— By Dan Minnaert, Partner and Industrial Specialist, TOK Commercial Real Estate —
Industrial leasing activity has slowed year over year in Southern Idaho markets with total transactions down 9 percent. However, all markets saw transactions increase or remain flat from the first quarter to the second quarter. Net absorption has also remained positive in all markets throughout the first half of 2023. Activity is strongest in the Boise MSA with nearly 900,000 square feet of net absorption recording so far this year. Top deals for the year include Ferguson Enterprises leasing 164,600 square feet of new construction in Nampa, and Hensel Phelps Construction leasing 92,900 square feet at 535 Gowen in South Boise.
Demand remains strongest for spaces in the 1,000- to 5,000-square-foot range, accounting for 51 percent of deals over the past 12 months. However, absorbed spaces above 15,000 square feet have increased 15 percent year over year. In addition, organic growth is the top driver for leasing activity considering 30 percent of deals over the past year were attributed to tenants opening additional locations or expanding. Additional new industrial tenants are expected to enter Southern Idaho, most notably in the Boise MSA as new projects such as Meta and Micron’s $15 billion expansion brings more semiconductor and other electronic manufacturing industries to the area.
Development remains a key highlight for the industrial sector with more than 2.5 million square feet of new construction completed halfway through 2023 across Southern Idaho markets. The majority of new space is being delivered in the Boise MSA with more than 2 million square feet. Of this total construction, 91 percent is speculative. Some notable speculative deliveries include Phase II of Fuller84 Business Park (439,600 square feet) and Madison Logistics Center (345,000 square feet), both located in Nampa. This additional space resulted in multi-tenant vacancy reaching its highest level in a decade (16.6 percent) at the end of the second quarter.
Total construction in Eastern Idaho has already surpassed last year’s total with 469,000 square feet delivered. The majority of new construction is attributed to a new Amazon warehouse (110,000 square feet) and the last two buildings at Gem Lake Industrial Park. Those buildings were 140,000 square feet each, and were completed in the second quarter. Industrial development in the Magic Valley has been slower compared to other markets. This will not remain the case for long, though, considering there’s more than 120,000 square feet of new space estimated to deliver in the latter half of the year.
The second half of 2023 will continue to see strong industrial development, most notably in the Boise MSA. The market is on track for a record-breaking year with an additional 1.8 million square feet currently under construction and anticipated to deliver by year end. In Eastern Idaho, Idaho Falls will remain the prime area for industrial development where multiple small projects are in the pipeline. This includes major industrial parks like Andersen Business Park and Clark Business Park. For the Magic Valley, top projects that are close to delivering include Iron Creek Industrial Park (60,400 square feet) and Sunset Business Park (25,000 square feet), both located in South Twin Falls.