Businesses take advantage of still-soft Valley market

It may not be enough to reduce commercial vacancy rates, but some Treasure Valley businesses are moving to new spaces to take advantage of a more affordable market.

A Concordia University School of Law construction project at the southwest corner of Fifth and Front streets in downtown Boise may not have been feasible or even contemplated two years ago.

Concordia has been looking for a building of 40,000 to 50,000 square feet to buy or a building site.  Concordia ultimately looked at about 40 properties, many unlisted.  The university had in mind a budget that wouldn’t have allowed a project that size in downtown Boise.

Last spring, Concordia bought the former Front 5 building on the 0.74-acre downtown site. Immediately south of the 16,800-square-foot building is a parking lot on which Concordia is expanding the structure to about 50,000 square feet.

It took a little imagination to make this site work for the project, but there were two keys:  the excess land immediately south of the existing building presented an opportunity not readily apparent at first.  And the property’s value had dropped.

Two years ago, the multi-tenant Front 5 building was full.  Some tenants left as the economy weakened, which created an opportunity for an owner-occupant, he said.

Another recent owner-occupant is the Idaho Pizza Co. restaurant chain.  Idaho Pizza constructed and recently occupied a 3,000-square-foot building at 310 Sugar Ave. in north Nampa for its commissary – where it makes dough and sauces, and grates cheese, for daily delivery to the restaurants.

For more than two years, Idaho Pizza had been looking to lease a facility, but it wasn’t until this year they decided to buy property and build, CEO John McNicholl said.  The deal enabled the pizza company to own instead of rent, and to expand the operation.

McNicholl credits the dour economy for the buy-and-build scenario.  The Nampa site is central to the five-restaurant Treasure Valley wide chain.  Idaho Pizza took occupancy in late May.

Lorana Quintero, president of the franchise operation, said franchised owner-operators are keeping their eyes and ears open for opportunities in the southwest Idaho commercial real estate market.

Kristi Bowins, senior property manager with Colliers, said shopping center managers must stay creative in what has been a higher-vacancy, lower-rent market.

“It’s how creative you get that makes it work for both the tenant and the owner,” she said.

Vacancy can hurt the landlord but can benefit businesses that are growing, Bowins said.

Leapfox Learning’s recent move from Oakbrook to Shopko Plaza is an example of a business taking advantage to expand, she said.

Leapfox, which offers computer training, last March expanded in Oakbrook.  And again in June, the business took over an additional 5,000-square-foot space at Shopko Plaza in part because an ideal expansion space wasn’t available at Oakbrook.

Leapfox Education Director Debbie Nolan, said, the move was possible in part because Leapfox’s lease at Oakbrook was a month-to-month add-on to the lease of neighboring Quick Computer, a sister business.

“They worked me such a deal at Milwaukee (Shopko Plaza), at a fantastic, discounted rate that a small business owner could afford,” she said.

Leapfox now has two locations including part of the Quick Computer space in Meridian.

Commercial vacancy rates, rents

Office vacancy was 18 percent throughout the Treasure Valley at the end of 2009 and 18.2 percent in mid-2010.  Average full-service asking rent for office space in the Treasure Valley was $17.21 per square foot per year at the end of 2009 and $16.30 as of mid-2010. The average rent paid is $14.73 per foot as of mid-2010.

Retail vacancy in the Treasure Valley increased from 13.1 percent at the end of 2009 to 13.5 percent in mid-2010.  Average triple-net asking rents (tenant also pays taxes, insurance and maintenance costs) were $13.83 per square foot per year at mid-year, down from $14.47 a year earlier.

Treasure Valley industrial building vacancy dropped from 12 percent at the end of 2009 to 10.9 percent in mid-2010.  Monthly, triple-net, average asking rents were 52 cents per square foot at the end of 2009 and 49 cents at mid-2010.

Source: 2010 Colliers Idaho Mid-Year Real Estate Market Review & IBR

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Positive news–Nonresidential construction gains jobs for first time since ’08

The nonresidential construction sector in March saw its first monthly increase in employment since 2008, gaining 9,400 jobs on a seasonally adjusted basis, according to the April 2 employment report by the U.S. Labor Department.

Year-over-year, the nonresidential construction sector has lost 75,600 jobs, or 10.1 percent of the total workforce. Industry employment stood at 675,100 in March.

Nonresidential specialty trade construction gained 9,400 jobs in March, but year over year has lost 302,400 jobs, or 13.2 percent of employment. Heavy and civil engineering construction employment increased by 6,000 jobs in March, but is still down 89,700 jobs, or 10.1 percent, from March 2009.

“After many months of consistent employment declines, a number of key nonresidential construction segments experienced job increases, but this is in part due to a return of construction activity in March after February’s disruptive storms,” ABC Chief Economist Anirban Basu, said in a statement.

The residential building construction sector lost 800 jobs in March and lost 86,600 jobs, or 12.9 percent of employment, over the past 12 months.

Overall, the construction industry gained 15,000 jobs in March, the first increase since June 2007, but is down 701,000 jobs or, 11.1 percent, year over year. The non-seasonally adjusted unemployment rate for the construction industry was 24.9 percent in March, down from the 27.1 percent unemployment rate in February, but still higher than the 21.1 percent unemployment rate at the same time last year.

Total employment figures, across all industries, increased by 162,000 jobs in March, the first six-digit increase since November 2007. Year over year, employment is down by 2,320,000 jobs or 1.8 percent. The unemployment rate stood unchanged at 9.7 percent for a third consecutive month.

“For the most part, today’s jobs report should be considered good news,” Basu said.. “Although the 162,000 jobs created in March failed to meet the expected estimate of 200,000 jobs, much of the difference was due to less employment generation by the U.S. Census Department than economists had been anticipating. Stripping out the impact of the Census, the jobs report was largely in line with expectations.

He added that there are reasons to be skeptical in how this employment report relates to construction. He said the declines faced earlier had likely suppressed February employment totals, which could have ended up making March look better than it was.

Source:  IBR

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Meridian’s Portico mixed-use development marks milestone

Over the last 18 months, the mixed-use development in Meridian called Portico has leased 265,000 square feet of commercial space. That’s about 80 percent of the 327,849-square-foot project at the Eagle Road exit off I-84.

In a commercial real estate market as tough as it is today, development company Gardner Ahlquist has decided the achievement is something to celebrate. At 1:30 p.m. today, Feb. 4, Gov. C.L. “Butch” Otter, Meridian Mayor Tammy deWeerd and other elected officials and corporate leaders plan to gather at the Portico West Building, 3277 E. Louise Drive, on the fourth floor to laud the progress.

“Here, in this anchor location of our med-tech economic development zone, Gardner Ahlquist Development has achieved something great and has demonstrated that an outstanding location and design can help commercial real estate thrive even in a soft economy,” De Weerd said in a Gardner Ahlquist release.

Tenants at the development include:

• St. Luke’s Meridian Medical Center, which purchased an 80,000-square-foot office building for use as an outpatient surgery center and physician offices

• Scentsy Inc., which is moving its headquarters into 67,000 square feet at Portico. Scentsy is a growing manufacturer, designer and marketer of scented, wickless candles

• ESI Construction, construction manager for the project, also moved its headquarters to Portico

• Saltzer Medical Group, which has leased and occupied a 20,000-square-foot office space for consolidation of two clinical locations, including 18 physicians

• A Buffalo Wild Wings restaurant

• Ling & Louie’s Asian Bistro, in a space that will be constructed soon. The restaurant will employ over 100 people.

Also planned is a 175-room upscale hotel from an Idaho-based hotelier. The hotel’s brand has not yet been announced.

Otter takes Portico’s successful leasing as a positive sign for Idaho.

“Meridian’s latest economic development success is one more important signal that the Idaho economy is going to be one of the turnaround stories of 2010 and 2011,” he stated.