Brokerage Outlook: Montana

• Montana Industrial

Montana Industrial Submitted by Don Cape, Jr., principal and sales associate with the Bozeman, Mont., office of Grubb & Ellis/Montana Commercial. Posted 9-19-06. What area is your expertise? • State of Montana What trends do you see presently in industrial development in your area? • Industrial development and demand remain strong in Montana. The majority of developments are smaller build-to-suite and housing sector related. There is a construction boom in Montana with a high demand and little supply for construction companies. This would hold true for R&D/flex industrial space as well. What type of industrial product is doing well in your area? • R&D /Flex space Who are the active industrial developers in your area? • JWT Capital and Washington Corp. Please name one or two significant industrial developments in your area. What impact will these projects have on the market • There are no significant developments at this time. Where is the majority of development taking place? Why is this area doing well? • Billings is the major economic hub for Montana. Therefore, we see most of the large industrial developments in this market. Billings is a regional distribution center for companies such as Sysco Corp., Food Services of America, Carquest, Napa, Keebler and Associated Grocers. The economy is largely oil and as related with Exxon Mobil Corp., Conoco-Phillips and Cenex refineries in the area. What area do you expect to be the next big industrial development market? Why? • I think we will see a boom for smaller space in the Bozeman area due to the increase in housing sector-related tenants and a continued demand for distribution space in Billings. Billings will remain a strong distribution hub due to its location within the region. Please describe the industrial leasing activity in your area. • Most of the industrial users are single-tenant or build-to-suit. Billings bulk warehouse ranges from $2.00 to $3.60 per square foot with an effective average of $2.75. The vacancy rate is 5 percent. Manufacturing ranges from $3.00 to $4.50 with an effective rate of $4.25 a square foot, with a 7.0 percent vacancy rate. Bozeman is currently at $8.50 per square foot for distribution and $10.00 per square foot for R&D Flex. Please describe the industrial sales activity in your area. • There is little sales activity in the state. Most sales are condo industrial units, smaller in nature. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • Billings Bulk: 5 percent Billings Manufacturing: 7 percent Missoula Bulk: 4 percent Missoula Manufacturing: 10 percent Bozeman: Distribution and R&D Flex: 5 percent What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in 2006? • Montana continues to grow with industrial demand at an all-time high. We have not seen any slowdown in demand for flex as seen nationally as a result of the slowdown in the housing sector, and most of the larger companies are seeking distribution centers in Montana due to the proximity to cities within the region. I feel the demand will continue to grow without over-developing since the majority of the tenant/owners are seeking build-to-suites. What industries do you expect to expand in 2006 to absorb a great deal of industrial space? What areas will be affected? • High-tech and construction-related tenants will continue to absorb space in Bozeman and Missoula with most of the Billings space being absorbed from distribution users.