Bozeman’s base economic sectors are pivotal drivers of its growth, shaping its prosperity. Industries constituting the core economy bring external revenue into the local community. This fosters the growth of other businesses within the region.
In a previous blog post, we looked at the importance of understanding a community’s economic dynamics before making real estate investments. This post will delve into Bozeman’s economic landscape.
To conduct this analysis, we looked at industries at a specific level, defined by the 4-Digit NAICS code. These industries exhibit a higher percentage of employment in the region compared to other regions. This indicates their potential to bring external income into the community.
Top 3 Growth Indusries in Bozeman by Employment
NAICS 7211 Traveler Accommodation: Nearly 4,000 individuals work in Bozeman’s hotels, motels, resorts, and inns. There has been a remarkable 108% employment growth over the past five years. The growth is due to increased tourism to national parks, the expansion of Bozeman Yellowstone International Airport, and the boom in Big Sky. Wages in this sector average $46,124 per year.
NAICS 2361 Residential Building Construction: With over 1,700 employees, this sector focuses on housing production. Average wages exceed $66,000 per year. This industry is mainly influenced by local spending. However it includes the construction of vacation and second homes, which bring in outside income.
NAICS 7139 Other Amusement and Recreation Industries: This category covers businesses like hunting guides, trail rides, sports leagues, rafting, and gun ranges. They employ close to 1,400 people. Wages are lower at just under $30,000 per year. The seasonal nature of these jobs does allow workers to earn other income.
Top 3 Growth Industries in Bozeman by Concentration
NAICS 1153 Support Activities for Forestry: This industry employes close to 300 workers with wages exceeding $80,000 a year. The category comprises private businesses unrelated to the US Forest Service, such as private forest management, firefighting, and timber valuation services.
NAICS 1114 Greenhouse, Nursery, and Floriculture Production: Notably, this category includes marijuana production. Employment in this sector has tripled since 2018, reaching approximately 420 people. It is assumed that recreational marijuana plays a significant role in this growth.
NAICS 7211 Traveler Accommodation: See above
Manufacturing in Bozeman
Manufacturing is a key base industry in Bozeman. Sporting and Athletic Goods is a key focus. The region’s access to the outdoors makes it an ideal testing ground for products like backpacks, boots, and bow sights.
Photonics, a growing industry in Montana, contributes to the economic base. Employment numbers are not as high as in service industries.
Both of these industries offer above market wages and a positive outlook for growth.
Government Jobs in Bozeman
Government jobs play a relatively smaller role in Gallatin County. Approximately 3,800 workers are employed in education at Montana State University providing economic stability. The university also supples a continuous supply of educated workers. The university’s research is contributing to the growing photonics industry.
Other Sources of Income
Bozeman residents derive a higher percentage of per capita income (32%) from investments compared to the national average (15%). This influx of external income boosts local spending power. It does pose a challenge as those reliant solely on earned income face affordability issues.
Outlook for Commercial Real Estate (CRE) in Bozeman
Bozeman boasts a diverse and resilient economy. It is skewed towards lower-paying industries, but there is growth in higher wage industries.
Demand for office and industrial real estate is contingent on attracting a stable workforce. The cost of living has not slowed growth in industries such as construction, professional services and manufacturing.
Lower-wage industries struggle with workforce challenges due to the high cost of living. This is impacting service and retail sectors. It has led to reduced hours and business closures. There is demand for these businesses, but the workforce is beginning to leave the region.
Multifamily demand is stabilizing, with higher-priced new developments facing slower than anticipated lease ups. Older, more affordable options remain in high demand. Multifamily is likely hitting the limit on what the market will bear for rents.
Despite a stable economy and positive outlook, careful consideration is key to designing buildings and spaces to align with the market. Multifamily is seeing pushback on rents, and may need to reconsider product type and underwriting assumptions going forward.
