You Oughta Know

Why new buildings may not boost Downtown Boise vacancy rates

Commercial real estate brokers and principals of Tenant Realty Advisors, a Boise tenant-representation firm.April 16, 2014 

The Boise skyline is changing. Holes - some literal, some not - are being filled in. While some folks are nervous about a potential oversupply of retail and office space Downtown, there are reasons to suspect that won't be a problem.

What a lot of people overlook is the snowball effect we can expect with the expansion of existing Downtown companies. And companies are growing, both in people and in real estate. Here are some examples:

• Zions Bank recently expanded to 60,000 square feet from 35,000 square feet.

• Law firm Parsons Behle & Latimer expanded to 20,000 square feet.

• Holland and Hart, another law firm, grew from 35,000 square feet to 50,000 square feet.

• Commercial lender A-10 Capital is expanding to 10,000 square feet.

• Software company Clearwater Analytics will expand from 40,000 square feet to 92,000 square feet. In 2004/2005, Clearwater occupied just 5,000 square feet.

• Simplot Headquarters will expand significantly into 334,000 square feet.

The net effect of these companies' expansions is an estimated 1,000 to 1,200 new employees coming into Downtown in the next 18 to 24 months. There are many small companies who are adding two, three or 10 new employees as well.

The recent and planned Downtown construction will take care of the office needs for most of these new workers.

For instance, we're all familiar with the recent success of the Eighth & Main office building. Eighty percent of the 280,000-square-foot building was already leased as construction drew to a close early this year.

Also on the horizon is a new office building in the Gardner Co.'s planned City Center Plaza, which will be built on the surface parking lot adjacent to the U.S. Bank Plaza. The proposal is for eight or nine floors totaling 200,000+ square feet, with Clearwater occupying 92,000 square feet. The development will also include a building with additional meeting rooms for the Boise Convention Center, which will enable the center to attract much larger conventions.

And a few blocks away at JUMP, Jack's Urban Meeting Place, Simplot's proposed headquarters building will accommodate that company's expansion plans.

But even more Downtown space may be needed. That's because every new job that comes into an area starts a chain reaction. These new workers need to eat, sleep, shop and more - often in close proximity to where they work - creating demand for more services.

The multiplier effect varies in each industry. In general, the higher paying a job is, the more jobs it, in turn, will create. Most of the expansion Downtown is driven by firms with high-paying positions, so the multiplier will be significant.

For example, the Idaho Department of Labor says the multiplier for high-technology jobs in Southwest Idaho is 2.75, meaning for every one job a high-tech company creates, 1.75 jobs pop up in other industries. Professional, business and information services jobs carry a multiplier effect of 2.15.

Without getting bogged down in the math, we can conservatively generalize that for each of those 1,000 to 1,200 new employees already scheduled to come Downtown, at least one additional employment opportunity will result. That brings the new estimated influx to at least 2,000 to 2,400 workers. Many of these jobs will be professional positions, such as lawyers and doctors, while others will be in retail and food service.

So even though more and more office and retail space is claiming a place in Boise's changing skyline, don't expect significant vacancy increases. Each new project brings not only increased vibrancy and amenities but new workers. And these new faces will be looking to new real estate to bring them the shops, services and restaurants they need to work, and maybe even live and play, Downtown.

beck@tenrealad.com, karen@tenantrealtyadvisors.com

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