Office Rental Rates Softening in Boise

The article below by Brad Carlson of the Idaho Business Review tells the story of where office and retail rates are headed in Boise. Expect to see more landlord concessions.

Office, retail users target softer rents

Downtown Boise office and retail businesses are taking advantage of lower rents, Colliers International commercial real estate brokers Karen Warner and Brook Blakeslee said.

Asking rents for office space in the downtown Boise core are down 5 to 10 percent from a year ago, said Warner, who specializes in office space. And more concessions are available, such as free rent for a period depending on the length of the lease, she said.

Other geographic submarkets in the Boise area now see steeper reductions in rent than the downtown core, which is one of Boise’s healthiest markets if not the healthiest, she said.
Downtown Boise businesses taking advantage of more attractive office lease terms include law firms and some financial planners, Warner said. Medical businesses also are looking for leasing opportunities downtown, particularly on the downtown periphery. She said she expects to see more deals for available sub-lease space, on which another business continues to pay rent to the property owner.
Some office tenants downtown express interest in moving, but then decide to renew their existing lease instead to avoid moving costs and a loss of productivity during a move, said Warner, who has written books on office relocation.

“Downtown is still healthy and active, although it has slowed,” she said, referring to the office market. “It’s not where it was a year or 18 months ago.”

As for downtown Boise retail space, there are leases in progress, but “deal volume or velocity has gotten significantly smaller and rents have tended to pull back or are pulling back,” Blakeslee said. Some restaurant operators and soft-goods retailers are looking for space downtown, he said.
Asking rents for retail space in downtown Boise are down 10 to 15 percent from a year ago, though rents are holding up better downtown compared to some other submarkets in the Boise area, he said.
Blakeslee said restaurant rents probably are highest on Eagle Road, in the Meridian area. There is a broad spectrum of restaurant rents downtown.

A number of restaurants have closed in downtown Boise recently, but downtown always has seen a certain amount of turnover in that segment, said Blakeslee, who has worked in the Boise market for more than 15 years.

“I have always been impressed that the downtown has remained the area for the independent restaurant or the independent entrepreneur, and I don’t see any of that pulling back,” he said.
Downtown Boise retailers are trying to figure out how to make money in the tough new economic environment, and some are asking landlords for concessions on leases, Blaskeslee said. “They’re struggling today, and that’s something you could say in a lot of markets in the West or the U.S.”
Soft-goods retailers in downtown Boise are “just starting to see sales stabilize” following a very difficult final two months of 2008, he said.