Missoula’s industrial real estate market is shifting after several years of unprecedented tightness. The vacancy rate has climbed to over 6% and is still rising, up from the 3-4% range seen between 2020 and 2023. The increase is driven by over 275,000 square feet of new and existing inventory hitting the market in Q1 2025 alone.
Most recent deliveries are for lease, with a smaller share offered for sale, creating new competition among landlords. Lease rates have softened, now averaging just over $11/SF, NNN, down 13% year-over-year, and concessions are appearing where they were rare just two years ago. Landlords are negotiating more aggressively to secure quality tenants, adjusting expectations on rental rates, and exploring incentives to shorten lease-up timelines.
More Than Rent: What’s Driving Occupier Decisions
Tenant and buyer decision-making now extends well beyond rental rate. Wage pressures, insurance increases, and tariff impacts all factor into whether a business moves forward with a lease or purchase. For landlords, understanding these operational headwinds is key to structuring deals that work for both sides.
On the sales front, Missoula continues to see limited owner-occupier inventory, with only 10 industrial properties sold in the past 12 months, 8 of which were to owner-users. With so few transactions, each sale becomes highly property specific, making value assessments more nuanced than relying on broad market averages.
Space Quality Matters
Much of the space coming to market has functional challenges. While Missoula has added some quality new product, there is also a surge in older, large, clear-span manufacturing buildings. These properties can be costly to subdivide, slowing absorption. For tenants with specialized needs or limited build-out budgets, these buildings can present barriers to occupancy.
Meanwhile, owner-occupiers remain active but face a shortage of quality purchase options. The imbalance, with ample space for lease but limited for sale, continues to support strong pricing on vacant building sales.
Strategic Considerations for 2025
- For Landlords: Competitive lease terms and flexibility will be key to winning tenants in a softening environment. Understanding a prospect’s total cost of occupancy, not just rent, can help secure commitments.
- For Buyers: Be prepared for case-by-case pricing on existing buildings, and anticipate additional due diligence to account for each property’s unique features.
- For Tenants: Increased vacancy may translate into more choice and leverage in negotiations, especially for those willing to consider older or adaptable buildings.
Missoula’s industrial market is shifting from its previous highs, but this recalibration is creating opportunities. This may be the ideal time to secure space at a more favorable rate, acquire a hard-to-find owner-occupier property, or reposition an older asset to meet today’s needs.
