Click for larger image. Graphic by Jason Jacobsen.
Vacancy is down and lease rates are up for Boise-area commercial real estate, according to Thornton Oliver Keller?s Market Watch 2012 Year-End Report, released Jan. 29.
Though vacancy was low, non-premium properties remained more difficult to lease in 2012, according to the report.
Class B office space remains abundant in West Boise. Class B and C industrial space remains abundant and difficult to lease, and the disparity is predicted to continue as more tenants seek higher-quality space.
In the retail sector, older and poorly designed properties that have been vacant for some time are expected to stay empty, as more conservative retailers prefer to pay a higher rent for a proven location.
The report indicates the commercial real estate landlord-tenant balance evened out some in 2012.
In the office sector, leases are returning to three- and five-year terms, while tenant improvement allowances and free rent are decreasing.
In the industrial market, the gap between asking and actual rates was the smallest it had been since 2008. The more closely aligned expectations between landlords and tenants helped spur leasing activity, the report states.
While asking rates for retail properties remained flat in 2012, actual rates rose. New retail centers on Eagle Road commanded prices as high as $35 per square foot, nearly triple the market average, according to TOK?s report.
Buyers and sellers were not on the same page in the investment market. While buyers are looking for bottom-of-the market deals, some sellers are overestimating the value of their assets, the report states. While stabilized, investment-grade properties are sought-after, the inventory of such properties is low.
Most office construction activity happened in the health care industry, according to the report. Leases and build-to-suits have declined for smaller medical offices, but hospitals are buying land and buildings for future development, and are leasing large office buildings.
The rebound of the residential market is having an effect on commercial real estate as well, according to the report. Tenants in the industrial sector may seek larger spaces as their business increases, and tenants in incubator spaces may also look for more space when their leases expire.
Permits for multifamily development, along with projects already under way, may lead to an overbuilt multifamily sector, the report states. Multifamily developers must still compete with low mortgage payments on starter homes, and multifamily land sales will likely slow as developers wait to see if the new inventory of apartments in progress is absorbed.
Source: http://idahobusinessreview.com/2013/01/30/bright-picture-for-boise-commercial-real-estate/
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