Monthly Market Reports - Single Family Residential Housing

While these numbers are residential and not commercial it is still very relevant to the commercial real estate in the valley. The saying goes that “commercial follows residential.” If that continues to be the case the commercial market, which is already very strong, has more runway ahead of it.

According to WalletHub.com Boise is #1 in 2020's Best Real Estate Markets. 

Resale Homes

Ada Co. closed 954 homes in the month of July 2020. We are down however from the YTD numbers in 2019 by 94 units or a -2%. Shortage on inventory continues to hold down these numbers.

Canyon Co. closed 322 homes in July. We are down by 41 units or a -2% from YTD last year.

Ada Co. average sale price YTD is at $393,407. This is up by $33,993 or a +9% increase over the 2019 average sales price.

Canyon Co. average sales price is at $264,773 YTD. This is up by $26,604 or a +11% increase over the 2019 average sales price.

Monthly Pending sales are at 1133 units per month. This is up by 82 units or a +8% over the 2019 average

Ada Co. available inventory is at 308 units. This is down by 540 units or a -64% from last July.

Canyon Co. available inventory is at 96 units. This is down by 228 units or a minus 70% from last July.

Ada Co. is at a 0.51 Months of Supply of homes. Canyon Co. is at 0.35 MOS.

New Homes

Ada Co. closed 2276 units YTD 2020. This is up by 182 units closed or a +9% over the same time period in 2019. .

Canyon Co. closed 1201 units YTD in 2020. This is up by 412 units closed or a +52% increase over the same time period in 2019.

Ada Co. average sales price for the year in at $452,369. This is up by $26,573 or a +6% over the 2019 average sales price.

Canyon Co. average sales price is at $318,026 YTD. This is up by $20,515 or+7% from the 2019 average sales price.

The average pending monthly sales for the combined counties is at 1426 units per month in 2020. This is up by 340 units or a +31% increase over the 2019 average.

Ada Co. showed 322 available new homes at the end of July 2020. This is down by 407 units or a -56% from July 2019.

Canyon Co. showed 118 available new homes at the end of July. This is down by 145 Units or a -55% from July 2019.

Ada Co. months of supply for new homes is at 1.08 months. Canyon Co. is at a 0.84 MOS.

If we look at the total market for the Boise MSA we have closed 9528 homes new and resale for the year 2020. This is up by 459 Units or a +5% over the YTD numbers in 2019.

Narrative From a Third Party Title Company

I have been producing these reports for well over 20 years. I have seen a lot of ups and downs. However what we are witnessing in our housing market locally in absolutely astounding! I know the numbers are real as I’m the one putting this report together myself. However just when I don’t think things can get any crazier they do. That comes through loud and clear with this month’s numbers.

Starting with the resale market in Ada Co. are YTD numbers are down by 94 units. But if we look at the sales in July we are up by 123 units or+15% over July 2019. The demand is so high for housing the market simply gobbles up whatever hits the MLS. Canyon Co. is somewhat different as we are just not getting enough resale listings to keep up with demand. We are down in Canyon Co. by 41 units closed in 2020 compared to 2019. If we look at the months of supply we are at 0.51 months in Ada Co. and 0.35 months in Canyon Co. Never in the history of this business have we seen numbers like this. If we look at the average sales price for the year in Ada Co. we are at $393,407 YTD. This is up by $33,993 or a +9% over the 2019 average sales price. Canyon Co. is at $264,773 YTD fir an average sales price. This is up by $26,604 or a +11% from the 2019 average sales price. Pending sales for the combined counties is running 1133 units per month YTD. This is up by 82 units or a +8% over the 2019 monthly average. Ada Co. had 308 units available at the end of July. This is down by an eye popping 540 units or -64% from July 2019. Canyon is not different. Canyon Co. showed 96 available resale homes at the end of July. This is down by 228 units or a -70% from July 2019.

Ada Co. new homes closed 436 units in July 2020. This is up by a whopping 132 units or +43% over July 2019. YTD we are up by 182 more homes closed or a +9% increase over YTD 2019.

Canyon Co. closed 251 units in July. This is up by 132 more units closed or a +111% over July 2019. YTD we are up by +412 units closed over the YTD numbers. We have closed 1201 units compared to 789 YTD 2019. That a 52% increase in sales. The average price of a new home in Ada Co YTD is at $452,369 which is $26,573 or a plus 6% jump over the 2019 average sales price. Canyon Co. is at $318,026 average sales price in 2020. This is up by $20,515 or +7% over the 2019 average sales price. Pending sales for the combined counties is at 1426 units per month. This is up by 340 units or a +31% increase over the 2019 monthly average. Ada Co. showed 322 available new homes at the end of July. This is down by 407 units or a 56% decrease from last July. Canyon Co. showed 118 available new homes in July. This was down by 145 units or a -55% from July 2019. Ada Co. months of supply stands at 1.05 months. Canyon Co. is at 0.84 months.

If we look at total sales for the year we are at 9528 units. This is up by 459 units closed over the YTD numbers in 2019. This is an increase of overall sales by 5%.

Garden City Report | Quarter 2

I’ve put together a quarterly newsletter to show potential projects, on market properties, what’s leased and sold in the last quarter. It’s an exciting time in the commercial real estate market in Garden City, but this is still relatively unknown.

Nestled between the West Boise and North Boise sub markets lies this hidden gem. With the Boise River running through the middle this market consists of approximately 756 commercial properties. It is a relatively small sub market compared to the surrounding Boise and Meridian markets, but with this small size comes big opportunities.

Garden City property close to the river and east of Veterans has seen a high increase in prices over the past several years. In some cases, land has been consolidated and small pockets of development have sprung up along the riverbank. This trend appears to be continuing with proposed developments such as The Boardwalk, a boutique hotel, two apartment buildings, bars, cafes and more.  

Another notable development that recently popped up is a proposal to revamp the Expo Idaho site, which has been discussed for years, but now has a proposal in front of Ada County. The proposal is to re-develop the 240 acre site into a mixed use project consisting of retail, office, single and multifamily housing, a new baseball stadium, playing fields and the continued existence of the fair grounds. Click here for details. 

These projects have a long way to go, but as complexes like these continue to be built, will rapidly and forever change the landscape in Garden City from the once industrial suburb of Boise, to a new central hub for living and playing. In the meantime, many smaller projects have appeared over the last five years.

Driving around you can see pocket neighborhoods of affordable housing, market rate apartment complexes, new wineries/breweries, and remodels of existing buildings for new businesses. These have helped create a new trendy vibe in Garden City, particularly near the Riverside Hotel up to Veterans.

What hasn’t seemed to change much in the city are the commercial rents (residential is a different story). Property prices have seen positive increases since 2015, due in part to hype from one particular land buyer. Rents however have been slow to climb and don’t support investment in many cases. The one area that doesn’t follow this trend is for industrial properties. Like the rest of the valley, and the United States for that matter, industrial property rents have seen a large increase in Garden City over the last five years. In several cases a tenant on a 5-year lease signed in 2014 has faced renewals near $.20/sf higher just five years later on the same property. This has made some development of new industrial possible, but the lack of land zoned for this use and some struggles of getting these projects through the city will make it so Garden City won’t see a great deal of development in this product type.

Overall, Garden City appears to be on an upward trajectory along with the rest of the Treasure Valley. In my opinion, increased in-migration to the Boise Metro will cause Garden City to see more pressure to re-develop older buildings into multifamily developments. The incredibly close proximity to downtown Boise, the Boise River, the Foothills, and Quinn’s pond make it an ideal area for living and playing.

The report includes the list of transactions from the second quarter of 2020 showing what was on the market, what sold, and what was under contract; many changes to these already in the third quarter. To download the report, fill out the brief form below.

For more information on Garden City or to discuss the commercial real estate market please feel free to reach out to me to schedule a time to talk at 208.789.4900 or email at chasee@leeidaho.com.

A Business Owner and the Office – What Do You Do Now?

As a business owner life was probably moving along fairly well in February of 2020. You had a packed calendar full of appointments with potential new clients, current clients, employees, emails, accounting tasks, and at the same time trying to find time to work on the big picture of where the business is going. Little did you know March was going shake things up and the phrase “in like a lion” took on a new meaning and we have yet to see the “out like a lamb” phase come to fruition.

Fast forward four months and the year is over halfway gone. You may be looking back wondering what just happened, where did the time go, and what am I doing now? You’ve made it through this part of the storm. You are adapting to some new changes in the world and the way you operate. You still have the day-to-day activities of running your business, but likely in a new and more digital or virtual format.

Not surprisingly, you aren’t the only business owner going through these scenarios. As you manage your teams virtually and find that you are able to be productive while not coming into the office, you have a new challenge. Do we actually need to come back to work, to a physical office? If we do come back, does everyone need to? Do we need as much space or do we now need more space to ensure employees can social distance?

These questions and more are permeating through the office sector of the business world and being met with some common answers. Many business owners believe if they don’t come back to the office, they will lose control over the culture of their team. They will lose productivity due to lack of supervision and their bottom line will suffer as they struggle to find ways to motivate employees to get the same amount of work done as they once did in the office. With many employees still not comfortable returning to the office it makes this an even bigger challenge.

On the other side of the coin you may have found your initial fear of everyone working from home to be unfounded. Sure, there were a few hiccups at the beginning getting everything set up for employees to work from home; but now things are running just a smooth as before. On top of that, your employees are responding that they enjoy working from home. They miss their office mates, they don’t miss the commute, they have more time with their families and they really love the weekly zoom calls (just kidding, they are over the zoom calls).  On the whole though, they enjoy working from home and would like to continue that into the future at least 3-4 days a week. Check out this article Are You Cut Out To Work From, it has some good research on the importance of having a balance between the office and the flexibility to work from home.

Since you didn’t already have enough to think about as a business owner, now you have another decision to make. What do you do with your office space? Maybe you own your office and your business has been renting from you. If you don’t have your employees come back, you will lose that income stream and need to figure out what to do next to make your loan payment. Maybe you rent a space and still have four years left on your lease term and now you’re stuck with a monthly payment for an empty office. What do you do now? What are your options?

If you are in the boat where you feel the team needs to come back together to ensure high productivity, you’re not alone. Many business owners are finding to ensure creativity, growth and innovation; employees need to be together. This leads to the conversation of how we safely come back to the workplace. I’m not an attorney or a cleaning professional so I’ll let you check these articles on Cleaning for Health and Legal Questions. As for the space itself we are seeing business owners pivot in a few different directions.

One direction being taken is a hybrid approach where some employees are going to be working from home indefinitely. These rolls typically don’t have a need for creativity, so these individuals can work successfully from home without losing productivity. Because of this reduction in employees in the office the remaining employees are able to spread apart if the office build-out allows; and they can keep better distance to reduce potential spread of germs. This works well in the open office environment that became exceedingly popular in the last 10 years.

The hybrid option also has led to a reduction in square footage for office users. Instead of needing 10,000 SF they can now downsize to 5,000 and reduce their overhead. This usually needs to line up with the end of their current lease term or a subleasing of space to get down to the smaller footprint.

Other companies have taken to scheduling when each employee comes into the office. This groups certain people together on the same schedules allowing for creativity and communication to continue, while keeping the workforce better distanced. If someone does catch the virus they are able to have that group of people isolate rather than the entire workforce. This can also allow for a reduction of space but make sure you read the Cleaning for Health information to keep everything clean for the next person using the shared desk space.

With those being some of the popular methods of re-entering the workplace we have also seen many clients decide they aren’t going to return to the workplace. If your business isn’t at the end of your lease, then you need to communicate that with your landlord. The first route would be to ask if they will let you out of your lease. I probably don’t need to tell you this isn’t a likely option. The landlord made commitments to you and you to them and you will likely be expected to honor those commitments. The next logical step is to read through the sublease clause and let your landlord know you would like to go the route of finding a new tenant to back-fill your space. This isn’t unusual and luckily for you there are still plenty of businesses on the lookout for built-out office space and you will hopefully be off the hook soon.

If you own the building your business has been renting, then you have a couple of options to pursue. Do you lease out the space to another business or does it make sense to put the property up for sale? With our market in Boise and the Treasure Valley as a whole continuing to be strong you can likely go either way or both ways. It’s important to talk with your tax advisor but my advice to clients recently has been to let the market decide. We help price the building for lease and for sale and put the property out for both scenarios. This makes it so you don’t limit your pool of people looking at your building and as long as you price it correctly you will see activity and be set up to be happy with either outcome.

If you have any questions on returning to the workplace or deciding what to do with your newly vacant space your invited to reach out to me at Chasee@leeidaho.com or give me a call at 208.789.4900.

Idaho Tax Changes

We are living in an interesting time. Everyday your inbox, phone, TV, and any other media device you use is inundated with information about a virus named after a beer.

While all of that is going on it is easy to forget that there are other things going on in the world. Thankfully there are people paying attention to issues going on in our state. The Associated Taxpayers of Idaho put together a great newsletter to summarize what passed and didn’t pass in regards to taxes during this legislative session.

I’ve picked a couple that are interesting to me that impact real estate, cities, employers/employees, and even Cows and Chickens (kind of).

Here are some things you may have missed: 

I don’t sell houses, but I like this piece of legislation that passed on March 24^th making it so first time home buyers can establish a First-Time Homebuyer Savings Account. The purpose of this legislation is to establish First-time Homebuyer Savings Accounts. Similar to existing Idaho tax-advantaged savings accounts for healthcare and education. Idaho's First-time Homebuyer Savings Accounts would encourage individuals to save for their first home, including down payment on a home, or other eligible home costs associated with closing on their first home in Idaho. The allowable tax deduction for an individual account holder is $15,000 per year, while the allowable tax deduction for a married couple is $30,000 per year. The proposed legislation mirrors existing Idaho code for reporting and depository related matters for other tax-advantaged savings accounts in Idaho.

If I’m reading this one correctly it is retroactive to January 1, 2020. So if you purchased your first home earlier this year you may want to see if this can still apply for you.

https://legislature.idaho.gov/sessioninfo/2020/legislation/H0589/

Another piece of legislation I like is great for employers and employees. 

The Income Tax Credit, College Savings – Idaho College Savings Program helps families to save for higher education and enables residents to further educational opportunities and pursue professional goals. The purpose of this bill is to provide an incentive for employers to help their employees enhance educational savings goals by contributing directly to the employee's qualified state tuition program accounts administered by IDeal. The bill provides employers a tax credit for contributing to an employee's individual IDeal – Idaho 529 College Savings Program account. The tax credit is 20% of the total employer's contribution with a maximum of $500 tax credit per employee, per taxable year. If you are an employer this is a great one to look into to provide extra value to your employees and help with attraction and retention.

This one receives the award for the funniest law change, while also equalizing how sales tax is distributed to Idaho cities: 

The purpose of this legislation is to correct the inequities that exist with regards to how much each city receives from the sales tax distribution formula. The current formula for determining how much each city receives is partially based on the antiquated system of historical calculations based on the now non-existent personal property tax assessed to every Idaho citizen which included among other things, the number of pigs, chickens, cows, silverware and other personal items. The current system creates additional inequities because it relies on property values. This has created a situation where some cities receive ten times the amount than other cities and counties receive when compared to how much they would receive if calculated based solely on population.
This legislation establishes a new base amount using the previous year's distribution to each city. If sales tax collections increase, the first 1% of the increase is divided amongst all of the cities. If the state collects more than a 1% revenue increase than the previous year, the excess funds are only distributed to cities that receive less than their respective counterparts based on per capita calculation.

Hoping that the Governor signs off on this one; it could mean more jobs and many large scale data centers coming to Idaho to take advantage of our relatively inexpensive electricity. Taxation, data centers The purpose of this legislation is to encourage the construction and location of large-scale data centers in Idaho. The landscape for attracting data centers is extremely competitive across the United States. At least 30 states offer a sales tax exemption for server equipment. It is highly unlikely that a large-scale data center will locate in Idaho – or any state – without a sales tax exemption. This legislation would allow a sales and use tax exemption to data centers that commit to a capital expenditure of not less than two hundred and fifty million dollars($250,000,000) within five years of commencement of construction and will create no less than thirty jobs within two years of commencing operations. If a data center fails to meet these two requirements, any sales and use tax exempted shall be repaid. This legislation also clarifies that data center server equipment is not included in the definition of "new construction" for property tax purposes. Data centers significantly add to the property tax base wherever they are built, and create jobs paying above the average local wage.

Should a Tenant Use a Broker For Representation?

Tenant Representation 

Who is looking out for your best interest when signing a new lease or a renewal? Will the Landlord look out for your best interest? A good Tenant rep broker will look out for your interest specifically as a Tenant, and advocate for your needs with the Landlord.

What Does It Cost

Does a Tenant rep broker cost money? Not typically, usually the Landlord pays the broker a commission or a finder’s fee. A Tenant rep broker is the best choice when considering whether to self-represent or use a broker. There are several things that a good Tenant rep broker will do: bring value by knowing and understanding the market, leverage and negotiate on your behalf, and assist in understanding the total cost of the lease.

Market Knowledge

Having good Tenant representation will level the playing field. How much market knowledge will a Tenant have vs a Landlord? How much time do you as a Tenant have to learn the market, and make sure that you are getting a good deal? I would imagine if you are running your business, you have a specialty, and time management is important. It makes sense to hire a broker to represent you that is immersed in the market. They have the knowledge to assist you in making a good, informative decision. A Tenant rep broker will have in-depth market knowledge, and be able to do a lease analysis on the presented terms. The broker will also negotiate on your behalf with the Landlord. Typically, a good broker will be able to solve problems, think outside the box and present solutions for any issues that arise.

Representation

When you use a Tenant rep broker you are making Landlords compete for your lease. When the Landlord knows that a broker is going to be showing a Tenant all the other properties on the market, they are more likely to negotiate and compete for your business. This usually results in a lower lease rate and more favorable terms. Companies that use a tenant rep broker typically end up paying less for their space.

Avoid Making Mistakes

A good broker will help you avoid making mistakes as well as save you money over the term of the lease. In addition, they will  assist in choosing the best location, evaluate market trends and demographics of your new or proposed location.

 Tenants have nothing to lose by choosing a broker to represent them!

 “Tenant representation brokers are basically what they sound like; they handle the tenant side of commercial real estate transactions. Sometimes referred to as tenant advisory or corporate services, a tenant rep is there to assist companies and organizations throughout the entire leasing process, from the initial needs assessment and site selection to occupancy, lease expiration, and beyond.” **https://aquilacommercial.com/learning-center/what-is-tenant-representation-broker-what-they-do/