HomeMy WebLinkAbout173007-Draft Demographic and Market Report 092817
Working Draft Report
Demographic and Real Estate
Market Assessment
Prepared for:
City of Bozeman, Montana
Prepared by:
Economic & Planning Systems, Inc.
September 28, 2017
EPS #173007
Table of Contents
1. INTRODUCTION AND SUMMARY OF FINDINGS ................................................................... 1
Introduction ........................................................................................................... 1
Demographic and Market Assessment Findings ............................................................ 2
2. REGIONAL TRENDS AND CONDITIONS ............................................................................ 8
Demographics ........................................................................................................ 8
Employment ......................................................................................................... 10
3. BOZEMAN SOCIOECONOMICS .................................................................................... 17
Economic Drivers .................................................................................................. 17
Workforce Characteristics ....................................................................................... 22
Migration ............................................................................................................. 26
Community Comparisons ....................................................................................... 27
4. HOUSING MARKET TRENDS ...................................................................................... 28
National Housing and Demographic Trends ............................................................... 28
Household Characteristics and Affordability ............................................................... 32
Housing Price Trends ............................................................................................. 34
Rental Market ....................................................................................................... 36
Construction Trends .............................................................................................. 37
5. RETAIL MARKET ................................................................................................... 41
National Retail Market ........................................................................................... 41
Bozeman Retail Development ................................................................................. 42
Supportable Commercial Area ................................................................................. 45
Commercial Zoning Evaluation ................................................................................ 47
6. OFFICE AND INDUSTRIAL MARKET .............................................................................. 54
Office Market Trends ............................................................................................. 54
Greater Bozeman Office Market ............................................................................... 56
Greater Bozeman Industrial Market ......................................................................... 57
List of Tables
Table 1 Population Trends ........................................................................................... 8
Table 2 Gallatin County Demographic Summary ............................................................. 9
Table 3 Gallatin County Employment Trends, 2005-2016 ............................................... 11
Table 4 Share of Job Growth by Sector, 2005-2014 ...................................................... 16
Table 5 Largest Private Employers, Gallatin County, 2015 ............................................. 21
Table 6 Gallatin County Net Migration, 2010-2015 ........................................................ 26
Table 7 Peer Community Demographics and Employment .............................................. 27
Table 8 Income Required to Afford the Median Priced Home........................................... 35
Table 9 Student vs. Local Housing Payment Example .................................................... 36
Table 10 Residential Construction Trends, 2005-2016 ..................................................... 37
Table 11 Bozeman Retail Inventory .............................................................................. 44
Table 12 Bozeman Supportable Commercial Area: Local Spending .................................... 46
Table 13 B-1 and B-2 Development Capacity ................................................................. 49
Table 14 B-1 District Supportable Square Feet by Number of Households .......................... 50
Table 15 Development Capacity (0.15, 0.5, and 1.0 mile radius) ...................................... 51
Table 16 B-2 District Supportable Square Feet by Household Spending ............................. 53
Table 17 Greater Bozeman Office Construction Trends .................................................... 56
Table 18 Greater Bozeman Industrial Construction Trends ............................................... 57
List of Figures
Figure 1 Population Index, 2000-2016 ........................................................................... 9
Figure 2 Gallatin County Employment, 2000-2016 ......................................................... 10
Figure 3 Gallatin County Employment Index, 2008-2016 ................................................ 12
Figure 4 Share of Job Growth by Sector, 2010-2016 ...................................................... 13
Figure 5 Gallatin County Job Distribution, 2014 ............................................................. 14
Figure 6 Share of Job Growth by Area, 2005-2014 ........................................................ 14
Figure 7 Average Firm Size, 2000 and 2016 ................................................................. 15
Figure 8 MSU Student Enrollment and Total FTE Count, 1990-2016 .................................. 18
Figure 9 YNP Annual Visitation, 2010-2016 ................................................................... 19
Figure 10 Annual Skier Visits, 2010-2016 ...................................................................... 19
Figure 11 Bozeman Educational Attainment, 2015 ........................................................... 22
Figure 12 Bozeman Age Distribution, 2015 ..................................................................... 23
Figure 13 Average Wages, Gallatin County, 2016 ............................................................ 24
Figure 14 Job Distribution by Wage Quartile, 2016 .......................................................... 24
Figure 15 Gallatin County Share of Job Growth by Wage Quartile, 2010-2016 ..................... 25
Figure 16 Gallatin County In-Migration, 2011-2015 ......................................................... 26
Figure 17 Price per square foot for compact walkable development, 2011 ........................... 30
Figure 18 Bozeman Housing Tenure, 2000, 2010, 2016 ................................................... 32
Figure 19 Percent of Owner Households Spending Over 30% of Income on Housing, 2015 .... 33
Figure 20 Percent of Renter Households Spending Over 30% of Income on Housing, 2015 .... 33
Figure 21 Median Sale Price by Area, 2003-2017 ............................................................ 34
Figure 22 Units Built by Density Type, 2005-2010 and 2011-2016 ..................................... 38
Figure 23 Average Single household Lot Size by Year Built ............................................... 39
Figure 24 Residential Development by Location and Year Built .......................................... 40
Figure 25 US E-Commerce Sales, 2001-2014 ................................................................. 41
Figure 26 Retail and Commercial Development Areas ...................................................... 43
Figure 27 B-1 and B-2 Commercial Districts ................................................................... 47
Figure 28 Location Preferences for Bozeman Businesses .................................................. 54
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1. INTRODUCTION AND SUMMARY OF FINDINGS
Introduction
This Working Draft Report contains an assessment of economic, demographic, and real estate
trends in Bozeman. The information and analysis in this working document is provided to inform
the Growth Policy update process. From the information in this Working Draft, we will prepare a
land demand forecast, and make policy and strategy recommendations to the City after
discussions with the City Planning Board and City staff. Those recommendations will be included
in the final report along with any supplemental analysis and revisions from comments from the
Planning Board and City Staff.
This document is organized into six Chapters outlined below:
• Chapter 1 – Introduction and Summary of Findings.
• Chapter 2 – Regional Trends and Conditions. This chapter presents an analysis of
economic and demographic trends in Greater Bozeman and Gallatin County including the
amount of population and employment growth occurring in each location, and a comparison
of the economic composition of each.
• Chapter 3 – Bozeman Socioeconomics. This chapter focuses on the socioeconomics of the
City of Bozeman including the economic base and MSU enrollment. It also describes the four
economic segments present which make Bozeman unique among small cities: higher
education, tourism and recreation, health care, and technology.
• Chapter 4 – Housing Market Trends. This chapter summarizes housing development
trends, housing demographics, affordability indicators, the impact of MSU student rentals,
and national trends present in Bozeman.
• Chapter 5 – Retail Market. In this chapter, the city’s major retailer inventory and spending
patterns are examined. It also contains an analysis of the amount and type of retail and
commercial space that is supportable in a prototypical B-1 and B-2 zoning area.
• Chapter 6 – Office and Industrial Market. This chapter presents data on office and
industrial building construction in Greater Bozeman, including the market share for each
area. It also includes market indicators such as land costs and rents and qualitative
perspective from area real estate experts.
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Demographic and Market Assessment Findings
1. Bozeman has five economic segments which make it unique and create both
opportunities and challenges.
Higher Education
Montana State University (MSU) is the largest employer with approximately 3,000 full- and
part-time employees. Employment levels in higher education are relatively stable, buffering
Bozeman from economic volatility; however, State budget constraints due to wildfire costs
may have a short term impact on employment. MSU also creates a pool of skilled labor and
many students stay in Bozeman after they graduate. MSU research partnerships have
resulted in some new business creation from technology transfer and spinoffs, a major focus
of the Innovation Campus under development. However, MSU on-campus housing has not
kept pace with enrollment—4.0 percent growth per year since 2009. Students have an
impact on the housing market because student housing typically rents by the bedroom at
roughly $500 to $600 per bedroom. Three students renting a home can pay $1,500 per
month or more, which is equivalent to the mortgage on a $325,000 to $350,000 home.
Students also contribute to the tight housing supply, particularly rental housing, and live in
nearly every neighborhood in Bozeman.
Tourism and Recreation
Many tourists travel to and through Bozeman on their way to Yellowstone and Glacier
National Parks, Bridger Bowl and Big Sky, and the many nearby rivers and mountains. These
include international and national visitors. Bozeman has a brand and identity and is well
known throughout the U.S. and internationally. A portion of people who visit Bozeman
eventually move there. The Bozeman and Montana brand has also boosted the outdoor
products industry, including Simms Fishing, Mystery Ranch (formerly Dana Design), and
Sitka hunting apparel.
The downside of being a tourism gateway is that a high proportion of jobs and job growth is
in low wage hospitality jobs. Also, people who have the ability to move or bring their job to
Bozeman often have high incomes and accumulated wealth which pushes up housing prices.
However, some of the people Bozeman attracts are entrepreneurs which are important in
growing the economy.
Health Care
The health care industry added nearly 1,400 wage and salary jobs since 2010 (an increase of
34 percent). It is a source of stable employment at a range of wages and skill levels, as
people need health care no matter how the rest of the economy is performing. Bozeman
Health is the largest private employer with over 1,000 employees, and Bozeman is a major
hub for health care in Montana. There are also numerous clinics and doctors around Bozeman
Health.
Technology
Bozeman has long been a highly entrepreneurial place in all sectors of the economy. A
number of factors have seemed to accelerate the growth of technology firms and workers.
Bozeman has made several “10 Best” lists (Men’s Journal, Forbes, Outside Magazine). The
purchase of RightNow Technologies by Oracle further put Bozeman ‘on the map’ for having a
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major international corporate presence. It also produced several spinoff firms when senior
management took their buyout funds to leave RightNow and start new ventures. Technology
workers are moving to Bozeman from the coasts and other large metro areas. This sector is
likely to grow more, and the higher wages may also contribute further to high housing costs.
Regional Trade Center
Bozeman is a regional trade and service center in Southwest Montana. Bozeman’s retail,
services, and healthcare businesses serve a trade area of approximately 150 miles or more.
Serving this large of a trade area has increased the amount of retail that Bozeman can
support. The influx of visitors has helped the community diversify the retail and food and
beverage mix and strengthen downtown through the additional injection of spending in
addition to the local and regional population. The growth in retail and hospitality jobs
however increases the need for more attainable and affordable housing.
2. For a city of 45,000 in a region of over 90,000, Bozeman has a level of economic
diversity and strength that exceeds many other small western cities, especially
those which are not part of a larger metropolitan region.
In many small western cities and rural areas, health care and government are the largest
sectors of the economy unless there is a strong energy or extractive sector. In Bozeman, job
growth has been robust and diverse including the sectors and clusters noted above:
accommodations and food services; construction; health care; retail; manufacturing; and
professional services. Countywide, employment has grown at 4.2 percent per year since
2010 (12,000 jobs), and 80 percent of the job growth occurred in Bozeman. This growth is
attributed to the quality of life; service in and out of the Bozeman Yellowstone International
Airport; spinoffs from local technology and R&D firms; growth of existing firms; and new
businesses and entrepreneurs moving to Bozeman.
3. Nearly three quarters of Gallatin County’s population growth is due to in-migration
with most of this occurring in Bozeman.
Of the nearly 15,000 new people in Gallatin County from 2010 through 2015, nearly 11,000
are people who moved to Gallatin County. The Census does not report these statistics for
geographies smaller than counties, but more than half of the County’s population growth
occurred within city limits indicating that those proportions are also representative of
Bozeman’s growth. Strong migration like this indicates that Bozeman is a highly desirable
place to live, work, own a business, or retire. It is also an indicator of the strength of local
economy.
Some new residents have moved from larger metro areas and brought a job and salary with
them. Others, such as retirees or people with investment portfolio income, who have other
sources of income, are moving to Bozeman for the lifestyle and quality of life. An effect of
these two trends is that housing prices become decoupled from local economy and local wage
levels. This trend – the influx of outside income and wealth – is occurring in every major
amenity rich and mountain resort community in the Intermountain West.
4. Most of the job growth in Gallatin County and Bozeman (as well as nationally) is
below $16.00 per hour, which is generally regarded as below a living wage.
Nearly half of all new jobs created from 2010 through 2016 paid less than $16.00 per hour
($34,000 per year). The primary industries in which these wage levels are present include
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health care, retail, and accommodations and food services, all of which grew since the
recession. Job growth at these wage levels further increases the demand for income
restricted affordable and market rate attainable housing.
5. Bozeman’s housing market is exhibiting several national trends related to changing
preferences and demographic changes.
National and regional consumer preference research has shown an increase in demand for
housing in communities and neighborhoods close to jobs, services, dining, shopping, and
recreation and leisure activities. Also, the time people feel that they have available to
maintain large homes and properties has decreased especially as dual income families have
become more of the norm or necessity. A portion of the housing market is moving away from
large lot suburban and rural homes to:
• More compact single household development with smaller lot sizes, such as the
Traditional Neighborhood Design (TND) style of development. Neighborhoods such as
Stapleton in Denver, CO; Josephine Crossing in Billings, MT; and Valley West in Bozeman
are examples of popular TND housing developments.
• Increased demand for rental housing both for affordability and lifestyle preference
reasons, especially among the 18 to 34 year old population.
• Increased demand for more affordable and lower maintenance housing by all age groups
including the retiring Baby Boom generation.
• Increased demand for downtown locations and original neighborhoods, as exhibited by
the rise in housing redevelopment and infill in the original Bozeman neighborhoods and
similar neighborhoods in other desirable cities nationwide. Over 100 new homes have
been built in the Downtown area neighborhoods since 2010.
6. Housing affordability is a growing issue in Bozeman that is negatively affecting
quality of life and may affect employee attraction and retention.
As of August 2017, the median home price in Bozeman was $398,000 up from $245,000 as
the recovery from the Great Recession began with annual appreciation rates over 10 percent
per year over the past five years. The median home price is now 150 percent of the median
household income in the city. In order to afford the median priced home, a household needs
to earn at least $68,400 per year or $32.00 per hour for one earner. The high cost of housing
and strong demand in Bozeman is also affecting housing prices in surrounding communities.
Home prices in Belgrade, Livingston, and Three Forks have also increased at 10 to 12 percent
per year over the same time period. Living in outlying areas may reduce amounts paid for
housing but increases costs for transportation that may offset much of the perceived cost
savings of locating outside of Bozeman.
The U.S. Department of Housing and Urban Development (HUD) defines a household as
being “cost burdened” when it is paying 30 percent or more of its income to rent or mortgage
payments. In Bozeman, 22 percent of owner households are paying more than 35 percent of
their income in rent. For renters, 44 percent are paying more than 35 percent of their income
to rent. Housing affordability is now a national problem as well due to low rates of wage,
income and wealth growth over the past decade or more.
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Bozeman’s housing market is already tight if housing production does not keep pace with job
growth, student growth, and housing occupied by retirees, it will constrain the labor market.
While it is one of the largest cities in Montana, it is still a small city with a small labor pool
compared to larger metro areas with a larger and deeper talent pool. Fortunately, Bozeman
has developable land to the west and northwest which can accommodate significant job and
housing growth.
7. The rapid growth of the economy combined with the high cost of housing compared
to local wage levels is creating a workforce shortage that needs to be addressed to
sustain the economy.
Bozeman has a diverse workforce that is both highly educated and well trained. However,
due to the rapid rate of employment growth over the past decade, there is an imbalance
between the number of jobs available and workers. The lack of available employees has
negatively impacted the ability of regional employers to find qualified employees. Employers
in all sectors ranging from manufacturing to technology have run into challenges associated
with finding qualified job candidates.
8. Bozeman is not expected to experience significant new regional retail growth.
Bozeman regional retail stores serve an approximately 150 mile trade area. This has shrunk
since Walmart, Costco, and Target located in Helena several years ago. Most of the national
‘big box’ retailers that are still active and expanding are already present in Bozeman (Costco,
Walmart, Lowes, Home Depot, Target, Kohls). New stores and concepts do appear in the
market from time to time, and Bozeman will be an attractive location for them. However, we
do not expect the demand for these types of sites and properties to increase substantially
over the next 10 years.
Bozeman has six full service supermarkets including a Walmart Supercenter and a new
proposed 70,000 square foot supermarket. This is about two more than a city of Bozeman’s
size supports, indicating that a large portion of the sales come from people living outside the
city. Bozeman also has more discount department stores, warehouse clubs, and home
improvement centers than its population alone can support also showing the large trade area
from which Bozeman draws its customers.
It is likely that as Belgrade grows, it will reach a critical size supporting its own retail base,
such as a Walmart supercenter. Given that there is no sales tax in Montana and therefore not
a large fiscal benefit to siting new retailers, and that Bozeman already has the largest share
of the regional retail market, retail development and recruitment does not need to be a
priority for the City.
9. B-1 and B-2 zoning can be adjusted to better align with the real estate market and
household density needs of retail development.
B-1 Zoning
At current housing and household densities in Bozeman, the assumption that a B-1 commercial
center serves a half mile radius trade area needs to be reexamined. If the density of
surrounding development is increased, B-1 commercial centers can be made more viable and
development may accelerate in them. B-1 neighborhood centers start to become more
viable, assuming a ½ mile trade area, at an estimated net density of 8 dwelling units per acre
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which is significantly denser than the original Bozeman neighborhoods and new development.
If a larger trade area is acceptable, the required household density can be lower.
The success of any individual B-1 area will depend on the strength and quality of the
business mix, the specific location, and surrounding demographics. Some B-1s have been
successful because of their location on an arterial and ability to draw from a larger citywide
trade area.
B-1 zoning can serve a variety of community and neighborhood needs besides daily shopping
and neighborhood dining. There is demand for small office and studio space, childcare
facilities, and health and wellness businesses. Having a diverse business mix within
neighborhoods can enhance quality of life. This flexibility of uses should be maintained in the
B-1 areas.
B-2 Zoning
B-2 Districts are intended to include a mix of larger community oriented retail/commercial
space serving a larger trade area. Traditionally, community shopping centers are 100,000 to
150,000 square feet in size and are anchored by a grocery store. New grocery stores begin at
about 50,000 square feet, but have been growing to 60,000 to 70,000 square feet and serve
at least a two mile trade area.
• Some B-2 zoning areas can accommodate 500,000 square feet of retail/commercial
development or more. This was the size of the “power center” development format that
emerged in the early 2000s when retail was expanding rapidly. Given market conditions
in the national retail landscape, and the typical 100,000 to 150,000 square foot
community shopping center size, it is not realistic to expect that an entire B-2 will build
out as retail.
• The B-2 areas do allow for numerous other commercial uses. This flexibility should be
maintained, as these areas can also support office development which is in demand, as
well as other services.
• At the current rate of housing, averaging 600 units per year over the past 10 years in the
City, and 800 to 1,000 per year in Greater Bozeman, a new grocery store could be
supported in the market in the next 5 years. The likely location would be on the west side
of Bozeman, the direction in which Bozeman is growing. A site on the west side could also
capture drive in demand from Belgrade, the unincorporated areas just outside the City,
and Four Corners.
• Adding additional housing density near or even in B-2 zoning areas can benefit retail
development. Bozeman may want to consider more flexibility for high density residential
development in B-2 zoning areas. Currently, it is only allowed as a conditional use if it is on
the ground floor. Some limitations on residential development could include the following:
— Limited to a percentage of land area; and/or
— May not front the arterial streets or hard corner (the best retail/commercial locations).
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10. There is demand for office space in Bozeman, but it is difficult for developers to
build new supply.
Gallatin County added over 1,600 jobs in professional services since 2005, with at least 80
percent of that occurring in Bozeman. Similarly, Bozeman accounted for 80 percent of the
office construction in Bozeman, Belgrade, and Four Corners. There is demand for office
space, but it is difficult for the market to respond. First, while there is demand, Bozeman is
still a small office market compared to larger cities. The bulk of the market is small firms
looking for about 1,000 to 5,000 square feet. Building large speculative office buildings is
therefore risky due to the large number of tenants needed to fill a building. Building smaller
buildings is more costly because some costs decrease per square foot with larger buildings.
The land and construction costs in Bozeman require high rents (over $20.00 per square foot)
to make an office building financially feasible. For a well located, shovel ready site,
commercial land can be over $50 per square foot. Office construction costs are approximately
$250 per square foot including land. Downtown is one of the most desirable office locations in
the city because of the proximity of other firms plus restaurant amenities and the walkable
and bikeable environment. The B-1 zoning areas in particular can meet some of the office
demand as second floor space. However, the strength of the residential market may be
outcompeting office in these areas.
11. Bozeman has lost significant market share for large industrial buildings and cost-
sensitive users of industrial space.
Over past 16 years, the Greater Bozeman market added 1.9 million square feet of industrial
space. Over half of this was in Belgrade and nearly 40 percent was in the Four Corners area.
Bozeman captured only 10 percent of the industrial market. Simms Fishing Products built a
61,000 square expansion in 2016 in Four Corners. In 2012, FedEx built a 35,000 square foot
distribution building at Jackrabbit and Baxter, also in Four Corners. Smith Equipment, a
manufacturer of high capacity off road (mining) trailers, built a 30,000 square foot building in
Belgrade in 2010. Frito Lay also constructed a 10,000 square foot warehouse in Belgrade in
2010. The bulk of the market though is made up of small local firms, especially in the
maintenance and repair and construction trades industries.
Bozeman should focus on higher value industrial businesses such as light and high skilled
manufacturing, R&D, and producers of high value specialty products. Some industrial jobs
pay living wages, so there is a benefit to attracting them to a community. Also, there is still
demand and interest for industrial development in Bozeman from firms that want to be closer
to the labor pool and be more associated with the Bozeman brand. However, the land
consumptive nature of many industrial uses coupled with land and development costs dictate
that Bozeman is no longer competitive for many larger heavier industrial uses.
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2. REGIONAL TRENDS AND CONDITIONS
This chapter provides an overview of economic and demographic trends and conditions in
Greater Bozeman and Gallatin County. These trends and conditions are also summarized by the
major cities and towns in the County and include the following:
• Bozeman
• Belgrade
• Three Forks
• Manhattan
• West Yellowstone
Demographics
Bozeman is one of the fastest growing places in the nation. Between 2000 and 2016, the city
added approximately 17,000 new residents, which translates to a growth rate of nearly 1,100
new residents per year or an annual growth rate of 3.0 percent (Table 1). While regional
population growth slowed during the Great Recession between 2008 and 2010, it has quickly
surpassed pre-recession levels. There is also no indication that growth will slow in the near-term
as growth rates since 2014 have averaged approximately 4.7 per year or roughly 1,800 new
residents per year.
Table 1 Population Trends
Although growth rates in Bozeman are the highest in Gallatin County, other communities, such
as Belgrade and unincorporated areas in Gallatin County, have experienced significant growth as
well (Table 2, Figure 1). Since 2014, population growth rates in Manhattan have also increased
compared to historical levels.
Description 2000 2005 2010 2016 Total Ann. #Ann. %
Bozeman 28,171 33,280 37,326 45,250 17,079 1,067 3.0%
Belgrade 5,839 6,728 7,469 8,254 2,415 151 2.2%
Three Forks 1,756 1,840 1,867 1,944 188 12 0.6%
Manhattan 1,443 1,503 1,514 1,691 248 16 1.0%
West Yellowstone 1,170 1,240 1,273 1,353 183 11 0.9%
Rest of County 29,996 35,719 40,182 46,010 16,014 1,001 2.7%
Gallatin County 68,375 80,310 89,631 104,502 36,127 2,258 2.7%
Montana 903,773 940,102 990,641 1,042,520 138,747 8,672 0.9%
Source: U.S. Census Intercensal Population Estimates; Economic & Planning Systems
H:\173007-Bozeman Land Use Forecasts\Data\[173007-Pop-2000-2016-06-27-2017.xlsm]R-Pop
2000-2016
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Figure 1 Population Index, 2000-2016
Approximately 43 percent of the total Gallatin County population resides in Bozeman (Table 2).
Bozeman is also the economic hub of the county and represents approximately 77 percent of
total county employment. The median household income in Bozeman is nearly $46,000 per year,
which is slightly lower than the countywide average of approximately $55,500. Some of the
differences are attributed to the large student population in Bozeman which brings down the
median, and the presence of large high end homes and luxury ranches in the unincorporated
areas outside Bozeman where household incomes are higher.
The presence of Montana State University directly impacts the general demographics of
Bozeman. Incomes, the average age, and average household size in Bozeman are all lower than
the county as a whole. In addition, the proportion of renter households is significantly higher
than in the rest of the County.
Table 2 Gallatin County Demographic Summary
Bozeman
Belgrade
Manhattan
Three Forks West Yellowstone
90%
100%
110%
120%
130%
140%
150%
160%
170%
2000 2002 2004 2006 2008 2010 2012 2014 2016
Population Index
Source: U.S. Census Intercensal Population Estimates; Economic & Planning Systems
Description Bozeman Belgrade Four Corners Manhattan
Gallatin
County
Population (2016)45,250 8,254 3,406 [1]1,691 104,502
% of County Population 43%8%3%2%100%
% of County Jobs (2014)77%7%7%1%100%
Median HH Income $45,729 $47,379 $78,142 $52,135 $55,553
Median Age 27.2 29.0 36.0 42.8 33.2
Avg. HH Size 2.22 2.58 2.74 2.18 2.39
Owner HHs (% of Total)44%59%81%73%62%
Renter HHs (% of Total)56%41%19%27%39%
[1] 2011-2015 American Community Survey 5-Year Estimates
\\EPSDC02\Proj\173007-Bozeman Land Use Forecasts\Data\[173007-CENSUS SUMMARY-06-27-2017.xlsm]SUMMARY
Source: U.S. Census Bureau; 2011-2015 American Community Survey 5-Year Estimates; LEHD Origin-
Destination Employment Statistics; Economic & Planning Systems
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Employment
Employment in Gallatin County has increased by approximately 12,400 jobs since 2005, which
equates to a growth rate of 2.4 percent per year (Figure 2). Between 2005 and 2016, the
largest gains in employment occurred in Health Care and Social Assistance (2,107 jobs),
Professional, Scientific and Technical Services (1,618 jobs), Accommodation and Food Services
(1,539 jobs), Retail Trade (1,188 jobs), and Manufacturing (1,086 jobs) (Table 3).
These employment statistics only include wage and salary jobs; the figures are more current
than sources which include proprietors employment. Proprietors employment (self-employed)
comprises 25 to 30 percent of the jobs in Gallatin County. Proprietors are concentrated mainly in
the construction, real estate, and professional services industries.
Figure 2 Gallatin County Employment, 2000-2016
40,36442,26343,77245,13942,09840,81141,85442,89145,04947,30949,67152,14330,000
35,000
40,000
45,000
50,000
55,000
60,000
2005-Q12006-Q12007-Q12008-Q12009-Q12010-Q12011-Q12012-Q12013-Q12014-Q12015-Q12016-Q1Wage and Salary
Employment
Source: Bureau of Labor Statistics; Economic & Planning Systems
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Table 3 Gallatin County Employment Trends, 2005-2016
Wage and Salary Employment 2005 2008 2010 2011 2012 2013 2014 2015 2016 Total Ann. %Total Ann. %Total Ann. %Total Ann. %
Agriculture, Forestry, Fishing and Hunting 428 431 483 546 520 520 534 555 553 4 0.3%51 5.8%71 2.3%125 2.4%
Mining, Quarrying, and Oil and Gas Extraction 74 240 202 220 231 225 237 197 183 166 48.2%-38 -8.2%-19 -1.6%110 8.6%
Utilities 100 110 118 122 117 58 98*52*26*10 3.1%8 3.4%-91 -22.0%-74 -11.4%
Construction 5,065*5,148*3,285*3,360*3,412*3,930*4,299*4,754*5,221*84 0.5%-1,864 -20.1%1,937 8.0%156 0.3%
Manufacturing 2,178 2,577 2,244 2,310 2,337 2,659 2,851 3,037 3,264 398 5.8%-333 -6.7%1,020 6.4%1,086 3.7%
Wholesale Trade 1,224 1,401 1,348 1,324 1,397 1,544 1,478 1,582 1,670 177 4.6%-53 -1.9%323 3.6%447 2.9%
Retail Trade 6,707 7,274 6,548 6,703 6,781 6,956 7,227 7,586 7,895 567 2.7%-726 -5.1%1,347 3.2%1,188 1.5%
Transportation and Warehousing 966*1,248*1,057*1,067*1,166*699*1,353*755*451*282 8.9%-192 -8.0%-606 -13.2%-515 -6.7%
Information 621 650 559 593 583 289 467 578 606 29 1.5%-91 -7.3%47 1.4%-15 -0.2%
Finance and Insurance 1,177 1,287 1,312 1,295 1,303 1,348 1,409 1,470 1,490 110 3.0%26 1.0%178 2.1%313 2.2%
Real Estate and Rental and Leasing 914 950 856 861 787 782 797 880 969 36 1.3%-94 -5.1%114 2.1%55 0.5%
Professional, Scientific and Technical Services 2,490 3,422 3,094 3,176 3,312 3,552 3,652 3,895*4,108*932 11.2%-329 -4.9%1,015 4.8%1,618 4.7%
Management of Companies and Enterprises 25 111 141 146 158 191 219 252 225 86 65.1%30 12.8%83 8.0%200 22.2%
Admin., Support, Waste Mng., and Rem. Srvcs.1,140 1,295 1,209 1,297 1,287 1,411 1,602*1,729*1,899*154 4.3%-86 -3.4%691 7.8%759 4.7%
Educational Services 392*537*520*571*605*632*654*657*692*146 11.1%-17 -1.6%172 4.9%300 5.3%
Health Care and Social Assistance 3,304*3,593*4,043*4,269*4,557*4,739*4,883*5,128*5,411*290 2.8%450 6.1%1,368 5.0%2,107 4.6%
Arts, Entertainment, and Recreation 1,285 1,283 1,250 1,319 1,289 1,361 1,395 1,429 1,404 -2 0.0%-33 -1.3%154 2.0%119 0.8%
Accommodation and Food Services 5,777 5,583 5,322 5,462 5,736 6,268 6,638 7,062 7,316 -194 -1.1%-262 -2.4%1,995 5.4%1,539 2.2%
Other Services, except Public Administration 1,445*1,511*1,468*1,541*1,679*1,775*1,876*1,994*2,096*67 1.5%-43 -1.4%628 6.1%651 3.4%
Public Administration 1,516 1,658 1,734 1,742 1,741 1,724 1,737 1,674 1,703 142 3.0%76 2.3%-31 -0.3%188 1.1%
Unclassified 7 4 1 1*0 3 6*3 6 -3 -18.9%-3 -39.9%5 27.8%-1 -1.6%
Total Employment 42,102 45,837 42,482 43,663 44,747 47,432 49,337 52,051 54,477 3,735 2.9%-3,355 -3.7%11,995 4.2%12,375 2.4%
* Indicates all or a portion of employment is withheld due to disclosure issues.
Source: Bureau of Labor Statistics; Economic & Planning Systems
\\EPSDC02\Proj\173007-Bozeman Land Use Forecasts\Data\[173007-BLS-06-27-2017.xlsm]T-FC-EMP SUM
Total
2005-2016
Pre-Recession Recession Recovery
2005-2008 2008-2010 2010-2016
Demographic and Real Estate Market Assessment
September 28, 2017
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The Great Recession and Recovery
During the Great Recession (2008-2010) there was a reduction in employment in nearly every
sector. The most significant losses occurred in Construction, which saw a decrease of nearly 50
percent during that time period, and Goods-Producing Industries, such as manufacturing, natural
resources, and mining (Figure 3). Employment in Retail, Accommodation, and Recreation and
Service-Providing Industries saw less significant reductions in total employment during the Great
Recession.
Between 2013 and 2014, employment in Retail, Accommodation, and Recreation, Goods-
Producing Industries, and Service-Providing Industries surpassed pre-recession levels. While the
Construction sector has not yet reached pre-recession levels, employment continues to increase
at a steady pace and based on current growth rates could surpass pre-recession levels by 2018.
Figure 3 Gallatin County Employment Index, 2008-2016
60
70
80
90
100
110
120
130
140
150
160
2005-Q12006-Q12007-Q12008-Q12009-Q12010-Q12011-Q12012-Q12013-Q12014-Q12015-Q12016-Q1Employment Index Goods-Producing Industries Service-Providing Industries
Construction Retail, Accomodation, and Recreation
Source: BLS; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 13 Working Draft Report
Between 2010 and 2016, growth in Accommodation and Food Service and Construction
represented roughly 17 and 16 percent, respectively, of growth in total employment (Figure 4).
These sectors combined with Health Care and Social Assistance and Retail Trade represent over
50 percent of the new jobs added following the recession.
Figure 4 Share of Job Growth by Sector, 2010-2016
17%
16%
11%
11%
9%
8%
0%2%4%6%8%10%12%14%16%18%
Accom./Food Srvc.
Construction
Health Care and Social Asst.
Retail Trade
Manufacturing
Prof., Scientific, and Tech Srvcs.
Source: Bureau of Labor Statistics; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 14 Working Draft Report
Employment by City
Bozeman continues to be the
economic hub of the region
with approximately 77 percent
of total Gallatin County
employment (Figure 5). While
Gallatin County employment
has historically been
concentrated in Bozeman, the
growth in the technology and
outdoor industries in the late
1990s accelerated this trend.
The concentration of high-tech
employment in Bozeman has
also translated to high number
of startups in the city. Since
2005, Bozeman has captured
roughly 80 percent of total
employment growth in the
county (Figure 6). This means
that for every 10 jobs created
in Gallatin County, eight were
in Bozeman.
Figure 5
Gallatin County Job Distribution, 2014
Figure 6 Share of Job Growth by Area, 2005-2014
Four Corners and Belgrade
represent nearly 15 percent of all
employment in Gallatin County.
While employment growth in
Belgrade has been consistent
with historical trends, growth in
Four Corners has increased
significantly. Between 2005 and
2014, roughly 15 percent of total
new employment in the county
occurred in Four Corners.
Bozeman
77%
Belgrade
7%
Four Corners
7%
Manhattan
1%
West Yellowstone
2%
Rest of County
6%
Source: U.S. Census Bureau, LEHD Origin-Destination Employment Statistics; Economic& Planning Systems
80%
7%
15%
6%
0%
-9%
-20%0%20%40%60%80%100%
Bozeman
Belgrade
Four Corners
Manhattan
West Yellowstone
Rest of County
% of Growth, 2005-2014
Source: U.S. Census Bureau, LEHD Origin-Destination Employment Statistics; Economic & Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
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Average Firm Size
The average firm size in Gallatin County has decreased from 9.2 employees per firm in 2000 to
8.6 employees per firm in 2016. However, in sectors that have added the most jobs to the local
economy since 2000, the average firm size has increased indicating that job growth is coming
from the expansion of existing firms as well as new firm creation. In the sectors with the largest
increases in total employment the average firm size is 13.7 employees per firm, which
represents an increase of 33 percent when compared to the average firm size in 2000. The
largest increases were in Construction, which increased from 4.7 employees per firm in 2000 to
10.0 employees per firm in 2016, and Health Care and Social Assistance, which increased from
11.8 employees to 19.3 employees per firm during the same time period (Figure 7). Overall,
these firm sizes show that Bozeman’s economy is driven by small businesses.
Figure 7 Average Firm Size, 2000 and 2016
17.2
10.0
19.3
14.1
13.3
8.2
15.7
4.7
11.8
10.9
14.8
3.9
Accom./Food Srvc.
Construction
Health Care and Social Asst.
Retail Trade
Manufacturing
Prof., Scientific, and Tech Srvcs.
2016 2000
Source: Bureau of Labor Statistics; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 16 Working Draft Report
Bozeman Job Growth by Industry
From 2005 through 2014, employment growth in education, health services, leisure, and
hospitality represented approximately 65 percent of the total job growth that occurred in
Bozeman (Table 4). Employment in Construction and Information both experienced contraction
in total employment. The loss of employment in these two sectors is indicative of two major
factors that are affecting regional employment. The first is the lasting impact of the Great
Recession. Specific sectors experienced a significant increase in employment in the period
leading up to the Great Recession. While a large number of service related jobs have surpassed
their pre-recession levels there are others, such as Information, that have experienced a slower
recovery and have not fully recovered to their pre-recession levels.
The second major factor impacting changes in employment in individual communities in Gallatin
County is an economic base that is expanding to include additional communities, such as Four
Corners and Manhattan. While Bozeman and Belgrade lost employment in construction,
manufacturing, and trade and transportation related sectors, Four Corners and Manhattan gained
employment in these same sectors. This is an indication of a more competitive landscape where
firms are moving to areas with low costs of entry and correspondingly lower development costs
that are the result of lower land and entitlement costs.
Table 4 Share of Job Growth by Sector, 2005-2014
Share of Job Growth Bozeman Belgrade Four Corners Manhattan
Natural Resources and Mining 1.2%0.0%-2.7%0.2%
Construction -2.2%-21.0%9.8%8.5%
Manufacturing 1.9%-15.5%3.8%2.5%
Trade, Transportation, and Utilities 0.8%-5.5%19.2%8.3%
Information -2.7%-1.5%3.3%4.2%
Financial Activities 1.9%-5.0%2.5%12.2%
Professional and Business Services 11.2%20.1%17.7%3.7%
Education and Health Services 30.5%44.1%24.1%29.3%
Retail Trade 7.0%26.6%7.6%9.9%
Leisure and Hospitality 35.0%43.2%6.4%13.2%
Other Services 8.5%14.8%8.3%2.3%
Government 6.8%-0.4%0.1%5.5%
Total 100.0%100.0%100.0%100.0%
Source: U.S. Census Bureau, LEHD Origin-Destination Employment Statistics; Economic & Planning Systems
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Economic & Planning Systems, Inc. 17 173007-Draft Report_092817.docx
3. BOZEMAN SOCIOECONOMICS
The previous chapter covered growth and economic trends in Gallatin County and Greater
Bozeman. This chapter provides more specific information on the socioeconomic trends and
conditions in the City of Bozeman.
Economic Drivers
The Bozeman economy has five key segments which distinguish it from other midsized cities.
This economic mix also creates unique challenges and opportunities.
• Higher Education – The presence of a major university affects the housing market, but also
creates opportunities for research and development partnerships, provides skilled labor, and
is a source of stable employment which buffers economic downturns.
• Tourism and Recreation – Bozeman is a “gateway community” that is the gateway, or
jumping off point, for world class recreation including the Bridger and Bowl Big Sky ski areas,
pristine rivers and stream, and Yellowstone and Glacier National Parks.
• Health Care – Bozeman Health is a regional hub for health care in Southwest Montana,
employing over 1,000 people. There are numerous other clinics and doctors’ offices clustered
around the hospital and located throughout Bozeman.
• Technology – Rare in small cities, Bozeman is a hub for technology and research and
development companies that have both started in and move into Montana.
• Regional Trade Center – Bozeman serves at least a 150 mile trade area, making it the
premier retail, services, and health care hub in Southwest Montana.
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 18 Working Draft Report
This section describes the major economic drivers in Bozeman. This summary is based on the
information and analysis included in the 2017 Economic Profile of Gallatin and Park Counties
published by the Prospera Business Network, supplemented by research and analysis by EPS.
Higher Education
Montana State University is one of the primary economic
anchors in the City of Bozeman. In 2016, the University
had a student headcount of 16,440 (Figure 8). Since
2009, the rate of growth in the number of students grew
at just under 4 percent per year, which is significantly
higher than the historical growth rate since 1990, which
was closer to 1.0 per year. While this rate of growth may
not be maintained over the long-term, the University will
continue to be a major driver in the local economy. The
University also employs roughly 3,100 employees and has
$514 million in annual operations spending. The vast
majority of operations spending is paid to employees and Montana vendors.
Figure 8 MSU Student Enrollment and Total FTE Count, 1990-2016
Tourism and Recreation
Tourism and recreation continue to be a major driver in
Bozeman and Montana as a whole. The Bozeman area
benefits from its close proximity to some of the state’s
most beautiful natural amenities, such as hiking trails and
rivers and streams that are often used for fishing and
rafting, as well as its close proximity to Yellowstone
National Park and a number of established ski areas
including the Bridger Bowl and Big Sky.
16,440
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016MSU Headcount
Source: MSU; Economic& Planning Systems
1990-2008: 1.0% annual growth
2009-2016: 3.7% annual growth
Demographic and Real Estate Market Assessment
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During the summer months, Yellowstone National Park is the top destination for nonresident
visitors in Montana, many of which pass through or spend time in Bozeman. Since 2000, park
visitation has increased at approximately 2.6 percent per year or by roughly 89,000 visitors per
year (Figure 9). Walking around Downtown Bozeman one often hears foreign, mostly European,
languages being spoken indicating the global draw of the region.
Figure 9 YNP Annual Visitation, 2010-2016
Skier visits to Big Sky and Bridger have also consistently increased since 2000. Between 2000
and 2016, skier visits increased by an average of 2.5 percent per year, which equates to an
additional 14,000 visitors per year (Figure 10). Nationally, skier growth has been flat over the
long-term.
Figure 10 Annual Skier Visits, 2010-2016
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Annual Visitation
Source: Yellowstone National Park Reports; Economic& Planning Systems
0
100,000
200,000
300,000
400,000
500,000
600,000
2000-20012001-20022002-20032003-20042004-20052005-20062006-20072007-20082008-20092009-20102010-20112011-20122012-20132013-20142014-20152015-20162016-2017Skier Visits Big Sky and Moonlight Basin Bridger
Source: University of Montana; USDA Forest Service, Northern Region and individual ski areas; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 20 Working Draft Report
Health Care
The Health Care sector is one of the largest employers in
Bozeman and Gallatin County and is a significant
contributor to the regional economy. Bozeman Health,
which is composed of two hospitals (one is located in
Bozeman), several treatment centers and urgent care
centers, and retirement and assisted living facilities, is
one of the primary drivers of the regional health care
sector. In addition, there are a number of smaller local
technology firms that are part of the health care field and
contribute to economic growth in the region.
Technology
Bozeman continues to be a hub for technological
companies that are both started in and move into
Montana. The city includes a diverse set of technology
companies that range from software and hardware
companies to optics and photonics firms. The presence of
larger and more established firms, such as Oracle, and
the influence of Montana State University creates a
business environment that is strongly entrepreneurial.
Regional Trade Center
Bozeman is a regional trade and service center in Southwest Montana. Bozeman’s retail,
services, and healthcare businesses serve a trade area of approximately 150 miles or more.
Serving this large of a trade area has increased the amount of retail that Bozeman can support.
The influx of visitors has helped the community diversify the retail and food and beverage mix
and strengthen downtown through the additional injection of spending in addition to the local
and regional population.
Demographic and Real Estate Market Assessment
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Major Private Sector Employers
The largest private employers in Gallatin County are listed in Table 5. Bozeman Health
Deaconess Hospital is the largest employer in the County, while Oracle, Town Pump, and
Walmart are in the second tier of largest county employers.
Table 5 Largest Private Employers, Gallatin County, 2015
Employer Name Number of Employees
Bozeman Health Deaconess Hospital 1,000+
Oracle America 250-499
Town Pump 250-499
Wal Mart 250-499
Albertson’s 100-249
Bridger Bowl 100-249
Community Food Co-Op 100-249
Costco 100-249
Federal Premium Ammunition 100-249
First Student 100-249
JC Billion 100-249
Kenyon Noble Lumber & Hardware 100-249
Korman Marketing Group 100-249
Martel Construction 100-249
McDonald’s 100-249
Murdoch’s Ranch & Home Supply 100-249
Ressler Motors 100-249
Rosauer’s Super Markets 100-249
Target 100-249
Town & Country Foods 100-249
Zoot Enterprises 100-249
\\EPSDC02\Proj\173007-Bozeman Land Use Forecasts\Data\[173007-Largest Employers-09-19-2017.xlsm]Sheet1
Source: Prosperra Business Network; Bureau of Labor Statistics Quarterly
Census of Employment and Wages; Montana Department of Labor &
Industry; Economic & Planning Systems
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Workforce Characteristics
This section provides a brief overview the general characteristics of the local workforce.
Educational Attainment
Generally, the regional workforce is highly skilled and well educated. Approximately 56.5 percent
of the workforce has a bachelor’s degree or higher (Figure 11). The presence of Montana State
University and the high concentration of professional and high skill jobs, such as technology and
health care, are drivers of the highly educated local workforce. Places with a high quality of life
are also able to attract skilled labor. Highly educated skilled workers have more choices and
flexibility in where they want to work and live.
Figure 11 Bozeman Educational Attainment, 2015
0.3%1.7%
12.5%
23.2%
5.9%
36.0%
20.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Less than 9th
grade
9th to 12th
grade
High school
graduate
Some
college
Associate's
degree
Bachelor's
degree
Graduate or
prof. degree
% of Total Population
Source: U.S. Census Bureau, Economic & Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 23 Working Draft Report
Age Distribution
The population of Bozeman is also younger when compared to the county and Montana as a
whole. The median age in Bozeman is 27.6 compared to a median age of 33.2 in Gallatin County
and 39.9 in Montana. The primary driver of this is the large number of students attending
Montana State University. The proportion of the total population between the age of 20 and 24 in
Bozeman was 21.1 percent compared to 7.2 percent in Montana. Bozeman also has a higher
proportion of people between the ages of 25 and 39 compared to Montana, due to the large
number of students that remain in the area following graduation and the appeal of the city to
those that are in the early stages of their career.
Figure 12 Bozeman Age Distribution, 2015
Average Wages
Average wages for wage and salary employees in Gallatin County were $40,950 in 2016
(Figure 13). The highest wages were for jobs in Utilities, Mining and Oil and Gas, Finance and
Insurance, and Professional, Scientific, and Technical Services. Annual wages in these sectors
ranged from an average of $69,511 to $77,584.
The lowest paying jobs were in Accommodation and Food Service, Educational Services, and
Retail Trade. Annual wages in these sectors ranged from $19,357 to $30,511. 5.50%4.60%3.20%9.50%21.10%10.80%8.80%7.50%4.90%3.60%3.90%4.70%3.80%2.20%1.80%1.00%1.40%1.60%6.00%6.40%6.00%6.40%7.20%6.20%6.30%5.80%5.50%6.10%7.30%7.70%6.90%5.40%3.90%2.80%2.10%2.10%0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
% of Total Bozeman Montana
Source: U.S. Census Bureau; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
Economic & Planning Systems, Inc. 24 Working Draft Report
Figure 13 Average Wages, Gallatin County, 2016
In Gallatin County, approximately 34 percent of jobs pay less than $49,000 per year or $23.60
per hour (Figure 14). Conversely, 66 percent of total jobs pay more than $49,000 per year and
37 percent of jobs pay more than $64,000 per year. Recall that about 80 percent of all jobs are
in Bozeman. While average wages are skewed towards the upper quartile, employment growth
has largely occurred in jobs paying less than $49,000 per year. Nearly half of the jobs created
between 2010 and 2016 paid less than $34,000 per year or less than $16.30 per hour
(Figure 15). While there was also growth in the number of jobs paying over $64,000 per year
(24 percent of total new employment), there was modest growth in the number of jobs paying
between $49,000 per year and $64,000 per year.
Figure 14 Job Distribution by Wage Quartile, 2016
$77,584
$74,360
$73,957
$69,511
$66,144
$63,674
$58,786
$57,217
$57,096
$49,797
$49,010
$45,906
$42,120
$40,950
$35,763
$35,672
$33,956
$31,356
$30,511
$26,949
$19,357
$0 $20,000 $40,000 $60,000 $80,000 $100,000
Utilities
Mining, Quarrying, and Oil and Gas Extraction
Finance and Insurance
Professional, Scientific and Technical Services
Health Care and Social Assistance
Management of Companies and Enterprises
Information
Public Administration
Wholesale Trade
Arts, Entertainment, and Recreation
Construction
Transportation and Warehousing
Manufacturing
Average Wage
Agriculture, Forestry, Fishing and Hunting
Real Estate and Rental and Leasing
Admin., Support, Waste Mng., and Rem. Srvcs.
Other Services, except Public Administration
Retail Trade
Educational Services
Accommodation and Food Services
Average Wage
Source: BLS; Economic & Planning Systems
14%
20%
29%
37%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Less than $34,000
(Less than $16.30/hr)
$34,000-$49,000
($16.30/hr-$23.60/hr)
$49,000-$64,000
($23.60/hr-$30.60/hr)
Greater than $64,000
(Greater than $30.60/hr)
% of Total Jobs
Source: Bureau of Labor Statistics; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
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Figure 15 Gallatin County Share of Job Growth by Wage Quartile, 2010-2016
Jobs in the roughly $20 to $30 per hour range are often “middle skill” jobs. These jobs pay a
living wage but do not require a 4 year degree. The growth of low wage jobs, and lack of growth
in middle skill jobs is a national trend.
Workforce Shortage
Bozeman has a diverse workforce that is both highly educated and well trained. However, due to
the rapid rate of employment growth over the past decade, there is an imbalance between the
number of jobs available and available workers. The lack of available employees has negatively
impacted the ability of regional employers to find qualified employees. Employers in all sectors
ranging from manufacturing to technology have run into challenges associated with finding
qualified job candidates. Nationally and locally, a shortage of construction and trades workers is
contributing to higher housing costs.
A factor in the workforce supply is the “trailing spouse” challenge typical of smaller cities and
more remote regions that don’t have the agglomeration economies or larger metropolitan areas.
The challenge is that it may be difficult for couples or partners to both find adequate
employment due to the size of the overall economy and diversity of firms and job openings. This
can be a deterrent for firms and skilled labor.
47%
24%
6%
24%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Less than $34,000
(Less than $16.30/hr)
$34,000-$49,000
($16.30/hr-$23.60/hr)
$49,000-$64,000
($23.60/hr-$30.60/hr)
Greater than $64,000
(Greater than $30.60/hr)
% of Job Growth(2010-2016)
Source: Bureau of Labor Statistics; Economic& Planning Systems
Demographic and Real Estate Market Assessment
September 28, 2017
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Migration
When a large portion of an area’s
population growth comes from
migration, it is a strong indicator
that the region has a dynamic
economy and is a desirable place
to live. Nearly three-quarters of
Gallatin County’s population
growth is from people moving
there (Table 6). While there
were a large number of residents
moving from other areas in
Montana, such as the greater
Missoula area, there were also a
large number of residents that
moved from the Front Range of
Colorado, the Pacific Northwest,
and California’s Bay Area.
Table 6 Gallatin County Net Migration, 2010-2015
Figure 16 Gallatin County In-Migration, 2011-2015
Description Total
Share of
Change
Population Change (2010-2015)
Births 7,134 49%
Deaths -3,256 -22%
Net Migration 10,815 74%
Total Population Change 14,693 100%
Source: U.S. Census Bureau; Economic & Planning Systems
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Community Comparisons
For reference, some comparative statistics from communities that have some similar economic
and geographic characteristics to the City of Bozeman are shown below.
Table 7 Peer Community Demographics and Employment
Description Bozeman, MT Billings, MT Missoula, MT Fort Collins, CO Boulder, CO Bend, OR
Demographics
Population (2016)45,250 110,323 72,364 164,207 108,090 91,122
Median Age (2015)27.2 37.6 30.5 29.1 28.8 36.5
% Renters (2015)44.4%62.9%47.9%53.9%47.8%58.2%
Median HH Income $45,729 $51,012 $41,421 $55,647 $58,484 $52,989
Employment
# of Jobs (2014)37,774 66,886 46,231 74,498 88,963 44,516
Top 3 Sectors
#1 Educational Services Health Care and
Social Assist.
Health Care and
Social Assist.
Health Care and
Social Assist.Educational Services Health Care and
Social Assist.
#2 Retail Trade Retail Trade Retail Trade Educational Services Prof., Scientific, and
Tech Srvcs.Retail Trade
#3 Health Care and
Social Assist.
Accom. and Food
Srvcs
Accom. and Food
Srvcs
Accom. and Food
Srvcs Manufacturing Accom. and Food
Srvcs
Housing Stock
1 Unit (detached)40%61%53%56%41%69%
1 Unit (attached)11%6%4%9%8%4%
2 Units 10%6%6%2%2%5%
3 or 4 Units 15%6%11%5%7%5%
5 to 9 Units 8%5%6%7%8%4%
10 to 19 Units 6%3%6%9%9%2%
20 to 49 Units 4%2%6%5%10%2%
50 or more Units 3%4%4%3%11%4%
Other 3%7%5%3%3%4%
Total 100%100%100%100%100%100%
Higher Education
Major Colleges/Universities Montana State
University
Montana State
University
University of
Montana
Colorado State
University
University of
Colorado
Oregon State
University
Enrollment 16,440 4,429 12,419 33,198 32,775 31,303
% of Total Population 36%4%17%20%30%34%
Source: U.S. Census; Bureau of Labor Statistics; Economic & Planning Systems
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4. HOUSING MARKET TRENDS
This chapter provides an overview of major trends in the national housing market and in
Bozeman, organized as follows.
• National Housing and Demographic Trends – An overview of the major demographic
trends (Boomers and Millennials) and economic trends after the Great Recession that are
influencing the housing market.
• Household Characteristics and Affordability – An analysis of trends in renters and
owners, and housing affordability metrics (cost burden).
• Housing Price Trends – A summary of home price trends in greater Bozeman.
• Rental Market – A synopsis of the rental market in Bozeman, including an assessment of
the impact of students on the housing market.
• Construction Trends – An analysis of new residential construction data and MT Department
of Revenue tax parcel data to document construction trends by product type, land use
density, and location.
National Housing and Demographic Trends
The U.S. housing market is changing as broad demographic shifts occur and in part due to the
lingering effects of the Great Recession. The Baby Boom and Millennial generations are the two
largest demographic segments now and are influencing the housing market, along with other
consumer segments of the economy. These two generations at their current ages have higher
preferences for walkable, urban locations. After the Great Recession, many households
experienced a loss of net worth due to lost income and unemployment, the crash in housing
prices, and high household debt levels.
Housing Preferences
At least two national housing surveys indicate a likely shift in demand toward denser single
household housing types, such as townhomes and row houses in walkable/bikeable or transit-
accessible locations, and a shift away from lower density and single use single household
neighborhoods. These preferences are in contrast to the trends in housing development for much
of last half of the 20th Century. The Baby Boom generation shares many of the same preferences
for housing as the millennials – modest cost, low maintenance, and close to shopping and
services and social activities and networks.1 These two groups account for about 41 percent of
the U.S. population (52 percent in Bozeman, weighted towards student age population). If a
small percentage of these people migrate towards different housing types or neighborhood
types, it has a large impact on the housing market and on land use policy and it is currently
changing markets in U.S. cities large and small.
1 What Is Livable? Community Preferences of Older Adults. AARP, 2014.
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The Urban Land Institute’s (ULI) survey of views on housing, transportation, and community,
“America in 2013,” found that demand will continue to rise for closer in, well located residential
development that is less car-dependent.
Sixty-one percent of respondents to the ULI survey prefer a smaller home with a shorter
commute over a larger home with a longer commute;
• 53 percent want to live close to shopping;
• 52 percent prefer to live in mixed-income housing; and
• 51 percent prefer access to public transportation.
A second national survey by ULI, “America in 2015,” found that just over half of all Americans,
and 63 percent of Millennials, would like to live in a place where they do not need to use a car
very often.
• Another notable survey by the National Association of Realtors (2011) following the Great
Recession had similar findings.
• Cost Matters: 59% of buyers will make trade-offs to stay within their budget, highlighting a
focus on housing affordability.
• Sense of Place: A majority prefer neighborhoods with a mix of houses, shops, and
businesses. Only 12% prefer traditional subdivisions with houses only.
• Walkability: 56% prefer walkable neighborhoods over conventional suburban neighborhoods
where a car is required for most trips.
• Convenience: 59% would downsize their home for a commute time under 20 minutes.
In 2011, EPS and the Sonoran Institute completed a study Reset: Assessing Future Housing
Markets in the Rocky Mountain West. A major finding was that buyers would pay more per
square foot to live in neighborhoods built in a style defined as compact walkable development
(CWD), 18 percent more on average before the recession. These areas also held their value
better than conventional neighborhoods during the recession, with prices per square foot 12.5
percent higher on average (Figure 17). CWD includes existing neighborhoods such as the areas
north and south of Main Street in Bozeman as well as new development built in a Traditional
Neighborhood Design (TND) style such as Valley West on the west side of Bozeman.
The premise of TND is many people do not utilize their whole yard or wish to maintain a large yard.
In a TND project, lot sizes are smaller, but there are parks and common open spaces located
throughout the neighborhood. This is a variation on a previous trend of golf course communities.
Many owners in these communities did not necessarily buy in that community for golf, but for
the experience of living next to a large open space. TNDs also focus heavily on walkability and
bicycle access through sidewalks, paths, and street design. Essentially, TND neighborhoods are
modelled after pre-war neighborhoods such as the original Bozeman neighborhoods north and
south of Main Street.
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Figure 17 Price per square foot for compact walkable development, 2011
Household Income and Assets
During the Great Recession, seven years ago now, household net worth declined by over 40
percent due mainly to the crash in home prices, but also due to declines in other asset values
(e.g. stocks), and a high level of household indebtedness.2 In aggregate, household net worth
has recovered although other trends run counter to this aspect of the recovery.
The share of American adults living in middle-income households has fallen from 61 percent in
1971 to 50 percent in 2015 according to the Pew Research Center.3 Pew defines “middle-income”
households as those with an income that is 67 percent to 200 percent (two-thirds to double) the
overall median household income after incomes have been adjusted for household size. Upper
income households received 49 percent of U.S. aggregate household income went to upper-
income households in 2014, up from 29 percent in 1970. Middle-income households accounted
for 43 percent of total household income in 2014, down substantially from 62 percent in 1970.
The implications are that more households have less savings or assets available to make a down
payment on a home and lower income to be able to afford rent or mortgage payments. There
has been a recent resurgence in low-down payment mortgages in response.
In some parts of the U.S., the housing market became more focused on the move-up and luxury
market segments of the market as the pool of first time buyers and middle income buyers
shrank. These trends have contributed to the affordability challenges in cities nationwide.
2 Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession? Edward N. Wolff NBER
Working Paper No. 20733.
3 http://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/
$289
$231
$110
$139
$175
$111
$267
$243
$144
$166
$210
$157
$50
$100
$150
$200
$250
$300
$350
Carbondale Eagle Buena Vista Bozeman Teton Valley Boise
$ perSquare Foot
Overall Market CWD
Source: LocalMLS; Economic & Planning SystemsSource: LocalMLS; Economic & Planning Systems
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Other notable statistics and considerations related to the Millennial generation are noted below.
• Diverse – Millennials are more racially and ethnically diverse than the U.S. population as a
whole.
• Wealth and Income – Millennials, like the Boomers, are also diverse in wealth and income.
Many graduated college during the Great Recession and had to take lower paying jobs than
they would have preferred, and many have large amounts of student loan debt. The National
Association of Realtors found that for the last four years buyers 36 years and younger
(Millennials/Gen Y) were the largest share of home buyers at 34 percent. Forty-six percent of
buyers 36 years and younger reported having student loan debt with a median loan balance
of $25,000.
• Highly mobile – Many Millennials, especially the well-educated, will look for a place to live
and then look for a job, and many work remotely. They are attracted to places with a high
quality of life, both in cities and mountain towns based on interviews conducted by EPS in
other Intermountain West cities and mountain areas.
• The Oldest Millennials are 36 – As Millennials age their housing preferences are likely to
change as their incomes rise and they start families. They may still prefer walkable
neighborhoods and access to mixed use areas, but may look for larger homes. Recent reports
from the National Association of Realtors note that Millennials are now the largest group of
homebuyers.
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Household Characteristics and Affordability
In Bozeman, the most recent American Community Survey figures estimate that 56 percent of
households are renters and 44 percent are owners (Figure 18). The 16,440 MSU students are a
major influence on this figure. The distribution of renters and owners has not changed
significantly over the 16 years shown here.
Figure 18 Bozeman Housing Tenure, 2000, 2010, 2016
The U.S. Department of Housing and Urban Development (HUD) defines a household as being
“cost burdened” when it is paying 30 percent or more of its income to rent or mortgage
payments. In Bozeman, 22 percent of owner households are paying more than 35 percent of
their income in rent and 9 percent are paying between 30 and 35 percent (Figure 19). For
renters, 44 percent are paying more than 35 percent of their income to rent (Figure 20).
Another 8.0 percent pay between 30 and 35 percent of their income in rent. Unfortunately, the
Census does not allow us to differentiate between students and the resident employee
population. Nevertheless, this is a large proportion of cost burdened households.
43%45%44%
57%55%56%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2010 2015
% of Total
Households Owner Renter
Source: U.S. Census Bureau; Economic& Planning Systems
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Figure 19 Percent of Owner Households Spending Over 30% of Income on Housing, 2015
Figure 20 Percent of Renter Households Spending Over 30% of Income on Housing, 2015
30%
14%
22%
27%
7%
34%
25%
19%
16%
7%
27%
23%
17%
17%
15%
0%10%20%30%40%50%60%70%
Less than $20,000
$20,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 or more
Bozeman Montana United States
Source: U.S.Census Bureau; Economic& Planning Systems
47%
34%
15%
4%
1%
59%
29%
9%
3%
0%
49%
30%
13%
6%
2%
0%10%20%30%40%50%60%70%
Less than $20,000
$20,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 or more
Bozeman Montana United States
Source: U.S.Census Bureau; Economic & Planning Systems
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Housing Price Trends
As of August 2017, the median home price in Bozeman was $398,000 up from $245,000 as the
recovery from the Great Recession began (Figure 21). The annual appreciation rates over the
past five years have been in the 10 to 12 percent per year ranges in and around Bozeman,
Belgrade, Livingston, and Three Forks. Home prices are highest just outside Bozeman city limits
for homes with large acreage. Home prices in Downtown Bozeman begin at approximately
$500,000 to $600,000 for a home that has not been updated and is in need of major
maintenance and upkeep. New construction, often redevelopment, in the Downtown area can be
priced over $1.0 million.
Figure 21 Median Sale Price by Area, 2003-2017
In order to afford the median priced home in Bozeman at the 30 percent of income affordability
standard, a household needs to earn at least $68,400 per year or $32.00 per hour for one earner
(Table 8). This is 150 percent of the current median household income in the city. In Belgrade
and Manhattan, home prices are better matched with area household incomes. However,
assuming a householder works in Bozeman, there are additional transportation costs especially
commuting from Manhattan.
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Table 8 Income Required to Afford the Median Priced Home
Factors Bozeman Belgrade
Bozeman Outside
City Limits Manhattan
Median Single Family Home $398,000 $308,000 $492,000 $260,000
Down Payment 10%-$39,800 -$30,800 -$49,200 -$26,000
Mortgage Amount $358,200 $277,200 $442,800 $234,000
Monthly Payment - 30-Yr. Fixed 4.0%$1,710 $1,323 $2,114 $1,117
Annual Payment 12 $20,521 $15,881 $25,368 $13,406
Required Household Income 30% of income $68,404 $52,936 $84,559.80 $44,686
Median Household Income $45,729 $47,739 $78,142 $52,135
Required Income as % of Median Household Income 150%111%108%86%
Source: Gallatin Assocation of Realtors; US Census; Economic & Planning Systems
H:\173007-Bozeman Land Use Forecasts\Data\[173007-Affordability Calcs.xlsx]Afford
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Rental Market
Rental market information comes from the 2014 Bozeman Rental Housing Survey, EPS research
of rental listings, and interviews with local realtors. There are no published statistics on the
Bozeman apartment market.
• Vacancy Rates – As noted in the 2014 Housing Survey, the rental market is very tight with
essentially vacancy at less than 5.0 percent which accounts only for unit turnovers between
tenants. Approximately 600 multifamily units were built since this survey which has helped to
ease the supply constraints somewhat. There are also 800 private student apartments in the
development pipeline now, and MSU opened a new approximately 400 bed dorm in 2016.
• MSU Enrollment – Enrollment at MSU increased by 2,900 students from 2010 through 2016
(21 percent), and MSU is expected to continue to grow over the next 5 to 10 years. Student
growth combined with the strong job growth in the region has created even more demand for
rental housing. MSU students live in nearly all neighborhoods in Bozeman.
• Rental Rates – Two bedroom rental rates average approximately $1,200 per month. The
student market drives a large portion of rental rates. Student housing is typically priced at
$500 to $600 or more per bedroom per month. This equates to over $1,000 per month for
two bedroom unit, and $1,500 or more per month for a single household home rental.
Impact of Student of Rental Rates
As shown in the example below, three students paying $550 per month equate to a monthly
housing payment of $1,650. This is roughly equivalent to the mortgage payment on a $345,000
home, 5 percent less than the median priced home of $360,000 (Table 9).
Table 9 Student vs. Local Housing Payment Example
3 Students
One Full Time
Resident Household
Student 1 $550
Student 2 $550
Student 3 $550
Total Rent $1,650 $1,650
Annual Housing Cost $19,800 $19,800
Percent of Median Household Income ---43%
Median Household Income ---$45,729
Rent in Equivalent Home Value [1]$345,611
[1] 10% down payment; 30 year fixed rate mortgage; 4.0% interest.
Source: Economic & Planning Systems
H:\173007-Bozeman Land Use Forecasts\Data\[173007-Affordability Calcs.xlsx]Rental Afford
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Construction Trends
In Bozeman, approximately 7,200 housing units were constructed from 2005 through 2016, an
average pace of 600 units per year (Table 10). The two most common types of housing built
were single household detached homes (2,681 units) and multifamily buildings (mostly
apartments) with 5 or more units. While classified as “5+plexes”, these are typically apartment
buildings with 50 or more units per building.
Table 10
Residential Construction Trends, 2005-2016
Description 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total Average
Single Family 266 244 214 99 74 143 161 247 388 283 266 296 2,681 223
ADU 3 2 9 8 10 2 10 11 6 13 14 9 97 8
Townhouse 62 62 71 43 19 21 4 38 74 77 24 72 567 47
Duplex 130 62 82 26 8 8 8 28 14 40 35 74 515 43
Triplex/Fourplex 199 123 60 42 38 17 10 9 24 42 44 63 671 56
5+ Units 406 210 332 143 62 51 23 102 308 453 399 219 2,708 226
Total 1,066 703 768 361 211 242 216 435 814 908 782 733 7,239 603
Source: City of Bozeman; Economic & Planning Systems
H:\173007-Bozeman Land Use Forecasts\Data\[173007-New Housing Units-07-12-2017.xlsm]Sheet1
2005-2016
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As a percentage, single household homes increased from 31 percent of construction during the
2005-2010 time period to 43 percent in the 2011 to 2016 time period. “Middle density” units
including duplexes, townhomes, and triplex/fourplexes declined from 32 percent of the market to
18 percent of the market. Higher density construction stayed about the same at 36 percent over
the 2005 to 2010 time period and 39 percent of the more recent 5 year period.
Figure 22 Units Built by Density Type, 2005-2010 and 2011-2016
These middle density unit types provide additional choices for housing types – small and lower
maintenance – and can sometimes be built more affordably than larger single household homes.
When priced attainably, they also provide another option for first time buyers, or people who
want a lower cost home, to build equity. There is therefore a policy interest in seeing more
construction of middle density unit types to increase affordability opportunities and to expand
housing choices.
31%
43%
8%
8%
10%
5%
14%
5%
36%
39%
0%10%20%30%40%50%60%70%80%90%100%
2005-2010
2011-2016
% of Total UnitsSingle Family Townhouse Duplex Triplex/Fourplex 5+plex
Source: Cityof Bozeman; Economic& Planning Systems
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The average single household lot size has dropped about 20 percent from the early 2000s
through the late 2000s (Figure 23). For example, in the Valley West subdivision, built in a
Traditional Neighborhood Design (TND) style, approximately 40 percent of the lots are between
5,000 and 7,500 square feet and a quarter are smaller than 5,000 square feet. Laurel Glen, built
in the late 2000s has most lots in the 6,500 to 8,500 square foot size range. Most of the lots in
the Valley Subdivision (between Babcock and Durston) are between about 9,000 and 10,000
square feet, built in the late 1980s through the 1990s. Lot sizes reflect ‘net densities’. When the
park/open space and amenity features of TND are included, the overall density may not be
significantly higher (i.e. more units per acre) than a conventional subdivision.
Figure 23 Average Single household Lot Size by Year Built
Like many cities surrounded by undeveloped and/or agricultural land, Bozeman is growing
outward, primarily to the west but also to the south (Figure 24). There have also been
approximately 100 homes built in the Downtown area neighborhoods since 2012. These are
comprised of the redevelopment of existing single household homes with new single household
homes, and townhome and condominium infill and redevelopment projects. These data do not
include ADUs.
Demographic and Real Estate Market Assessment September 28, 2017 Economic & Planning Systems, Inc. 40 Working Draft Report Figure 24 Residential Development by Location and Year Built LOVEINTERSTATE 907THHUFFINEBAXTERGOOCH HILLDAVISFRONTAGEDURSTONCOTTONWOOD19THKAGYBLACKWOODSTORY MILLBOZEMAN TRAILBRIDGERHARPER PUCKETTOAKBRIDGER CANYONRED W INGGRIFFINFORT ELLISSPRINGHILLVALLEY CENTERKELLY CANYONCOLLEGEHIDDEN VALLEYROUSE11THSIMMENTALMAIN3RD27THTSCHACHEOFF RAMPO N RAMP
GOLDENSTEIN22NDBAXTERFRONTAGEO N R A M P 7THINTERSTATE 90B A X T ER
7THHUFFINEYear Built - ResidentialBefore 20002000 - 20102011-2017´00.91.80.45Miles
Economic & Planning Systems, Inc. 41 173007-Draft Report_092817.docx
5. RETAIL MARKET
This chapter begins with an overview of the changes in the national retail market and its
potential impact on Bozeman. Next, it presents an analysis of citywide spending potential
compared to the current major retailer inventory, followed by an evaluation of the B-1 and B-2
commercial zone areas.
National Retail Market
The retail industry has shifted greatly over the last 10 to 15 years, impacted by the growth of
internet sales, declining brick and mortar store sales, retail chain consolidations, and
demographic shifts and preferences. Collectively, these trends are impacting store sizes and
reducing the overall demand for new retail space locally and nationally.
The Rise of E-Commerce
Between 2001 and 2015, total online retail purchases (excluding auto related) grew from
approximately $29 billion to $310 billion, a 21.8 percent annual growth rate. Online sales
accounted for 22 percent of total retail sales growth (Figure 25). During the same period, brick
and mortar stores grew at a 3.7 percent annual growth rate, decreasing their share of the total
retail market from 98 percent to 89 percent. Despite still accounting for only 11 percent of
overall spending, the growth in online shopping is impacting the demand for traditional brick and
mortar stores. This also affects the way retailers are doing business, pushing them to alter store
formats and incorporate online sales and marketing into their business concepts. The list of top
online retailers reinforces this point as many have a significant brick and mortar presence as
well. This group includes such major retailers as Walmart, Target, Home Depot, Best Buy, and
Bed Bath & Beyond.
Figure 25 US E-Commerce Sales, 2001-2014
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A number of key national trends impacting the existing inventory of retail stores as well as new
development are highlighted below:
• Social Media and “Showrooming”- According to the National Retail Federation, 86 percent
of American consumers at least occasionally research items online before buying in a store;
of this, 22 percent conduct this research primarily on blogs and 32 percent primarily on
Facebook. Electronics is most researched, followed by apparel, appliances, and then shoes.
Many consumers will also look at or try on an item in a store and then price shop and
purchase it online.
• Spending Patterns - Changes in spending patterns are also affecting the amount and mix
of retail space. Millennials, who are highly mobile, are less likely to accumulate furniture and
home furnishings and other large, high cost items. They are also more interested in
experiences, emphasizing travel and entertainment over material goods. Their spending
patterns are similar to the boomer generation who has already purchased much of the goods
they need and are downsizing their homes and accumulated items. Boomers are also
spending more of their income on travel, leisure, entertainment, and dining out.
• Changing Retail Mix - These changes in spending patterns are impacting the mix of retail
space in aggregate and in downtowns in particular. The restaurant, bar, and microbrewery
segment has grown rapidly and new food and beverage formats have been introduced (e.g.
food halls and market halls, farm to table restaurants, and food trucks). The growth of
shoppers goods store space (general merchandise, apparel, furniture, and other shopper’s
goods) is flat or declining in contrast as exhibited by numerous closures by Macy’s,
JCPenney, Sears, and Kmart.
• Store and Chain Closures - Over the past five years, there have been nearly 200 retail
chain bankruptcies. In 2017, CNN Money reported that there were 5,300 store closing
announcements through June 20 compared to 6,200 in 2008 during the Great Recession—the
worst year so far for store closings. There are fewer stores in the market now, making it
more difficult to find tenants for new retail developments. Vacancies are increasing nationally
as large blocks of space are vacated by store brands which no longer exist.
Bozeman Retail Development
Retail development in Bozeman is concentrated along two major arterials that include U.S.
Highway 191 (W. Main Street and Huffine Lane) and North 19th Avenue (Figure 26). U.S.
Highway 191, including Bozeman’s historic downtown along Main Street, is a vibrant corridor of
retail and restaurant spaces that is frequented by locals and tourists throughout the year. Retail
development to the west of downtown Bozeman along Hwy 191 includes smaller strip malls and
commercial nodes as well as Bozeman’s regional mall, the Gallatin Valley Mall.
Historically, N. 19th Avenue was defined by low density retail uses, such as car washes and auto
dealerships. However, with the addition of several big box retailers that include Home Depot,
Target, and Costco, the N. 19th Avenue corridor is now a regional node for big box retailers and a
destination for those living in and outside of Bozeman. Development along this corridor is
anticipated to continue to be defined by large format users that draw demand at the regional level.
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Figure 26 Retail and Commercial Development Areas
Based on a high level review of commercial retailers in Bozeman, there are a wide variety of
national grocery chains, big box retailers, and smaller local stores. There are six full service
supermarkets (including the Walmart Supercenter) in Bozeman plus several smaller specialty
food stores and independent grocers such as the Community Food Co-op (Table 11).
Bozeman also has most of the national anchor retailers that are still active in the market,
including Costco, Target, Home Depot, Lowes, Kohls, and Macy’s. While a number of these stores
are located within the Gallatin Valley Mall, an increasing number have located along the N. 19th
Avenue corridor.
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Table 11 Bozeman Retail Inventory
Store Type
Description Avg. Sq. Ft.
Supermarkets and Grocery Stores
Walmart Supercenter 220,000
Safeway 65,000
Albertsons 65,000
Smith's 50,000
Rosauers 50,000
Heebs East Main Grocery 20,000
Huckleberry's Natural Market 20,000
Community Food Co-op 10,000
Town & Country Foods 10,000
Shopper's Goods
Costco Wholsale 120,000
Target 120,000
Kohls 60,000
Macy's 50,000
Sportsman's Warehouse 50,000
Wholesale Sports 50,000
Dollar Spree 50,000
Dollar Tree 50,000
REI 25,000
T.J. Maxx 20,000
Ross 20,000
Sears 20,000
JCPenney 20,000
Play it Again Sports 20,000
Gap Outlet 10,000
Joann 10,000
White House Black Market 10,000
Other Shopper's Goods
Gallatin Valley Furniture 35,000
Barnes and Noble 20,000
Office Depot 20,000
Staples 20,000
Petco Animal Supplies 20,000
PetSmart 20,000
Mattress King 10,000
Building Material & Garden
The Home Depot 150,000
Lowe's Home Improvement 150,000
Murdoch's Ranch & Home Supply 50,000
Source: Economic & Planning Systems
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Supportable Commercial Area
Spending by households located in the City of Bozeman is estimated to support roughly 1.36
million square feet of retail development (Table 12). This is based on an estimated 33,000
households in the city, an average household income of nearly $46,000, and retail spending
equating to 35 percent of total household income.
Commercial businesses in the city rely on spending from local households, households living in
the Greater Bozeman area and travelling to the city for their retail needs, and tourists. While the
ratio between local spending and inflow ranges by store type, comparing local spending potential
to the existing inventory of stores provides an indication of the amount of inflow supporting
commercial development in the city.
Supermarkets and Grocery Stores
Local spending is estimated to generate enough demand for approximately four full service
supermarkets at an average size of 55,000 square feet. As noted earlier, Bozeman currently has six
full service supermarkets plus other smaller independent and specialty food stores. This indicates
that approximately two-thirds of the total space is supported by local spending and the remaining
one-third is supported by inflow from outside city limits and the Greater Bozeman region.
General Merchandise
Local spending also generates enough demand for roughly two and a half general merchandise
stores (e.g. Walmart, Target, Kohls, and Costco). There are currently four major general
merchandise stores in the city, indicating that slightly more than half of total demand for these
store types is generated by local households and the remainder is inflow from the larger regional
trade area.
Building Material & Garden
Local households generate enough demand to support roughly 1.6 building material and garden
centers. There are now two major home improvement centers (Lowes and Home Depot) plus
several other hardware and building supply businesses such as Ace Hardware, Murdochs, Kenyon
Noble, and Empire Building Materials in the city. Similar to supermarkets and general merchandise
stores, slightly more than half of the existing building material and garden space is supported by
local spending.
Market Potentials
Bozeman is more than adequately supplied with regional and community level retail
development. Any additional development will need to result from two sources. First is the
continued growth of Bozeman and Greater Bozeman. Additional household and business growth
generates demand for retail space, and substantial growth may be needed to support more
retail—especially community shopping center formats anchored by a supermarket. Second, while
unpredictable, new brands or store formats do emerge and look for new markets to enter and
compete with the existing store offerings. Bozeman is likely a good ‘test market’ in Montana for
new retail concepts.
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Table 12 Bozeman Supportable Commercial Area: Local Spending
Retail Sales Expenditure Avg. Sales Capture Supportable Average Est. Stores Existing
Store Type % of Total (2012)Potential Per Sq. Ft.Rate Square Feet Store Size Supported Stores
($000s)
Spending Potential
Housholds (City of Bozeman)33,146
Average Household Income $45,729
Total Personal Income (TPI) ($000's)100%$1,515,733
Convenience Goods
Supermarkets and Other Grocery Stores 6.9%$104,877 $450 100%233,000 55,000 4.2 6+
Convenience Stores (incl. Gas Stations)1 2.0%$30,000 $300 100%100,000 5,000 20.0 N/A
Beer, Wine, & Liquor Stores 1.1%$16,320 $300 100%54,000 5,000 10.8 N/A
Health and Personal Care 1.7%$25,246 $400 100%63,000 20,000 3.1 N/A
Total Convenience Goods 11.6%$176,443 $403 100%450,000
Shopper's Goods
General Merchandise 7.2%$108,966 $455 100%250,000 100,000 2.5 4
Other Shopper's Goods 6.9%$105,323 $337 75%246,750 N/A N/A N/A
Total Shopper's Goods 14.1%$214,289 $397 93%496,750
Eating and Drinking 6.1%$92,303 $350 95%250,800 N/A N/A N/A
Building Material & Garden 3.3%$49,494 $300 100%165,000 100,000 1.6 3
Total Retail Goods 35.1%$532,529 $382 94%1,362,550
Source: 2012 Census of Retail Trade; Economic & Planning Systems
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Commercial Zoning Evaluation
While the majority of commercial development has occurred along major arterials, there is a
desire for neighborhood oriented commercial space located in closer proximity to housing as
identified in the Community Plan. These centers are envisioned as serving a half to one mile
neighborhood trade area—easily accessible by walking, bicycling, or a short car trip. In an effort
to create locations for neighborhood commercial development, the City has primarily relied on B-
1 districts. In addition to B-1 districts, the City has also established a number of B-2 districts
that are intended to provide a mix of locally and regional oriented commercial types. A summary
of each district is provided below, with locations shown in Figure 27. A half mile radius around
the center of each B-1 zone is also shown.
It is notable that the half mile trade areas around many B-1 zones overlap. There are some B-1
zoning areas that may be considered to be antiquated zoning that assumed a past development
plan that is no longer viable. Others have poor access and no utilities. Going forward, these
types of areas should be considered for rezoning.
Figure 27 B-1 and B-2 Commercial Districts
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• B-1 Districts – “The intent of the B-1 neighborhood business district is to provide for smaller
scale retail and service activities frequently required by neighborhood residents on a day to
day basis, as well as residential development as a secondary purpose, while still maintaining
compatibility with adjacent residential land uses. Development scale and pedestrian
orientation are important elements of this district.”
• B-2 Districts – “The intent of the B-2 community business district is to provide for a broad
range of mutually supportive retail and service functions located in clustered areas bordered
on one or more sides by limited access arterial streets. The intent of the B-2M community
business district—mixed is to function as a vibrant mixed-use district that accommodates
substantial growth and enhances the character of the city. This district provides for a range
of commercial uses that serve both the immediate area and the broader trade area and
encourages the integration of multifamily residential uses as a secondary use.”
B-1 and B-2 Development Capacity
Many of the areas zoned as B-1 and B-2 have been built out. However, some B-1 and B-2
districts have been much slower to develop. To address concerns about how much B-1 and B-2
land is needed, the size of the B-1 neighborhood centers, and development timing, we have
developed prototypical scenarios.
For the purposes of this analysis, a prototypical B-1 district is assumed to be 10 acres. The
current average size of a B-2 district (not including the Huffine/Main Corridor) is 75 acres
(Table 13). To account for the undevelopable area of each district that will be dedicated to set-
backs, rights-of-ways, streets and sidewalks, an efficiency factor of 75 percent is applied to the
gross acreage to calculate the net developable area. To calculate the building area that can be
developed on the net developable acreage a floor area ratio (FAR) of 0.30 is applied in B-1
districts and a slightly lower density of 0.30 is applied in B-2 districts. Finally, this analysis
accounts for a distribution of uses. In B-1 districts, 60 percent of the building area is assumed to
be developed as office or non-retail uses, 20 percent is assumed to be developed as restaurant
and/or bars, and 20 percent is assumed to be developed as retail space. In B-2 districts, 25
percent of the area is assumed to be developed as non-retail uses, 25 percent as restaurant
and/or bar space, and 50 percent as retail.
Based on these assumptions, a 10-acre B-1 district can accommodate nearly 40,000 square feet
of retail, food and beverage, and office/service development. A larger B-2 district can
accommodate approximately 460,000 square feet of retail, food, and beverage development.
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Table 13 B-1 and B-2 Development Capacity
Household Expenditure Potential
While the intent of the majority of B-1 districts is to provide smaller scale retail and services
primarily frequented by neighborhood residents, a number of B-2 districts not located along
major arterial roads are also intended to provide a mix of commercial space that is supported by
neighborhood spending as well as regional demand. For the purposes of this analysis,
commercial development in B-1 zones is evaluated in the context of the amount of space
supportable by households living within a 0.5 to 1.0 mile radius. While B-2 districts are
anticipated to include some amount of neighborhood oriented commercial space, they were
primarily envisioned as locations for community shopping centers. Traditionally, community
shopping centers are anchored by grocery stores that help attract other ancillary retail and
service businesses. Their trade areas are typically at least two miles in a densely populated area.
Supportable Commercial Area: B-1 Districts
Generally, neighborhood oriented commercial space is frequented by households residing within
a radius of 0.5 to 1.0 miles. Throughout Bozeman, the number of households living with this
radius of existing B-1 districts varies greatly. In order to provide an estimate of supportable
retail, food, and beverage space, this analysis provides a range of households that create the
demand and the corresponding amount of space supported by that demand.
In order to calculate the supportable commercial area in B-1 and B-2 districts, this analysis relies
on a number of key assumptions that include the following:
• Neighborhood retail centers will generally include a mix of the following uses:
— Convenience Goods – A small market or specialty foods store.
Description B-1 District B-2 District
Prototype Land Area (Acres)10.00 75.00
Developable Area (% of Total)75%75%
Developable Area (Acres)7.50 56.25
Developable Land Area (Sq. Ft.)326,700 2,450,250
Development Density (FAR)0.30 0.25
Development Potential (Sq. Ft.)98,010 612,563
Office/Service/Non-Retail (% of Total)60%25%
Restaurant and Bar (% of Total)20%25%
Retail (% of Total)20%50%
Retail & Food & Beverage Development Capacity (Sq. Ft.)39,204 459,422
Source: Economic & Planning Systems
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— General Merchandise – None. In the current retail market, this store category is
dominated by national discount retailers that look for regionally accessible locations (e.g.
N. 19th. Avenue).
— Other Shopper’s Goods/Misc. Retail – A modest amount of miscellaneous retail, e.g.
children’s clothing, florist, arts and crafts, stationary.
— Eating and Drinking – A neighborhood café, coffee shop, restaurant, or bar.
• Households spend approximately 35.1 percent of their total household income on retail goods.
• While required average sales per square foot vary by retail categories, we have estimated
that average sales of just under $300 per square foot per year on average are needed for a
business to be viable.
• Neighborhood resident spending capture rates vary by commercial type, location, and
development scale. For the purposes of this analysis, a weighted capture rate of 11.0 percent
is estimated for B-1 districts. This capture rate reflects a 15 percent capture of spending on
convenience goods, 5 percent on shoppers goods, and a 10 percent capture of spending on
eating and drinking.
It is estimated that a B-1 district with 500 residents within 0.5 to 1.0 miles can support
approximately 2,000 square feet of retail, food, and beverage space. However, a vibrant
neighborhood commercial center needs a larger ‘critical mass’ of space to be viable, judged to be
in the 20,000 to 30,000 square foot range. Therefore, a B-1 district requires approximately
3,500 to 5,500 households within a 0.5 to 1.0 mile radius (Table 14).
Table 14
B-1 District Supportable Square Feet by Number of Households
% of Total Avg. Sales Spending
Store Type Spending Per Sq. Ft.Capt. Rate
Households (Surrounding Area)500 1,500 2,500 3,500 4,500 5,500 6,500
Retail Spending
Convenience Goods 11.6%$300 15.0%1,800 5,400 9,150 12,750 16,350 19,950 23,700
General Merchandise N/A N/A N/A 0 0 0 0 0 0 0
Other Shopper's Goods 6.9%$275 5.0%400 1,200 1,950 2,750 3,550 4,350 5,150
Eating and Drinking 6.1%$275 10.0%700 2,100 3,500 4,800 6,200 7,600 9,000
Building Material & Garden N/A N/A N/A 0 0 0 0 0 0 0
Total Retail Sq. Ft.24.7%$287 11.0%2,900 8,700 14,600 20,300 26,100 31,900 37,850
[1] 2010-2014 ACS Estimate
Source: 2012 Census of Retail Trade; Economic & Planning Systems
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New residential development in the city is currently being developed at a density of 4.0 to 7.0
dwelling units per net developable acre (DU/acre) with most occurring at the lower density
range. Residential development with a net density of 6.0 DU/acre results in approximately 2,300
households within a 0.5 mile radius and can support roughly 11,000 square feet of commercial
development (Table 15).
Net density of approximately 4.5 units per acre
Net density of approximately 7.0 units per acre.
Table 15 Development Capacity (0.15, 0.5, and 1.0 mile radius)
Description 0.25 mi 0.50 mi 1.00 mi
Developable Area
Gross Developable Area (Acres)125.6 502.4 2,009.6
ROW (25% of gross)31.4 125.6 502.4
Net Developable Area (75% of gross)94.2 376.8 1,507.2
Housing Units and Net Density
5.0 DU/Acre 471 1,884 7,536
6.0 DU/Acre 565 2,261 9,043
7.0 DU/Acre 659 2,638 10,550
8.0 DU/Acre 754 3,014 12,058
9.0 DU/Acre 848 3,391 13,565
10.0 DU/Acre 942 3,768 15,072
11.0 DU/Acre 1,036 4,145 16,579
12.0 DU/Acre 1,130 4,522 18,086
Source: Economic & Planning Systems
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• At current household densities, B-1 commercial centers must rely on spending from
households outside of a 0.5 mile radius. Some B-1s meet this criterion as they are located on
arterial streets, or are on or near the N. 19th corridor and therefore benefit from additional
traffic and visibility. In other words, current densities–especially on the periphery of
Bozeman–are not high enough to support significant retail demand in a B-1 without being
able to draw from a larger area.
• If the density of surrounding development is increased, B-1 commercial centers can be made
more viable and development may accelerate in them.
• Retail and restaurant businesses in B-1 neighborhood centers start to become more viable,
assuming a half mile trade area, at an estimated net density of 8 dwelling units per acre.
• The success of any individual B-1 area will depend on the strength and quality of the
business mix, the specific location, and surrounding demographics.
• B-1 zoning can serve a variety of community and neighborhood needs besides daily shopping
and neighborhood dining. There is demand for small office and studio space, childcare facilities,
and health and wellness businesses. Having a diverse business mix within neighborhoods can
enhance quality of life. This flexibility of uses should be maintained in the B-1 areas.
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Supportable Commercial Area: B-2 Districts
B-2 Districts are intended to include a mix of larger community oriented retail/commercial space.
As a result, the estimated capture rates of B-2 districts are higher than B-1 districts (25.9
percent in B-2 districts compared to 6.7 percent in B-1 districts). Traditionally, community
shopping centers are 100,000 to 150,000 square feet in size and are anchored by a grocery
store. New grocery stores begin at about 50,000 square feet, but have been growing to 60,000
to 70,000 square feet as they offer more prepared foods and general merchandise.
• As shown, at least 6,500 households more are needed to support a grocery store (Table 16).
At the current rate of housing development, averaging 600 units per year over the past 10
years in the city, and 800 to 1,000 per year in Greater Bozeman, a new grocery store could be
supported in the market in about the next five years. The likely location would be on the west
side of Bozeman, the direction in which Bozeman is growing. A site here could also capture
drive in demand from Belgrade, the unincorporated areas just outside the city, and Four Corners.
Table 16 B-2 District Supportable Square Feet by Household Spending
• As shown earlier, a 75 acre B-2 district can accommodate over 400,000 square feet of retail/
commercial development. This was the size of the “power center” development format that
emerged in Bozeman in the early 2000s when retail was expanding rapidly. Given market
conditions in the national retail landscape, and the typical 100,000 to 150,000 square foot
community shopping center size, it is not realistic to expect that an entire B-2 will build out
as retail.
• The B-2 areas do allow for numerous other commercial service and employment uses. This
flexibility should be maintained, as these areas can also support office development that is in
demand, as well as other services.
• Adding additional housing density near or even in B-2 zoning areas can benefit retail
development. Bozeman can also consider more flexibility for high density residential
development in B-2 zoning areas. Currently, it is only allowed as a conditional use if it is on
the ground floor. Some limitations on residential development could include the following:
— Limited to a percentage of land area; and/or
— May not front the arterial streets or hard corner (the best retail/commercial locations).
% of Total Avg. Sales Spending
Store Type Spending Per Sq. Ft.Capt. Rate
Household Growth (Community-wide)500 1,500 2,500 3,500 4,500 5,500 6,500
Retail Spending
Supermarket 6.9%$450 75.0%3,750 10,500 18,000 25,500 32,250 39,750 46,500
Other Convenience Goods 4.7%$300 65.0%3,250 9,750 16,250 22,100 28,600 35,100 41,600
General Merchandise N/A N/A N/A 0 0 0 0 0 0 0
Other Shopper's Goods 6.9%$350 25.0%1,500 4,750 7,750 10,750 14,000 17,000 20,250
Eating and Drinking 6.1%$300 25.0%1,500 4,750 8,000 11,000 14,250 17,500 20,500
Building Material & Garden N/A N/A N/A 0 0 0 0 0 0 0
Total Retail Sq. Ft.24.7%$356 46.7%10,000 29,750 50,000 69,350 89,100 109,350 128,850
[1] 2010-2014 ACS Estimate
Source: 2012 Census of Retail Trade; Economic & Planning Systems
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6. OFFICE AND INDUSTRIAL MARKET
This chapter summarizes national and local trends in the office and industrial markets, followed
by a review of trends in office and industrial construction and market share within Greater
Bozeman. Other market indicators such as rent levels, development and land costs, and
qualitative information gathered from interviews conducted by EPS is also included.
Office Market Trends
There are numerous trends, workforce, and demographic factors affecting the national office
market. This section discusses the four major trends with the most potential to influence the
local market in Bozeman.
Location Preferences
Nationally, there are trends in office development moving away from the suburban office park or
corporate campus to more mixed use, centrally located, and often transit-accessible locations (in
major urban areas). Much of this trend relates to the housing and neighborhood preferences of
Generation X and Millennial-aged workers who wish to have more access to amenities near work
such as shopping, services, and dining. This mix of land uses allows workers to combine errand
and work trips to save time. It also provides a more interesting and pleasant environment
especially for people who wish to spend less time in their cars. Some firms also see value in
being close (walking, bicycling, or a short car or transit trip) to customers and other business
partners as it allows for convenient frequent contact as well as spontaneous interactions on the
street or in restaurants or coffee shops. There is evidence of these trends in interviews with
economic developers conducted by EPS in major western cities, economic development and real
estate literature, and data in the City’s Economic Development Strategy.
Figure 28 Location Preferences for Bozeman Businesses
In the Bozeman Economic
Development Strategy,
firms were surveyed on
their ideal location. Nearly
35 percent of all
businesses indicated a
desire to be Downtown
(Figure 28). Among
professional services
businesses, Downtown was
the most desired location
(approximately 20
percent) followed by the
MSU Tech Park (10
percent). All other
locations made up the
balance of preferences for
professional services.
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More Efficient Office Space
Businesses are leasing office space than in past
years. Technology has reduced the need for
paper records storage space, and new
workplace designs are more efficient. Open
floor plans and shared spaces are becoming
more common. In these settings, workers are
freer to move around an office with a laptop
and mobile phone. The National Association for
Industrial and Office Parks (NAIOP) reported in
2015 that the average office lease size had
dropped by approximately 10 percent from
2004 through 2014. Some of the trend in
efficiency (more workers per square foot of
building area) is driven by cost. Fast growing industries like technology are not necessarily
cutting space requirements as they desire spacious and luxurious offices to attract the highest
skilled talent. Slower growth industries such as law and accounting are reducing their space
requirements to cut costs.
Co-Working Space
Co-working space is a new type of office space in which tenants rent desk(s) space in a space
shared with other workers and firms. They are popular with small new firms, which can be in any
field including professional services, creative industries, and technology. Tenants have access to
conference rooms and shared office equipment (e.g. printers). The benefits of co-working space
are that they typically have lower tenant finish levels and lower cost than traditional office space
and are flexible in that they give a firm a low cost way to grow from one to a few employees.
They also offer, and are marketed for, opportunities for collaboration and knowledge sharing with
likeminded people and potential business partners. Some also offer events including networking,
speakers, and skill development workshops.
Co-working space is popular with entrepreneurs and remote workers. It is becoming more
common in major and mid-sized cities but is still a small portion of the total office market. In
Bozeman there are at least two co-working spaces: Blue Ocean Innovation Center (19th and West
Lincoln) and CoWork Bozeman (East Main between Black and Tracy).
Innovation Districts
“Innovation districts” can be defined as economic development tools that utilize partnerships
with higher education institutions, businesses, and government to fuel job growth and
redevelopment in targeted locations. Innovation districts are based on the premise that
collaboration and productivity result from proximity; therefore, job creation and innovation can
be fostered through the intentional clustering of businesses, institutions, ideas, and people.
One model for innovation districts is to anchor the district at a major research institution. These
are typically in downtown or mid-town settings. Examples include the Kendall Square/MID cluster
in Cambridge; the University City/University of Pennsylvania cluster in Philadelphia; and the St.
Louis/Washington University and St. Louis University cluster in St. Louis.
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The MSU Technology Park, which MSU is working to develop, is an example of an innovation
district. This planned project is located along the south frontage of West College just west of 23rd
Avenue. MSU is proposing approximately 263,000 square feet of R&D space on a 40 acre campus
just west of the Advanced Technology Park.
Greater Bozeman Office Market
The demand for office development and construction is driven by job growth in industries and
occupations which use office space. In Greater Bozeman, those sectors are primarily professional
services and health care, and financial services (banking and insurance). The City of Bozeman
has been the location of most office development, with nearly 862,000 square feet constructed
over the last 16 years, capturing 80 percent of the regional office market (Table 17). Some of
the largest buildings constructed during this time period include:
• A 37,500 square foot office building for a construction company;
• An 18,000 square foot medical office building at the hospital;
• A 25,000 square foot office and retail building in the Gateway development (West College
and West Main);
• At Huffine and Cottonwood, an 18,000 square foot office building and 11,000 square foot
building for a sports medicine clinic;
• The 17,200 square foot Crowley Fleck law offices; and
• The Mountain View professional building on the north side of Main at Cypress.
There were also several other buildings in the 4,000 to 8,000 square foot range.
Table 17
Greater Bozeman Office Construction Trends
• Tenant Characteristics - Interviews conducted by EPS indicate that most office tenants
look for spaces in the 1,000 to 4,000 square foot range. The few larger buildings noted above
were medical-related and a law firm making a major expansion in Bozeman.
• Rents and Construction Costs – Office rents are approximately $18 to $20 per square foot
(plus operating expenses) and $25 for new construction (plus operating expenses). Rents are
reported to be expensive for small professional firms. Rents are a function of construction
costs, which are approximately $250 per square foot including land and $180 to $210
without land. These figures result in a 10 percent return on cost or less which is a small
margin given the risks in real estate development and construction.
2000-2016
Area 2000-2006 2007-2011 2012-2016 Total Sq. Ft.Ann. Sq. Ft.Market Share
Belgrade Area 88,000 31,000 9,000 128,000 7,529 11.9%
Bozeman 404,000 101,000 357,000 862,000 50,706 80.1%
Four Corners Area 36,000 25,000 25,000 86,000 5,059 8.0%
Total 528,000 157,000 391,000 1,076,000 63,294 100.0%
Source: MT Dept. of Revenue GIS; Economic & Planning Systems' Analysis
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• Land Costs – Land costs are relatively high in Bozeman compared to the regional market.
Well located finished pad sites that are shovel ready sell for $65 to $75 per square foot of
land. Raw land that needs to be planned, developed, and taken through the City process
costs roughly $12 to $14 per square foot.
• Supply - There is very little available office space in Bozeman. It is challenging for
developers to expand the supply for several reasons. First, most tenants are looking for small
blocks of space meaning that a speculative building will need to find numerous tenants which
may result in a long lease up period. Second, it is reported to be difficult to make office
development financially feasible with the rents the market can bear and the construction and
land costs.
The office market in other areas is comprised of local small businesses and professionals. There
is far less demand for office space outside of Bozeman currently. Bozeman has a larger labor
pool and the other services and amenities such as restaurants, shopping, and other services,
which make it more appealing as an office location. Developers also report that the Bozeman
identity is important to some businesses.
Greater Bozeman Industrial Market
The trends in industrial construction are the invers of the office market. Over past 16 years, the
Greater Bozeman market added 1.9 million square feet of industrial space. Over half of this was
in Belgrade and nearly 40 percent was in the Four Corners area. Bozeman captured only 10
percent of the industrial market (Table 18). Not included in these figures is an 80,000 square
foot facility occupied by Vista (outdoor brand wholesaler) and Blackhawk manufacturing which
makes injection molded firearm accessories. Simms Fishing Products built a 61,000 square
expansion in 2016 in Four Corners. In 2012, FedEx built a 35,000 square foot distribution
building at Jackrabbit and Baxter also in Four Corners. Smith Equipment, a manufacturer of high
capacity off road (mining) trailers, built a 30,000 square foot building in Belgrade in 2010. Frito
Lay also constructed a small 10,000 square foot warehouse in Belgrade in 2010.
Table 18 Greater Bozeman Industrial Construction Trends
2000-2016
Area 2000-2006 2007-2011 2012-2016 Total Sq. Ft.Ann. Sq. Ft.Market Share
Belgrade Area 479,000 268,000 238,000 985,000 57,941 51.4%
Bozeman 128,000 34,000 28,000 190,000 11,176 9.9%
Four Corners Area 378,000 160,000 204,000 742,000 43,647 38.7%
Total 985,000 462,000 470,000 1,917,000 112,765 100.0%
Source: MT Dept. of Revenue GIS; Economic & Planning Systems' Analysis
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• Tenant Characteristics - The buildings noted above were among the largest new facilities.
Of the approximately 100 buildings developed over this time period, approximately half were
6,000 to 7,000 square feet or smaller. These smaller buildings are used by maintenance and
repair businesses, some of which are automotive; construction and trades firms; small
wholesalers/distributors. Small manufacturing firms, which are an important component of
Bozeman’s economic development strategy, also occupy smaller industrial and flex-space
buildings.
• Land Costs – Land costs are considerably lower outside Bozeman. In Four Corners, land
with highway frontage ranges from $8.00 to $10.00 per square foot. These sites are more
attractive to businesses that need showroom space and visibility. Interior sites are in the
$5.00 to $6.00 per square foot range.
• Construction Costs – Development fees in Belgrade are reported to be similar to Bozeman.
The design standards in Belgrade are less prescriptive which results in modest construction
cost savings. In Four Corners, which is in the unincorporated County, development fees are
substantially lower and there are minimal design standards. This has created for the time
being a cost advantage in Four Corners. Water supply constraints will eventually temper the
growth of Four Corners.