Treasure Valley commercial real estate continued to lose tenants in the first half of 2009, according to a new report from Colliers International.

Vacancy rates went up as absorption rates and prices decreased in office, retail and industrial buildings. But the report points out a few bright spots.

For office space, downtown Boise is healthy and will likely remain so. Vacancy rose just slightly, from 9.5 percent at the end of 2008 to 10.6 percent in mid 2009.

And in retail, Eagle Road has become the “first choice for most retailers,” with the Eagle and Ustick intersection especially attracting new tenants.

Dollar stores, fast food, check cashing and cell phone dealers were actively looking for space.

Action in industrial development in the future will largely be attributable for “build-to-suit projects for companies with specific needs that can’t be satisfied by existing sites,” the report said.

The investment market is at a standstill, according to the report, because of lack of liquidity, income erosion and a disconnect between buyer and seller expectations.

“Owners are getting pummeled from multiple sides, cap rates are increasing and income is dropping as tenants are either failing or asking for rate reductions in their rent,” the report said. “There is money out there for good deals. Buyers tend to be enamored with the homerun deals, instead of focusing on doubles and triples that are available.”

“There appear to be more REITS and private groups raising equity to take advantage of future market conditions,” it continued. “Those investors that have access to capital and patience to endure more stringent lending standards should see great opportunities in the months and years ahead.”

© 2009 Idaho Business Review

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