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Boise valley boom: Retail, industrial, commercial are hot. Experts weigh in on current, future growth – and if it’s a bubble


Much of the Idaho commercial real estate industry gathered for the annual Building Owners and Managers Association conference in Boise Tuesday, with a main panel focused on the impacts and dynamics of Boise’s fast-growing market.

The panel included experts on retail, office, mutli-family, and industrial real estate. The theme? The Boise valley has seen a lot of growth – and everyone is bracing for more.

‘On the map’

Van Auker Adler Industrial
One of the 80 properties now owned by Adler Industrial, formerly owned by Van Auker Companies. This site on Gowen Rd. sits next to a future empty lot the company also owns. Photo: Don Day/BoiseDev

“We are on the map,” Devin Ogden with Collier said, talking about industrial demand – but summing up the general sentiment. “I used to go to conferences and people were like ‘Boise? Cool.’ and move on. The last conference I went to in Nashville, developers and brokers around the country are like ‘tell me more, I’ve been hearing a lot about it,’ and wanting more information.”

Ogden said it’s been a wild ride with industrial space in recent years, with demand far outstripping supply. The latest figures from TOK Commercial the vacancy rate for industrial space is just 1.3%.

“It’s not only the growth that we’ve had but the trajectory of our growth,” Ogden said. “(Investors) see us as a long-term good play.  It’s been underserved. You look at the ratio of industrial space to population and competing markets in the west, we’re at the bottom.”

[Large new industrial park approved on edge of Boise limits]

Ogden said Colliers is hearing from firms who are frustrated with the regulation in states like California or Washington looking to the Treasure Valley. While they are keeping their offices in coastal states, they are moving other operations to Idaho — and using up large amounts of industrial space in the process.

The COVID-19 pandemic helped accelerate long-term trends to e-commerce use from customers.

“We are seeing a lot more demand for e-commerce fulfillment. COVID took away the discomfort some consumers felt about ordering online.”

The market is also seeing a significant influx of out-of-state investment.

“This used to be a couple (of developers) market,” Ogden said. “But with Adler, Boyer, LDK Ventures, Bow River, AT Industrial, Trammel Crowe… the list goes on.”

Ogden said the pipeline for new industrial buildings – as we’ve covered at BoiseDev – is robust.

“Get used to seeing large buildings going up. No one is building under 100,000 square feet. There’s going to be a lot of buildings.”

More retail. More food

A new Albertsons store in Star Idaho opened last month. Photo: Don Day/BoiseDev

Retail space is also accelerating — and changing.

“Retailers have their foot on the gas, they’re not going to stop. Even with issues of labor, it’s not going to slow down,” LeAnn Hume with Cushman & Wakefiled told the breakfast crowd. “Retailers are expanding. We’re on the map. They know the people are here. There are lots of challenges – but it goes to supply and demand. The demand is there because of the people.”

She said one of the biggest users – unsurprisingly – is food and restaurants.

[In-N-Out Burger considers location at Village at Meridian]

“Food users are the ones growing the fastest. Everyone wants a drive-thru now. There’s a trend toward just pickup windows – you order online and you pull up and you don’t get out of your car. There are also requirements in leases for dedicated pickup spaces.”

Hume pointed to two new shopping centers coming online anchored by Albertsons stores. One, in Star that opened last month – and another in South Meridian that should open later this year.

“We leased them out in six months.”

The valley’s increasing traffic – though nothing like the issues faced in Seattle or California – is changing the calculation for retailers.

“The thought of going from East Boise to Eagle Rd… It’s not something you do lightly anymore. You plan ahead,” she said. “I think you are going to start seeing people sticking close to home. You’re going to see people want to live closer to retail, with more neighborhood-y options so everyone has services close by their home.”

[2019: IKEA? In-N-Out? Dunkin’? A crystal ball look at when the area could get some big names]

Multi-family growing fast

Boise apartment growth
Construction at The Lucy and Thomas Logan apartments in Downtown Boise is wrapping up. Photo: Don Day/BoiseDev

Casey Lynch, who owns local multi-family developer Roundhouse ran through a quick rundown of numbers on apartment units that helped illustrate the growth of the multi-family market:

  • In 2000, there were 24,000 apartemnt units.
  • By 2010, there were 29,000.
    • That’s a compound annual growth rate of 1.8% from 2000-2010
  • By 2020, the valley had 44,000 units
    • That’s a CAGR of 3.7%.
    • What’s more, the growth from 2010 to 2020 came almost entirely from 2015 to 2020.

“Multi-family as been historically undersupplied in this market,” Lynch said. “We finished a project last year in Eagle (The Clara) with 277 units. You would expect to absorb between 12 and 15 units a month. In March of last year, we leased 70 units in a month. It was unbelievable.”

Lynch said they’ve seen a significant change in the types of people renting apartments – with 75% of all renters making $150,000 or more in household income per year.

“These people have different needs and different desires and they have disposable income so they are looking for more fully amenitized apartments,” he said.

[New apartments on hoped-for stadium site could feature local modular tech., daycare center, sustainable methods]

Before 2010, he said the Boise valley was “lagging behind” in terms of apartment development quality.

“It was looked at as the lowest cost (a developer) could build multifamily – and those were the renters. Everyone else was buying a house.”

But, with the parallel changes to the cost of multi-family housing, the types of complexes being built started to change.

“Now it’s dog washes and bikes and a place to store kayaks and canoes,” Lynch said.

He said newcomers are looking for apartments in more urban areas – a place Roundhouse has focused, with several projects built in Downtown Boise, and more on the way.

“They want to live in urban environments with dining and retail. They demand a higher level of service.”

Skyline changes

Boise skyline
Boise, Idaho. Photo: Don Day/BoiseDev file

The industrial market is hot. The retail market is hot. The housing market is hot.

Office space?

“It’s a little bit of a wild card with office buildings,” Al Marino with TOK said.

Unlike other sectors, Marino said the last year has mostly been about local firms expanding over regional or national.

“Nine of top ten office deals we saw last year were local companies expanding. The trend we are seeing is more locally and regionally controlled companies have been able to (lease) space. Some of the national guys haven’t put their employees back in the office.”

He noted that there is just one building formally proposed in downtown Boise with office space in it – the new ICCU Building planned for 4th St. and Idaho St.

“There’s (almost) no new product coming online in downtown – then there’s all this growth in downtown. I think there’s going to be a moment in the office environment where we are under-built.”

While there aren’t a lot of office buildings planned downtown, there are a number of multi-family and hotel projects. (See the BoiseDev Project Tracker.)

“There’s a resurgence in urban development, especially multi-family,” Lynch said. “You’re going to need to be in urban environments where the high-income earners want to live. My wife is from Austin. Look at the picture of its skyline from 2010 to 2020 and it’s unrecognizable. I think you are going to see some high rises go up in downtown Boise. It’s going from a 12-hour city with tumbleweeds in the streets at night to now you can live downtown and shop downtown and dine downtown.”

[Is Boise like Austin 20 years ago? Lessons from Texas’ capital city provide clues to Boise’s possible future]

A bubble?

The panel discussed if the current environment is a bubble — a fast run-up that will eventually pop — or decline.

Panel moderator Ryan Cleverly of BVA Development — who is an accountant by background and handles the financials for the developer as CFO set up the discussion rhetorically:

“As the finance guy I always go ‘absolutely there’s a bubble and we need to stop. It’s too frothy.’ But there are arguments to both sides,” he said.

“There’s so much liquidity in the market right now”, Lynch said, with one of those counterarguments. “We’re not in a bubble right now. People are looking at commercial real estate and multi-family and industrial as an inflation hedge.”

[Analysis: Study says Boise housing is overvalued. Local real estate experts push back. What’s happening?]

“The demand is high and there are people who don’t necessarily care about the metrics,” Hume said. “There’s a huge land grab going on right now.”

Wes Jost with Zions Bank thinks changes are coming – though not exactly a bubble.

“It’s going to be who can afford those (more expensive) goods and those services and the housing,” he said. “One of the things from a conservative standpoint is – how much longer can rents go up or housing costs go up and people can afford that? It’s going to have to change. It’s going to slow or even stop. How many households over $75,000 are going to come here? At some point, it’s going to slow down – but I don’t know that’s when that is. Maybe it’s 2023 or 2024 but no one knows.”

Don Day - BoiseDev Editor & Founder
Don Day - BoiseDev Editor & Founder
Don is the founder and publisher of BoiseDev. He is a National Edward R. Murrow Award winner and a Stanford University John S. Knight Fellow. Contact him at [email protected].

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