Market Update

TOWER…IS IT SAFE TO LAND?

See full report here: https://daniels.du.edu/assets/Cycle-Monitor-23Q1.pdf

According to Dr. Mueller, retail, hotel and industrial properties continued to expand in the first quarter. Industrial & retail rental rates increased 10.4% and 3.9% year over year respectively. Hotel revenues experienced 7.7% revenue growth year over year.

Apartments have moved into the “Hypersupply Phase” as occupancy declined 0.7% year over year. He projects slower demand this year as new supply hits record numbers not seen since the 1980’s. Office has clearly entered the “Recessionary Phase”. Occupancy is down 0.7% and is now lower than the 87% occupancy mark during the Great Recession. As this sector continues to slow, over 67 million SF of new office space has hit the market.

How does this compare to our market? On the one hand, we cannot avoid the increase in interest rates. Commercial loans are now well into the 8% to 9% range. Like gravity, interest rates have a strong pull on market conditions. Counterbalancing this pull however is the increase in people and businesses moving to our market. This trend, coupled with the launch of a new $1 Billion dollar hospital project in downtown Billings, and demand for quality properties in superior locations, indicates the landing may be a soft one.

George Warmer, CCIM Managing Partner Coldwell Banker Commercial CBS

*Source B.B.E.R. for migration trends.