ADA and CANYON COUNTY SUBMARKETS
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OFFICE
Q3 REVIEW
O v er vie w view
Office Vacancy rose slightly in the third quarter, to 20.3% overall. Meridian led all submarkets in total amount of space leased, with 74,437 square feet (9 transactions), followed by Central Bench at 29,930 square feet leased (7 transactions), and Downtown at 22,081 square feet (11 transactions). The West Bench, Eagle, and Southeast submarkets all had minimal activity in the office market during Q3; however, there are a few sizeable companies looking to transact in Q4 in these areas. Significant lease transactions in Q3 included: Power Engineers expanding and taking an additional 15,311 square feet in Sundance's Silverstone Business Campus in Meridian, and Balsam Brands leasing 26,374 square feet in Rafanelli and Nahas' project at Stratford Center. Balsam Brands is a new business to Idaho and is expected to create 75 jobs over the next 12 months. Notable Q3 sales transactions of office property included: The sale of an 8,351 square foot office/condo at 301 S. Capitol Boulevard previously occupied by the Idaho Association of Realtors.
A 4,305 square foot stand-alone office sold at 503 S. Americana. The sale of a 2,430 square foot office condominium sold in Eagle to an owner occupant. In Q3, a new Class 'A' Office and Retail development was announced by the Gardner Company for Boise’s Downtown Core. 8th and Main will be comprised of 253,000 square feet of retail and office space, and will include three stories of parking. This building is planned for construction Spring of 2012, and will be open for tenants in 2014. This is exciting news for Boise. Zion’s Bank will be the anchor tenant for this development. In the fourth quarter, we predict slight overall improvement in the market, led by Downtown and Meridian submarkets. Tenants currently seeking space seem to want longer terms than those in the market six to twelve months ago. We expect lease rates to flatten and then begin to rise at some point in the next twelve months.
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RETAIL
Q3 REVIEW
O v er vie w view
The predominant theme regarding vacancy in the third quarter of 2011 is the lack of class 'A' product available. Prospective tenants looking for quality retail space in prime locations such as Eagle Road and the Mall area are having trouble finding locations to match their needs. While overall vacancy remains stagnant, quality space is compressing at a much higher rate. The lack of development over the past four years is catching up with us as new retailers struggle to find the right fit. Tenants are being forced to be patient, as few are settling for less than desirable locations. It is not uncommon for a retailer's search to take well over a year before they find the right setting. By and large, it is regional and national restaurant concepts searching for class 'A' settings. Discounters along with restaurants remain the most active categories of tenants, with preexisting restaurant space especially in high demand. In all, there were 29 retail transactions in Boise's submarkets in the third quarter. The West Bench submarket was the most active, with 30,410 square feet leased, including a 12,905 square foot shop space leased to Vets4Success (thrift store). Other submarkets with strong market presence include Meridian (17% of market transactions), Northwest (14% of market transactions), and Southwest (14% of market transactions). Leasing was minimal in Downtown and Garden City. Several new tenants have committed to moving to Boise such as Tai Pan Trading Post (30,000+ square feet), Gordman's (50,000+ square feet), Chipotle, and Chick-Fil-A. These will provide an even higher demand for
prime retail space. Sales remain stagnant, with the exception of a few smaller transactions such as the 6,860 square foot retail building at 1301 S. Capitol Boulevard, occupied by Papa Joe's. Colliers tracks slightly over 18 million square feet of retail space, and currently shows 2,389,560 square feet on the market. Vacancy as a whole has increased this last quarter by .8% throughout the Treasure Valley, though individual submarkets have shown positive signs. Eagle vacancy dropped 6% from Q2 to Q3, with Garden City, Meridian, North End, and the Northwest all showing some positive improvement. Asking rates inched up slightly throughout the Treasure Valley, moving from $13.32 at the end of Q2 to $13.34 in Q3, the same rate found at the end of Q1. Looking forward, the influx of grocery stores and the competition they create will make an interesting story. Whole Foods and Rosauer's are two new concepts entering our market, and we are hearing more rumors that Wal Mart's neighborhood concept could land shortly. Fred Meyer is under construction on Chinden, and a Wal Mart Super Center on Ten Mile should break ground soon. These grocers will spur new development surrounding their locations and in turn, help us find class 'A' locations for our clients.
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INDUSTRIAL
Q3 REVIEW
O v er vie w view
The industrial market has remained steady so far this year. Lease rates continue to stabilize, but it is still a tenant's market in which landlords offer concessions to qualified tenants. Vacancy rates have had little movement in 2011, shifting slightly from 10.9% at the beginning of the year, to 11.2% mid-year, and currently are at 10.4%. This trend looks to continue in the near future. Most construction trades are still struggling, and there is minimal interest from outside companies relocating or expanding into the Treasure Valley. There is a shortage of available large industrial warehouses, as well as vacant class 'A' industrial space. These two driving factors, along with more owner-users looking to purchase rather than lease, could spark more speculative development in 2012. Q3 was devoid of any significantly sized lease transactions. The largest lease in Canyon County was Red Ball of Idaho, expanding by 13,500 square feet to total out at 22,500 square feet, on North Elder Street in Nampa. Transactions in Ada County included a 10,444 square foot flex building sold to J&M Land on
Ann Morrison Park Drive. ASML US, Inc. leased 9,960 square feet in the Airport submarket, and Sletton Construction purchased a building on 1.3 acres, also in the Airport submarket. The number of transaction consummated per submarkets was fairly consistent. Average asking rate for industrial space was $.48 NNN per square foot, with effective rates over the lease term on done deals dropping below that average due to the incorporation of free rent. Free rent offered by landlords is generally one month per year on the lease term. Tenant improvement dollars are still available from property owners for credit-worthy tenants. Looking forward, there is a more positive attitude among industrial businesses than there has been in the past couple of years, but continued uncertainty concerning the economy remains on the forefront of the minds of the business owners. With reduced lease rates, owners are not willing to sell their buildings as investments. The lower lease rates devalue a building in the eyes of an investor. Therefore, property owners will continue working to improve the income of their properties.
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Q3
STATISTICS
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COLLIERS IDAHO
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