The Magic Valley is becoming a hot spot for food processing technology, as more and more food companies expand in the area. According to the Idaho Business Review, Gem State Dairy Products is building a 200,000 square foot asceptic milk plant in Twin Falls, which is set to be completed in 2020. The plant is expected to be three times the size of an average fluid milk plant.
At the close of Q1, unanchored retail vacancy dropped below total vacancy for the first time on record. Unanchored vacancy has been on a downward trend for the last 2 years and is currently the lowest level since 2002.
Total retail vacancy saw an increase in March after the closure of Shopko (95,400 SF) on Fairview Avenue in Boise. Total vacancy is expected to increase even higher over the next couple of months with the closure of the last two remaining Shopko stores – on Boise's Broadway Ave. and in Nampa.
A new company is coming to the Boise market. Ravenswood Solutions, a California-based company that specializes in GPS-based mobile instrumentation systems for the military, is expanding its operations to the Airport submarket, where industrial vacancy is currently 2.6%.
The company is moving into 105,000 square feet of industrial space at 645 East Gowen Road and plans to use the facility to maintain and test equipment. Tenant improvements at the site are currently underway. Ravenswood Solutions expects to be hiring throughout 2019.
2018 was a good year for office construction, which experienced an increase of 62,000 more square feet than in 2017. The top 3 projects contributing to this increase were 27,500 SF at 3302 Valencia Dr. (Bingham Memorial Hospital); 22,973 SF at 1460 Elk Creek Dr. (Connections Therapy); and 35,000 SF at 1207 S. 25th (CAL Ranch).
The Foothills School of Boise (https://www.foothillsschool.org/) purchased the 22,500 square foot former Creamery Building in Downtown Boise last month. The building, located at 9th & Miller Streets, had been vacant since Sage International School moved out in 2016 to their new location on Parkcenter Blvd.
The overall retail vacancy has oscillated in the mid-7 to mid-8 percentage range for the last 2 years. However, the next two months will witness large back-to-back vacancy increases with the closure of the three Treasure Valley Shopko sites. The 95,000 SF Shopko on Fairview will close this March. In April, the Nampa and Broadway Shopkos are also expected to close, totaling 191,000 SF.
In addition to increasing the vacancy rate, these large vacancies will also dramatically decrease net absorption which is currently -83,000 SF for 2019.
Retail CAP rates in the Boise MSA have decreased for the 4th straight year, ending 2018 with an average rate of 6.5%. Single-tenant retail remains in high demand. Inventory of this product is limited, but the assets that are trading are high quality with strong national tenants already established in the Boise market.
Industrial net absorption ended 2018 at a record high level of nearly 1.4 million square feet, up 39 percent from 2017. As a result, vacancy ended the year at 2.9 percent. Many large move-ins occurred in 2018 including, Fresca Foods occupying 183,000 SF in Caldwell and FedEx leasing a newly constructed 237,000 SF building in the Airport submarket. The Airport submarket was the strongest market in 2018 and accounted for nearly 30% of total net absorption.
Overall supply of office space in the Boise area is within a healthy range (13.4 months), despite the lowest vacancy rates since 2002 (7.23%). To put it simply, tenants are able to find space within a reasonable time regardless of the tight market.
While the supply is projected to continue its decline, there has been an increase in demand for spaces over 10,000 square feet. Transactions over 10,000 square feet had a 40% increase from 2017 to 2018, and the demand for these spaces is increasing.
National tenants are expected to continue popping up in the Valley as local population growth and Boise’s accumulation of national accolades and attention are piquing the interest of out-of-state retailers. Multiple planned projects are on the horizon with the possibility of breaking ground in 2019 or 2020 - including Costco at Chinden & Ten Mile, Winco at Linder Village, and Winco on Overland.