Missoula retail vacancy has been low for many years. Tenants are posting solid sales, and buyers are still competing for well-located buildings. We expect those conditions to hold through the rest of 2026.
Consumer spending is strong
We track interest rates, the bond market, and inflation. For retail, consumer spending is arguably the most important of those metrics.
Spending has kept pace with inflation. That supports retail sales, which supports tenant performance and the investment capital moving into retail real estate.
New construction is limited
Missoula has seen very little new retail construction, and the pipeline doesn’t come close to covering current demand. The same holds across Montana and the Mountain West.
Retailers with strong sales want to expand, but there isn’t enough new space coming online to accommodate them. We expect retail to remain a low-vacancy asset type through the rest of 2026 and into 2027.
Owners of well-located retail buildings in Missoula are in a strong position. Demand for quality space is high and tenants have few alternatives.
Investors are still buying
Two things give retail investors confidence right now.
First, the tenants in these buildings are performing well.
Second, the lack of new construction protects existing assets. Investors expect limited supply to push values up over the next several years.
The headwinds
The labor market in entry-level and lower-wage positions has been difficult. Wage growth in those categories has compressed more than in others, and staffing remains an operational problem for retailers.
Inflation has been persistent. Interest rates remain higher than most people expected 12 to 18 months ago.
Credit card spending has supported consumer spending. We are watching credit card defaults, which are trending up and currently at 15-year highs.The fundamentals are still strong.
Stores are posting good sales, and demand for quality retail locations is high.
What this means for Missoula owners
I’m optimistic about Missoula retail through the rest of 2026 and into 2027. Supply is tight and tenant demand is holding.
Three things worth checking on your own property:
- In-place rents against current market rates. Leases signed three or four years ago may sit below what the same space would command today.
- Lease expirations in the next 18 to 24 months. Low vacancy changes the renewal conversation. Knowing your rollover schedule tells you when to start it.
- Current sale value. If your last valuation predates this run of low vacancy and limited construction, it’s out of date.
SterlingCRE Advisors can pull current lease and sale comps and advise you on how to position your property in today’s market. Let’s connect.
