Missed Missoula MarketWatch 2023?
Read on for a quick snapshot of the office, retail, and industrial sectors.
The SterlingCRE team noted that Missoula’s commercial real estate sector is still active, with interest on both the sale and lease sides – but, there are challenges ahead for every asset type.
Missoula’s commercial real estate market is facing low vacancy rates, with a limited supply of office, retail, and industrial spaces to meet growing demand. Stay tuned for a deeper dive into the multifamily sector and insights on the short-term rental market coming soon.
Since 2019, office vacancy rates have decreased, showing a current vacancy rate of 4.74%. The age of office buildings in Missoula is a concern as 33.7% are economically obsolete, meaning they require significant renovations or complete demolition. There is increased demand for executive-style offices with common areas to accommodate efficient pricing for tenants. The new development pipeline is looking pretty slim for the office sector, with only about 17,300 square feet of office space currently under construction. Of that, approximately 50% is already spoken for.
While there are some projects waiting in the wings, SterlingCRE was conservative in estimating new square footage – that’s in direct response to the hesitancy from developers in the office space. Kara Hogan can provide more information on the office sector.
The retail industry is facing new challenges, including inflation, supply chain issues, employment, and low vacancy. Despite these challenges, the retail investment landscape is still promising for buyers who specialize in retail, and SterlingCRE encourages buyers to look for spec projects in growth areas. For sellers, inventory on the market is still very low, but there seems to be far less cash in the market, and higher interest rates have pushed up buyers’ expected yield.
In Missoula, retail vacancy sits at 3.43%, down from the previous year. The average lease rate is up 19.61%, with sale prices also on the rise. Interested in more detail on the retail sector? Contact Connor McMahon.
The industrial sector continues to perform well. Missoula matches up with the US industrial real estate market, as local and national markets show around 4% vacancy. Missoula’s industrial vacancy is slightly down from prior years, decreasing 130 basis points year-over-year. Sale prices and lease rates have risen, and with lending restrictions on speculative development, these rates will likely hold until more product can deliver.
In the development pipeline, about 150,000 square feet will be coming online. However, like the office sector, most of this square footage is already claimed – leaving industrial users to continue seeking space in a tight market. To drill down more into industrial availability, contact Claire Matten, CCIM/SIOR.
Missoula MarketWatch also included a deeper dive into the multifamily data and a segment that offered insights on the city’s short-term rental market. Keep an eye out for those posts in the coming weeks or contact Info@SterlingCREadvisors.com for more information on Missoula commercial real estate.