The industrial sector shows no signs of slowing down with absorption surpassing 1 million square feet halfway through the year.
Transaction volume picked up significantly in the second quarter, with an increase of over 50 percent in the amount of office square footage absorbed. Midway through the year, net absorption in the Office market already outpaced the amount seen at the end of 2020. Meridian and Downtown Boise have had the most net absorption occur, 192,000 square feet and 105,000 square feet, respectively. Projected supply for Meridian, the market’s second-largest submarket, is currently 10 months.
The Retail market experienced a boost in activity during the second quarter, with both gross and net absorption rising dramatically versus Q1 and overall transaction volume up over 60 percent (by number of deals). As a result of this strong market activity, overall vacancy has declined from 8.6 percent to 7.2 percent.
Investment transaction volume is on pace with the amount seen in 2020 ($574 million). Through the first half of 2021, $232 million in investment product has exchanged hands in the Boise MSA.
The closing of Q1 demonstrated that 2021's office market is off to a solid start in the Boise MSA, posting 310,000 square feet of positive net absorption. This is the second strongest quarter (second only to Q4 2020) in the past five years.
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.
While the impact of COVID-19 on Idaho's commercial real estate markets continues to play out, as we enter 2021, it's very helpful to consider a few key metrics which we believe best highlight the overall condition of individual product sectors.
Despite the economic conditions the pandemic created both locally and nationally, Boise’s Investment market ended 2020 with the third strongest transaction volume on record. In addition, the number of off-market deals continues to increase, highlighting that the true value is undoubtedly higher than the year-end investment transaction total of $574 million. Many offerings do not make it to market in this environment where the number of buyers far outweighs the number of listings available.
Like most sectors, the uncertainty at the onset of the pandemic resulted in a brief slowdown for the commercial land market in early 2020, however, the sector picked back up in the latter half resulting in a year-end total of 345 acres sold and a total consideration of over $68 million.
The industrial market had another banner year in 2020, ending the year with record-breaking absorption, construction, and total number of transactions. The most notable project of the year was the 2.6 million square foot Amazon Distribution Center in Nampa, making the company a dominant player in the local industrial market and ultimately creating more economic growth throughout the Treasure Valley.