For the past few years, we’ve shared nothing but good news about industrial real estate. Fueled by e-commerce and supply chain shifts, the sector became a darling for investors—something that many people overlooked before the pandemic.
But in 2025, the tone has shifted. The Missoula industrial market is still solid, but we’re clearly entering a new cycle—and it’s time to ask the real question: Is this just a market breather, or are we seeing the start of a longer correction?
Vacancy Is Rising—And That’s Worth Watching
Industrial vacancy is creeping up in Missoula. We’re still outperforming national benchmarks, but we are seeing more options sit on the market longer, and lease rates are starting to show some softening as landlords adjust to compete for tenants.
We’re also watching what could be a notable amount of additional space coming available soon. Some of this is tied to tenants leaving the market; other properties are rolling onto the market as new projects are completed.
Pricing Holds—For Now
Here’s where things get interesting. While leasing activity has slowed and marketing timelines are stretching, sale prices have not dipped. Buyers–especially owner-occupiers–believe in the long-term value of industrial real estate. Construction costs are driving new building costs out of range for many users, keeping existing asset values elevated.
That kind of confidence tells us there’s still plenty of belief in the fundamentals of the asset class. But with rising vacancy, we do expect more landlords will need to sharpen pricing or offer incentives to get deals across the finish line.
The Development Pipeline Is Quiet—but That Might Change
In terms of new construction, 2024 was sluggish. Land costs, elevated interest rates, and construction pricing made it tough for many developers to move forward. Most of the activity we saw came from owner-occupiers building for their own use.
That said, with infrastructure improvements underway in key areas—especially in places like Bonner—we may start to see permitting activity pick up. If land becomes more accessible and fire suppression issues are addressed, that could open the door for more build-to-suit or speculative projects.
Large Bay vs. Small Bay: It’s All About Fit
We’ve been pushing for more large bay development in Missoula for a while—and we’ve finally seen some delivered. But timing matters. A wave of larger freestanding buildings recently hit the market, creating additional competition for those new large bay facilities. Some of these large bay properties are now seeing the most downward pressure on rents.
In contrast, small bay flex space lease rates and sale prices are still holding strong, as long as the numbers make sense. Smaller users are facing higher costs across the board, but demand for well-located, efficient space—especially with the option to purchase—is still very prevalent.
Amenities That Matter: Yard, Power, and Rail
If you’re looking to attract long-term, stable tenants, there are a few things you need to think about now more than ever:
- Yard space for lay-down and material staging—especially for trades.
- Three-phase power—many users need more intensive power capacity.
- Rail access—more users are asking about rail access as on-shoring/re-shoring discussions heat up.
These aren’t optional upgrades anymore. For certain tenants, they’re essentials.
Investment Outlook: Activity Remains—At the Right Price
The buyer pool is still there—but they’re more selective and the elevated cost of capital has created limitations many buyers are struggling to work with. Deals priced with appropriate cap rate expectations are getting attention, especially when the property has lengthy lease term remaining. Sellers who understand today’s pricing realities are having productive conversations and are getting more deals done.
Looking Ahead: Be Ready for the Pivot
Is this a short pause before things tighten up again? Or are we heading into a longer stretch of elevated vacancy and downward rent pressure?
Right now, the market is in transition. There’s opportunity out there, but it’s harder to find and requires more creativity. Owners need to be strategic, understand what users want, and deliver spaces that are functional, flexible, and ready to go.
Have questions about where your building fits in this shifting market? Let’s talk. I’m always happy to walk a site, review plans, or talk through what we’re seeing in real time.
