The Other Hot Real Estate Market
Last week the Wall Street Journal reported Billings as a “Boomtown” and ranked as No 1 on the
WSJ/Realtor.com Housing Market Index. This may not come as a surprise to many as we are all aware of
the very tight residential market in Billings and the surrounding area. However, what may come as a
surprise is the unusually strong commercial market today.
Less discussed is the continued strengthening of the commercial real estate market across product
types. We have seen a number of new businesses move into the market. Most notable is the recent
purchase of land by RVU for a 135,000 SF medical campus on the West end.
The industrial sector has seen a strong increase in demand for smaller shops. A number of projects are
planned to come online but have been hindered by pricing and availability of materials. Demand for
industrial will continue to grow as traditional industrial users compete for available space with start up
marijuana facilities. This is a trend that larger markets such as Denver have experienced.
A more surprising development is the reduction in available office space. This is counter cyclical to what
is occurring in larger markets and may be a result of Billings’ hesitance to build new office space since
the great recession.
What has not changed is the demand for income generating properties. 1031 Exchange replacement
properties are scarce and continue to place pressure on CAP Rates. Concerns about taxes, the frothiness
of the stock market and inflation are driving investors to real estate. However, like the residential
market, commercial income generating properties are equally scarce.