Would there be enough buyers? It seems the current influx of buyers is sufficient to buy any and all reasonably priced, functional, second-generation building in the Treasure Valley. Obviously, there are many qualifications in that statement and I will address those later. Most active Commercial Real Estate Advisors, or more commonly known as “brokers,” within our office receive three to four calls per month from first-time buyers or buyers from outside the market targeting investments in southern
Idaho. Calls traditionally come from the Western region, including California, Oregon and Washington companies. However, significant interest today is coming from the Midwest and even Southern states.
Developers with patient money saw what happened in Denver, Austin and Salt Lake City over the past 20+ years and expect the same will happen in Boise. It is exciting to see what new perspectives, vision and experiences can bring to our development community however long-standing and equally patient developers control much of our downtown and key development sites throughout the valley. New players to our market find it peculiar there are few, if any, options currently listed for sale. While commercial real estate is not as competitive currently as our single-family counterparts, the Treasure Valley is certainly a seller’s market.
Most out-of-state investors and developers call with a great story to tell about their success in other markets although only about 5% of them actually fly to Boise to experience the market and meet with advisors. These investors are sophisticated and are openly chasing higher yields they cannot find within their current markets. In other cases, the less-sophisticated buyers are simply ready to exit coastal markets and transfer sizable gains away from restrictive development communities and/or politically charged markets.
There are a few best practices I can offer first-time investors to the Boise Valley. First, identify a Commercial Real Estate Advisor(s) who is qualified and specializes in your desired investment. Contacting the Market Leader of an office or Responsible Broker is a great place to start. Also, online biographies, resumes and public reviews will reveal qualifications, experience and professionalism. Next, simply ask the advisor(s) early in the conversation about their focus and recent transactions to back up their claims. Some veteran advisors have experience in multiple product types due to our smaller market size but in general it is best to work with an advisor dedicated to current trends within the product type and submarket being sought. Then, ask what conflicts of interest the advisor or company may have. While the preference will always be to have no potential conflicts, this decision needs to be tempered since most all active advisors in a market our size will have at least some competing business. Lastly, interview multiple advisors and select one, or a team, to dedicate your time with for at least six months. Stay educated on the direction of the market through consistent contact with your advisor. Regular communications will establish loyalty and trust and if you find a potential opportunity on your own, ask for your advisor’s involvement. This step will save you significant time and energy since experienced advisors have resources to provide significant information in short order.
As for the qualifications I made at the onset, the key words are “seems,” “reasonably priced,” “functional” and “second-generation.” While in this market, it seems buyer demand is too strong to find good deals, with hard work this is never the case. There are also plenty of unreasonably priced properties, so be sure to work with an advisor who understands the market and can warn you of not so obvious details. In any given year, I estimate between 1% and 2% of the building inventory will become functionally obsolete for reasons such as access, deterioration, usability, or design. Lastly, we are late in the expansion cycle, but we still have runway before recently constructed buildings are readily traded. Construction costs are at historically high levels, and it will be difficult to appraise and finance an investment value at or above actual cost. Therefore most properties transacted will be second-generation and justified in part because the value is below replacement cost. The aforementioned qualifications are complicated to analyze and understand but working with a qualified CCIM who represents your best interests is bound to accelerate your success.