Montana Office Market Update: Looking for that just-right space
There was plenty of doom and gloom about the office market in the past 12 – 14 months, and probably rightfully so. No one was sure when empty offices were going to be used again and we saw a quick rise in remote work, begging the question: do we need offices?
In Montana, the answer is yes.
Across the state, demand for office product rose more quickly than on the national stage.
In Missoula and Bozeman, vacancy showed more stability than in other markets. And while transaction volume was down in Missoula, the median sales price per square foot was up 28%. In Bozeman, the average sale price per square foot was $199.10 for freestanding offices. For Bozeman condos, the price jumped to $253.03 per square foot. In many Montana markets, plenty of new office product is coming to market – and even slightly increased lease rates during a year when office took a big hit.
Just Right
But to compete in the market, having the right space is critical. Location and layout can make or break a project. Being in an undesirable location or having very dated finishes can quickly render a space obsolete (time for that maroon carpet to go). Even as vaccination rates rise, workers are passing on bullpen or open office workspaces for safety reasons.
We are seeing demand for office space driven by companies expanding or relocating to the market, and they have specific needs as they bring folks back to the office with COVID precautions top of mind. The space that fills quickly is newer buildings with modern amenities.
In Missoula, a quarter of the office sales last year were buildings constructed since 2010. That’s up quite a bit from 2019 when only 3% of office transactions were buildings constructed since 2010. There’s a palpable shift to a preference for newer office product.
And while a preference for new builds exists in Bozeman, the rapidly rising cost of construction materials can push occupiers to consider older buildings.
While the development pipeline is relatively robust, with a fair amount of new product coming through, we can’t overstate how selective consumers are. There are some real opportunities ahead for the office sector. One is in coworking spaces – but only those with private office suites.
Opportunities
Bloomberg recently identified Bozeman as a “Zoom town,” where remote workers are flocking in droves. Coworking space was bustling before the pandemic and we are already seeing a resurgence across Montana.
Flex office with warehousing is in demand, combining space for manufacturing and distribution on-site with administrative operations. Finally, some businesses are looking to expand in the wake of the pandemic – meaning a larger footprint to allow for social distancing is in their future.
Montana is heading back to the office, whether we’re ready to give up our comfy couches or not. Stay tuned for more office data and market trend updates. Keep tabs on fresh market data here.
For Missoula market info, contact Matt Mellott.
In Bozeman, contact Ryan Springer.
