2020 began with a strong start for the Retail market, posting 166,000 square feet of positive net absorption in the first 90 days. However, along with the pandemic came many business closures and the subsequent two quarters posted negative net absorption. However, a rebound began in Q4, where the market saw over 400,000 square feet of gross absorption, the strongest quarterly activity since 2013. As a result, net absorption finished the year at 191,000 square feet. The number of transactions completed in Q4 was also up 28 percent from its lowest point in Q2. Retailers that had delayed business decisions during the spring, at the peak of Boise’s stay home order, began moving forward with deals upon the news of the COVID-19 vaccine’s distribution.
In the past 12 months, 22 percent of retail activity was driven by tenants new to the Boise MSA. This trend is expected to continue as Idaho remains one of the more business-friendly states to operate within. According to the State Economic Competitiveness Index, Idaho ranks 3rd in the nation for economic growth outlook. This high ranking is attributed to the cost of doing business and ramp-up time through permitting and regulations that companies experience. The largest portion of transactions completed in 2020 was with tenants opening additional locations or expanding into larger spaces (37 percent).
New construction will also be a trend for the Retail market in 2021. There are a number of apartment projects slated to complete construction in both downtown Boise and Meridian, and nearly all of them have retail space available on the ground floor—as both an amenity to those living in the building and those who work nearby. The 80,200 square foot WinCo at Chinden & Linder is also slated to deliver late in the year.
Throughout 2020, average asking rates continued to climb, with the average rate for the market reaching $18.00 per square foot (NNN, annual). Rent for newly constructed space will likely remain at record high levels throughout 2021 given that the cost of tenant improvements is unlikely to abate in the near future. Overall asking rates will likely remain at their current levels for existing or second-generation space.