Bozeman continues to attract retailers drawn to its abundance of customers with high-income levels and a propensity for luxury goods and premium experiences. Until recently, there has been relatively little retail inventory added to the market. However, we are monitoring several “new to the market” developments and several in planning.
Consistent Growth
Bozeman was already seeing significant annual growth, and the series “Yellowstone” was already in its second year when Covid seemed to shut the world down in the spring of 2020. It seemed like the world was trying to move here. Multifamily development surged to meet projected housing demand but perhaps “overshot” as things cooled down to more “normal” pre-Covid growth levels, and as a result, vacancy rates have risen substantially.
In contrast, retail vacancy is relatively low, and demand remains strong, particularly in areas underserved by grocery stores, restaurants, and everyday conveniences. As a result, we saw the Gallatin County County lease rates inflate by 27% over the past year, reaching an average of $27.93 per square foot
High Rents and Limited Vacancies
Downtown Bozeman is known for its unique blend of shops, restaurants, and boutique hotels, making it a popular tourist destination. As a result, it is also a preference for retailers, especially those that rely on the disposable income that these tourists bring with them. But, because the downtown area resides in a relatively small area, competition for vacant space is high, and as a result, lease rates in this area are the highest in the city, driving acquisition Cap rates down substantially.
Where is My Clientele?
As the saying goes it is “Location, Location, Location”. But, in an era where on-line retailers are bringing a daunting amount of competition to “brick and mortar” retailers, retail as an assest class may be the most sensitive asset class to both location and price.
It can be easy to focus on high-profile areas such as Downtown and think, “I need to be there.” However, few retailers can afford the location cost that Downtown spaces are fetching, and for many retailers, it is not where their customers are or even convenient for their customers. Successful retailers “know” their customers—where they live, work, and recreate—and identify locations within their area of daily habits. Here are some opportunities in areas of growth that we at SterlingCRE are monitoring:
- The North 7th Avenue corridor area is undergoing significant high-density residential activity. Additionally, its access to I-90 and established neighborhoods make it a prime location for service-oriented retail and dining.
- West Kagy has had significant development in the form of student housing, high-density residential, and some single-family. Additionally, several office parks do not offer any retail.
- The Jackrabbit corridor from Belgrade to Four Corners is a major traffic corridor connecting areas of West Bozeman to Four Corners and Belgrade, which is currently the fastest-growing municipality in the state.
Bozeman’s Retail Future
Whether you’re evaluating a value-add property or planning a new development, a thoughtful approach is essential in today’s market. SterlingCRE Advisors is here to guide you, offering insights and expertise to help you make the right investment decisions.
