The Treasure Valley office market started 2011 with positive momentum due to increased activity among local, regional and national tenants. Though the economy still seems to be slightly unstable, some optimistic trends are starting to occur. During Q1 2011, the office market saw the first decline in vacancy since 2006, and in Q2 the vacancy rate continued declining to 18.4%.

Meanwhile, the Treasure Valley unemployment number has remained at 9.5% since year-end 2010, showing signs of stabilization. Healthcare, Financial, and Business Services are leading the way with leased tenant activity, and Call Center inquiries have more than doubled from 2010 and are expected to continue into 2012.

New tenants looking at the Treasure Valley were most interested to find space in downtown Boise, Silverstone Corporate Park and the El Dorado Business Campus. For the first time since 2009, multiple offers are being presented to landlords on quality available space. With landlords also feeling the positive momentum, they are holding firm on rates and offering concessions such as free rent, moving cost reimbursement, and tenant improvements on long term leases.

Transactions are still taking a considerable amount of time to close and this trend is expected to last throughout the remainder of 2011. Sales activity remains fl at, but the number of people looking to purchase has increased.

INVENTORY AND VACANCY

Colliers International tracks 17.4 million square feet in 863 office buildings 5,000 square feet or larger in ten different submarkets throughout Ada and Canyon Counties. The Downtown Boise submarket makes up 21% of the office market. The Downtown submarket also has the largest amount of Class A space at just over 2 million square feet.

Meridian is the second largest submarket, with just over 1.4 million square feet of Class A office space. Overall vacancy slightly declined in 2011 from 18.6% to 18.4% from Q1 to Q2. The West Bench submarket continued its trend as the submarket with the highest percentage of vacancy, 29.1% due to the Boise Research Center (45% vacancy) and the Emerald Corridor.

On a positive note, Downtown vacancy declined from 11.8% to 11.6% and the Meridian submarket declined from 26.8% to 25.5%. The declines in these submarkets can be attributed to tenants wanting to be in quality space. As stated earlier, tenants first look to be downtown, and then set their eyes on business parks such as El Dorado and Silverstone.

Throughout the first half of 2011, Meridian was the most active submarket and is anticipated to lead the market for the next six months. One reason for the rise in activity in Meridian is the fact that there is very limited space for larger users (6,000-12,000 square feet) in Downtown Boise.

FULL SERVICE ASKING RATES AND COMP RENTS

Landlord asking rates are still slightly declining. Full service overall average asking rates are at $15.61 and in Class A properties $16.87. The good news is with rates beginning to reach bottom, actual rents are trending closer to the asking rates.

Actual rents in Class A properties range between $16.00 and $17.00 and in all classes, the range for comparable rents is $12.00 to $14.00. As vacancy continues to decline and stabilize, both landlord asking rates and transaction rents will start to slowly increase in price.

OUTLOOK

The second half of 2011 should be very similar to the first. Vacancy will hover around 18.4% and asking rates will begin to stabilize. Tenants will have to decide if they want to take a little higher lease rate and sign a longer term lease with better landlord concessions or choose to sign a shorter term lease and benefit from asking rates bottoming out. Look for more of the browsers to turn into buyers as more and more of the money that has been on the sidelines comes into play.