— By Karena Gilbert, Office and Investment Associate, Colliers —
Idaho experienced significant population growth in recent years, and the commercial real estate market reflected that trend. The pace of growth has begun to slow, although overall growth is expected to increase over the next decade.
The growth brought both business and talent to the state as the Boise MSA continues to maintain a healthy office market. Second-quarter vacancy sits at 7 percent, up from 6.1 percent in the first quarter and outperforming the national vacancy rate, which stands at 16.4 percent. The Boise MSA has experienced an 18.5 percent job growth over a five-year period compared to the national growth level of 3.4 percent.
Despite these promising stats, Idaho is not immune to the economic turbulence being felt on a national level. With interest rates rising and market uncertainty, some buyers have become more cautious while others still actively seek opportunity. Cap rates have increased from 5.1 percent in the second quarter of 2022 to between 5.5 percent and 6.5 percent in the second quarter of 2023.
Office lease absorption is down, though we’re still seeing a lot of interest in Boise. Micron, a $66 billion semiconductor company founded and located in Boise, recently announced a $15 billion memory fab expansion project. The announcement has been drawing additional interest in Idaho from supporting businesses seeking both office and industrial space.
Class A office space continues to be sought after for lease and for purchase. The balance of business and talent coming to the state held unemployment, currently at 2.6 percent, below the national average of 3.6 percent. Attracting and retaining talent continues to be a priority for business owners and decision-makers as Boise touts low unemployment and increased commute times due to population growth. Downtown Boise continues to be a draw for many as others look to Meridian and Canyon County, heading West, to be centrally located. Workers have returned to work with some businesses offering flexible hours. The parking garages downtown are nearly full with some creative steps being taken to work with those on flexible schedules.
The state’s low unemployment rate and strong job growth, along with open spaces and easy access to recreation continue to attract many people to Idaho.