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Increase In Vacancy Rates OR A Strong Boise Valley Commercial Real Estate Market? Main Boise Valley Commercial Real Estate

The Idaho Satesman reported on some upticks in vacancy rates in the Boise Valley Commercail Real Estate Market today. When you analyze the article in light of the fulfillment process and existing vacancies, you'll see that we are in a great investment and tenant situation. Once again, the Boise Valley proves to be a great investment and business location. shhhhhh, don't tell anybody........

On the heels of my earlier blog on suspicious CAP rates, the Idaho Statesman discusses higher vacancy rates, particularly in the retail & office segments.

Okay, so I got a little joy over being right about someone pushing their product just a little too hard.  I think the term "Buyer Be Ware" comes to mind.

Other than just gloating for a moment, what else can we learn from today's article?

There does seem to be some uptick in the vacancy rates.  Now, sit back, take a breath and analyze what is being said.

When you sit back and actually consider all the moving parts, the reality is that there is a tremendous amount of strength in the Boise Valley Commercial Real Estate Market.

Sure, the activities related to Albertson's have created some temporary weakness in the office segment and the retail segment has seen vacancies rise as well - for other reasons (e.g.; new construction), but that is the nature of the beast isn't it?

What we are seeing is the normal business cycle.  Developers see market needs, they fulfill those needs, sometimes causing temporary oversupply.  The rule of thumb is: Concept to Conception takes 18 months, so once a shortage in a market segment is recognized, it takes about 18 months to fulfill that need.  In the meantime / during that process, anomalies come & go creating short-term market swings.

One interesting point that was obvious by its absence is that the industrial / flex market vacancy rate is still under 6%.  That's a great sign for the Boise Valley and greater still for investors & developers in that market segment.  The other good news for tenants is that, even with that low vacancy rate, lease rates still continue to be affordable and that's Great News for tenants and tells us that investors/building owners in the industrial / flex market segment are more interested in having a healthy market than trying to take advantage over short term product shortages!

 
Posted by Scott Nicholson at 9/19/2007 5:01:00 PM
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Comments (2)
Re:Increase In Vacancy Rates OR A Strong Boise Valley Commercial Real Estate Market?
First, kill the bold...
'
Second, "When you sit back...still enormous strength.."- What, vacancy rates are up and the best evidence to the contrary you present is that Albertsons is a blip and the business cycle...
...okay maybe an arguement for a future upturn, but you generally present no facts to sustain that.

Third, and where you completely lose me... "investors/bilders are more interested in a healthy market than (making money)" hahaha

Give us a break, investors are pricing at MARKET! The market is soft. These guys aren't a charity! A particular builder may offer favorable rents, but when the whole group does it is called MARKET PRICING not some selfless love of Boise commercial space...

Posted by on 9/19/2007 1:43 PM
Re:Increase In Vacancy Rates OR A Strong Boise Valley Commercial Real Estate Market?
I present my data in no other fashion than as empirical.

Relative to the question of investor motivation, it looks like we have different experiences. I work with building owners / investors every day and my experiences are that they (owners and tenants, for that matter) are looking for win-win relationships. They want their tenants to be financially healthy so they can get paid. If owners were just motivated by profit then why wouldnt they take into consideration the investment tenants have in their space & calculate the cost of tenants to move when re-negotiating lease rates? The simple reason is and I agree with you on this aspect of your point they are motivated by the bottom line. In order to improve their bottom line, they are much better off having healthy, long-term, win-win relationships.

Do some owners use different pricing strategies? Obviously. Are they owners who dont consider the effect of the lease terms on their tenants? Almost certainly. Do I consider them to have a long-term vision. Nope.

Case in point. I was discussing a lease with an owner yesterday and he told me that the lease needed to be a win-win proposition.

The reality is that owners and tenants are actually business partners. Experienced owners and experienced tenants both know that.
Posted by Scott Nicholson on 9/21/2007 8:29 AM
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