Our work spaces are changing: 4 trends affecting Valley commercial development in 2018

Real Estate

There’s no doubt that Boise has tipped, says George Iliff, managing owner of Colliers International’s Boise operation.

Iliff, a leader in the Treasure Valley’s commercial real estate sector, says the idea that author Malcolm Gladwell made popular in his book “The Tipping Point” reflects what’s happening in the Treasure Valley now: Interest by outside investors is accelerating the growth of our commercial real estate market.

We’ve been discovered.

George Iliff, Colliers managing owner

“We’ve been discovered by people around the country and by the investment and development community nationally,” he says.

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In recent months, Boise has made nearly every “best places” list put out by Forbes, and Idaho now is officially the fastest-growing state, according to the U.S. Census Bureau. Meridian is the nation’s 13th fastest-growing city.

The interest will bring more investment in 2018. And that will spur more construction and development as Boise, Meridian, Nampa and Caldwell try to keep pace with the demand for places to live, shop, eat and work.

“We’ve been in this up-cycle for some time, and it will go on into the next few years,” Iliff predicts.

There’s plenty of opportunity in all commercial sectors: retail, office and industrial/warehouse. The Treasure Valley is not overbuilt in any area. “We are behind in several areas,” says Old Boise developer Clay Carley.

Interest in doing business here has outpaced the availability of work space, says Gardner Co. Executive Vice President David Wali.

“A better job market leads to more competition for skilled workers and more companies coming into the area,” he says.

These four trends will affect the way Valley residents live and work:

As Boise’s Downtown’s skyline continues to change, expect more interest from regional, national and international investors.

Idaho Statesman file photo

1. More Outside Investment

Outside interest has been gathering since the prerecession boom.

Chicago’s Baum Realty bought the Downtown block bordered by 8th, 9th, Bannock and Idaho streets in 2006. Baum brought The North Face to Boise in 2008 and other national boutique retailers since, including furniture store West Elm in 2016.

Los Angeles developer LocalConstruct began investing in Boise in 2010. Co-founders Casey Lynch and Mike Brown have been behind the dramatic increase in Downtown apartment living since, with projects such as The Owyhee, The Watercooler and The Fowler, set to open in February.

Utah based-Gardner Co. merged with Boise’s Ahlquist Development in 2013 and started pouring money into Treasure Valley projects such as Downtown’s Eighth and Main Building and Pioneer Crossing project, and Meridian’s Ten Mile Crossing.

Last fall, Wisconsin billionaire Diane Hendricks bought the three-building Downtown retail development known as BoDo in 2017. The company says it may spiff up BoDo’s exterior to give it a more historic feel, similar to the adjacent 8th Street Marketplace.

Today, Las Vegas’ Brass Cap Cos. is building large industrial spaces in the Valley. Ketchum’s Strider Group, which specializes in industrial and build-to-suit development, has several projects, including three buildings totaling 145,000 square feet at the Gowen Road interchange with I-84. Strider also is preparing 90 acres near Gowen and Eisenman roads to be shovel ready by spring, says associate Harrison Sawyer.

The industrial market is really growing here — I’ve seen it explode in the last five years.

Harrison Sawyer, Strider Group associate

“I think we’re headed down the right path,” Sawyer says from the firm’s Boise office. “We’re seeing large corporate clients from California, Texas and Florida that are looking to relocate or expand in Boise. We’re just hampered by a lack of product right now.”

Fresca Mexican Foods, a Boise-based tortilla maker, is building a new 200,000 square-foot plant in Caldwell. It’s scheduled to open for full operation this spring.

Provided by Fresca Mexican Foods

2. More industrial construction

The Valley emerged from the economic downturn beginning in 2012 with a flurry of Downtown construction and development. At the time, industrial construction didn’t get the same attention.

Now the inventory of industrial space in the Valley is at a historic low: between 1.5 percent and 3 percent. In recent years, the Valley has missed opportunities to bring companies to the area, says Chris Pearson, a partner in Thornton Oliver Keller and an industrial brokerage specialist.

Provided by Thornton Oliver Keller

“On numerous occasions, a number of larger corporate tenants looking at Northwest markets might need 50,000 square feet of quality industrial space, but we just didn’t have it,” Pearson says.

Developers and Valley cities are pushing to catch up. Buildings are going up at the Gowen Industrial Park, in areas around Nampa and at Sky Ranch Business Park in Caldwell.

Provided by Thornton Oliver Keller

Mike Peña, a senior member of Collier’s Nampa brokerage team, predicts more industrial and light industrial construction in 2018 — and higher rents.

“During the recession we had a depression of leasing rates,” Peña says. “Now that vacancy remains low, rental rates are going up, making it feasible for new construction to happen.”

Some of the work is being done on speculation, with the hopes that a company will sign a lease. But the Treasure Valley is hot, more companies are coming, and “what is being built is getting absorbed at a rapid rate,” Pearson says.

Boise tech startup Cradlepoint is expanding its offices in the Boise Plaza at 11th and Jefferson streets. They are following current trends to make their work spaces more user friendly.

Idaho Statesman file photo

3. Evolving office spaces

Office space in the Valley is getting tight. Some companies are trying to figure out how to fit in more people per square foot by tearing down walls and creating more free-flowing spaces.

Others, such as Boise tech startup Cradlepoint LTE Solutions, are reconfiguring the traditional cubical farm, getting creative and tearing down walls in some cases, to create work environments that are flexible enough to allow for different styles within the work culture.

“We’re trying to create the environments that work best for a particular group,” says CEO George Mulhern.

The company, which makes wireless routers, has been on a hiring spurt, swelling its ranks to nearly 600 people, up from 450 last March. It has offices on the fourth and second floors of the Boise Plaza building Downtown and will expand to the first floor later this year.

Firmware designers keep prototypes and gadgets on their desks; they want cubes with high walls, privacy and quiet. The marketing team wants cubes with low walls and an ease of communication so they can share information. Software designers want to sit at a big table.

“Even where we do have offices — and in general we’ve reduced the number — we’ve created more open space and collaborative areas where people can get together and brainstorm,” Mulhern says.

Office developers are seeking amenities such as gyms, espresso bars, restaurants and attractive surroundings to attract a millennial workforce. Millennials are more interested in experiences than previous generations, Wali says, and such amenities encourage people to spend more time on work campuses.

“Employers don’t want to pay for travel time for someone to go grab lunch,” Wali says.

[Employers] also want a collaborative environment, with more light and more engagement with the outside world.

David Wali, Gardner Co. executive vice president

CTA Architects inside the Eighth and Main Building has a corner espresso bar and kitchen. Its offices feature moveable cubicle dividers and breathtaking views of Downtown and the Boise Foothills. J.R. Simplot Co.’s new headquarters features open, elegant work spaces, two restaurants and a living wall and mirror pools in the lobby.

Artist’s rendering of TM Crossing.

Provided by Gardner Co.

Gardner’s TM Crossing, on Ten Mile Road north of I-84, will have more and larger windows than older office buildings to allow more natural light. TM Crossing also will feature open spaces and nearby restaurants nearby, a health club and basketball courts.

Hotel openings in Downtown Boise last year included the Inn at 500 and the Residence Inn. Expect more in 2018.

Idaho Statesman file photo

4. More places to stay

The rebound in local hotel development will continue in Downtown Boise and Canyon County in 2018.

The Inn at 500 Capitol, on the southeast corner of Capitol Boulevard and Myrtle Street; a Marriott Residence Inn, across the street; and a Hyatt Place, at Bannock and 10th streets, all opened Downtown in 2017.

A Hilton Garden Inn is under construction at Front and 11th streets and will open later this year. An as yet unnamed hotel and parking garage project is on the way at 5th and Front streets from Carley, the developer of nearby Old Boise.

“Everyone thought we might be overbuilding, but they’re all doing well,” Colliers’ Iliff says.

Carley’s project took 11 years to come to fruition. The original agreement with Wisconsin’s The Raymond Group, the company that built Downtown’s Hampton Inn, was set in 2006. Plans were put on hold when the recession hit. The project should break ground in 2018.

“I’ve wanted a hotel in for my neighborhood for a long time,” Carley says.

In Canyon County, a Best Western Plus opened last year next to the Nampa Civic Center, 311 3rd St. South. Home2 Suites, an extended-stay hotel by Hilton, will open near the Ford Idaho Center in spring 2018.

Across I-84 at the Nampa Gateway Center, work is expected to begin in coming months on a four-story Candlewood Suites. Evergreen Hospitality Group, the company building the hotel, plans a second phase in a few years that will put a four-story La Quinta Inns and Suites next door, says Peña, the Nampa broker.

Caldwell Mayor Garrett Nancoles is behind the development of Indian Creek Plaza in his city’s downtown. The goal is to change the character of the sleepy farm town and keep people engaged in downtown.

Provided by City of Caldwell

The Caldwell example

In Caldwell, Mayor Garret Nancolas is using commercial development to change the farm town’s character.

During the downturn, Nancolas and his staff used redevelopment funds to buy 140 acres out by Sky Ranch. In the past few years, the city has sold 130 acres of that land to companies wanting to build industrial and light-industrial space, says Steven Fultz, Caldwell’s economic development director.

Sixteen buildings have been built at Sky Ranch since 2014. Eight to 10 will be completed in 2018 or are under construction, Fultz says, including one by Cold Steel Constructors and a 60,000-square-foot, multitenant building by Strider.

Profits from the land sales have fed grants to entice companies such as Fresca Mexican Foods to do business in Caldwell. The tortilla maker received incentives to move from Boise to Sky Ranch and build a 200,000-square-foot plant, CEO Andy Savin told the Idaho Statesman in May.

Land-sale profits helped pay for infrastructure improvements, such as realigning Smeed Parkway and extending Skyway Drive around the industrial park. They also helped build the $7 million Indian Creek Plaza at Kimball and Arthur streets in Caldwell’s downtown.

Caldwell will get its own Flying M. The popular Treasure Valley coffee shop, with locations in Downtown Boise and Nampa, is adding a third shop across from the new Indian Creek Plaza.

That ambitious civic improvement project is drawing commercial development nearby, including Gardner’s 11-screen movie theater and two retail pads for restaurants and shops. New and remodeleted businesses include a Flying M Coffee Shop that will open across from the plaza this spring.

For a downtown to grow, you must give people a reason to stay, Wali says: “Dinner and a movie. That’s where you start. You want to capture people in the evening and compel them to come back on the weekend. For that to happen you need entertainment, food, beverage.”

The city’s redevelopment agency is still buying properties, Fultz says.

“We’re making sure they’re shovel-ready and putting them up in a competitive market to draw quality job creation,” he says. “We’re also working with housing developers in the area and trying to create a full range of housing inventory, from apartments to high-end homes.”

Challenges persist

With all this activity, it’s easy to overlook the commercial real estate sector’s challenges. Construction costs are high and leasing rates are low, making speculative development risky, says Strider’s Sawyer.

“We do not see this imbalance correcting anytime soon,” Sawyer says. But he adds: “We have made a strategic commitment to the Treasure Valley market [and] have a longer-term vision. We think Boise has hit critical mass and has an energy that will continue to attract businesses and families for the foreseeable future.”

Dana Oland: 208-377-6442, @DanaOland

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