As the market shifts from a tenant market to a landlord market, the question on many minds is when will someone spec a new office building? The Gardner Company has had recent success with the new 8th and Main tower and City Center Plaza, capturing pent up demand for true Class-A space downtown. Prior to that, the Sundance Company sat on a largely vacant Silverstone Corporate Center until they eventually leased up the majority of the space in 2012. The Library Square office building in Nampa had a slow start but is starting to be absorbed. So, while developers have had some successes recently, and with vacancy rates dropping and rents are rising, these factors still do not justify a new spec building—especially at today’s construction costs. That said, it stands to reason that the first developer to put up a well located building will enjoy success as large floor plate options are hard to find right now. An office user needing over 30,000 SF currently has less than a handful of options. Out of area occupiers are looking at Boise, but the lack of product compels them to consider other cities.
So, when will we see new spec construction? Sundance has a Meridian building designed on paper right now. The Gardner Company is considering an office building as part of their planned development of Parcel B. There are a few large companies considering build-to-suit options right now and one of these could kick off a larger project if they decide to pull the trigger. Rents continue to rise and we are seeing numbers not seen since 2008. As companies continue to do well, and as the office supply shrinks, this trend will continue. So, my crystal ball tells me we will have a new speculative office building under construction by mid 2016 … but I’m not betting on it!