By Devin Ogden, Partner, Colliers
Idaho has been overlooked by investors and developers in the past due to its smaller size and geographic isolation. This is not the narrative anymore. Tenants and users are currently looking to expand their operations into Idaho to serve the surging population and take advantage of a business-friendly environment with minimal regulation. Expensive land costs and significant cap rate compression in primary markets are causing developers and investors to shift their focus to secondary and tertiary markets to chase yield and opportunity. With the positive trend of people and businesses moving or expanding to Idaho, Boise is now near the top of the list for many national and regional investors and developers.
The Boise industrial market has been underdeveloped in the past with only a handful of local developers that never got out ahead of themselves. The population of the Boise MSA is more than 750,000. Total industrial inventory is more than 42 million square feet with an additional 5 million-plus square feet being flex product. The market has had nearly 3 million square feet of positive absorption over the past two years and, as such, the current vacancy rate is 1.9 percent. Most new warehouse being constructed is leased prior to completion
Devin Ogden, Partner, Colliers
. In many cases, the building is pre-leased before construction begins. Monthly lease rates for new Class A warehouses are about $0.68 per square foot (NNN) for the warehouse portion and $1.40 per square foot for the office portion.
However, there is a changing of the guards occurring in the industrial market. Adler Industrial purchased a large portfolio of both buildings and land from a local developer over three years ago and has been active in constructing new build-to-suits and spec buildings. LDK Ventures came into the market last year by purchasing a vacant 350,000-square-foot distribution center, which was then leased to the AZEK Company. LDK has also acquired more development land and is starting the three-building, 345,000-square-foot Madison Logistics Center.
Boyer Company, which has been in the market for a couple years, plans to add another 180,000 square feet on its site. Bow River Capital entered the market this year with a land acquisition and started on Fuller 84 Business Park, a three-building project totaling 464,520 square feet. AT Industrial is also new in the market and is currently finishing construction on a 265,000-square-foot warehouse that was recently committed to a single manufacturer.
The other main industrial markets in Idaho are Twin Falls and Eastern Idaho, the latter of which consists of Pocatello and Idaho Falls. Some of the main drivers in the Twin Falls market are food processing, packaging and distribution due to substantial farms and dairies in the area. Major producers include Chobani, Cliff Bar, Glanbia Foods, McCain Foods and Lamb Weston. Eastern Idaho has also been consistently growing with diverse industries. Pocatello will soon receive Idaho’s first intermodal rail terminal, ensuring that growth and vibrancy will continue in the area. All this activity is putting Idaho on the map.