If we have a housing shortage, how can we continue to have record levels of sales? The simple answer is that not enough existing homes are freshly coming on the market to keep pace with demand. Historically we have seen a 15% absorption rate in home sales. The absorption rate is the percentage of homes on the market that sells in any one month. For the past 12 months, the absorption rate has exceeded 32%.
As a result of continued strong demand, 2022 will see a large increase in new housing starts, new subdivisions and large multifamily developments. This spells good news for the overall Billings economy.
Other trends to watch in the Billings market include rising demand and costs in the industrial sector. States that have legalized recreational marijuana have seen a surge in demand for industrial space. As growers move into the industrial sector, some traditional industrial users are pushed out creating more demand for new warehouse space. Even without increased demand from growers, shop space continues to be in short supply. We have seen both an increase in the cost to build shop units but also a willingness by tenants to absorb higher lease rates.
Office space is most likely the biggest question mark in 2022. According to CCIM large companies with over 10,000 employees plan to shrink their office footprint in 2022. However, 40% of smaller companies plan to increase their office holdings. Continued growth in the medical sector demands attention. The Rocky Vista University will complete its 135,000 SF medical school by year’s end. Other large medical facilities are in the works along with the new Alcohol Treatment facility on 6th Ave N.
2022 maybe one for the books! Hold on for a wild ride this year!
