Vacancy saw an uptick in the 4th quarter, rising to 8.9 percent, due in large part to new space delivered at The Village at Meridian, located at Eagle & Fairview. Unanchored vacancy continued to decline, though a slight bump in the 3rd quarter ended 15 consecutive quarters of improvement. Although vacancy may have increased due to new construction, demand for space at The Village at Meridian should lead to fast absorption of this new product.
Pad activity remains strong due to low interest rates and improved financing options. Demand for prime pad locations has often resulted in bidding wars for quality sites. Banks, mattress companies, auto repair facilities, fast food restaurants, and coffee shops are among the most active pad buyers.
Over 630,000 square feet of new construction came online in 2013, the most since 2008. Most of the new construction occurred in Meridian where notable projects included The Village at Meridian, Gateway Marketplace, and a new Walmart on Overland near Meridian Road. Idaho’s first Trader Joe’s is under construction in downtown Boise, slated to open in 2014. Over 50 percent of construction was speculative development, the highest percentage since 2005 and more than the past four years combined.
Despite strong leasing activity, average lease rates were flat in the second half of the year and remain 25 percent below pre-recession levels. However, demand for anchored Class A space is permitting owners of these centers to stand firm on lease rates which are among the highest our market has ever seen.
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