to the west in Caldwell, Sky Ranch Business Park continues to develop with BMC West mid-way through construction on its trust plant and two 10,200-square-foot spec buildings sold third quarter 2007.

For many of the smaller users, the valley has lacked properties with yard space. In Nampa, four new buildings ranging from 2,400 to 3,000 square feet each with 9,000 square feet of fenced yard were just completed as an answer to what many believe is an underserved market.

Although Idaho has consistently offered some of the nations lowest power rates, there is a shortage for prospective users in heavy industry. As a result, two heavy industrial users with requirements of 60 and 200 megawatts each had to remove the Boise Valley from their site selection list in the last quarter. Relief does appear to be on the horizon. Alternate Energy Holdings Inc. has submitted a proposal for a nuclear plant in Elmore County and MidAmerica Nuclear Energy Co. has been doing some site testing in Payette County. Both plants would be capable of producing between 1,000 and 1,600 megawatts but neither would be available until approximately 2015.

The Boise Valley industrial market will continue to grow, but expect vacancy rates to rise as banks tighten their belts and housing developers ease up on new homes in existing projects or look for long-term investors to take over. All is not lost though. The Boise Valley Economic Partnership (BVEP) continues to work to attract new industry to the Boise Valley. BVEP is also working in conjunction with the Idaho Economic Development association to introduce legislation aimed at providing developers property tax relief for speculative industrial buildings exceeding 20,000 square feet. Their intention is to bring new product to market that would be available for new business to occupy in a 3- to 4-month window.

Greg MacMillan is an industrial specialist for Grubb & Ellis|Idaho Commercial Group in Eagle, Idaho.

Sources: Van Auker Companies, Brighton Corporation, Idaho Statesman, Boise Valley Economic Partnership, Colliers International, Thornton Oliver Keller and DK Commercial

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