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HomeMy WebLinkAboutCover Memo for Draft Market Report 09252017 V3 M EMORANDUM To: Bozeman Planning Board From: Brian Duffany, Dan Guimond, and Tim Morzel Subject: Draft Market and Demographic Analysis Report Date: September 28, 2017 We have prepared a Working Draft Report on economic, demographic, and real estate market trends in Bozeman. The purpose of this Report is to: • Document and assess key trends that will affect the growth forecasts using available data, supplemented with interviews. • Inform discussions on issue areas as part of this Market and Demographic Analysis project and the full Growth Policy update. • Establish the baseline framework for the land demand forecast task. The Draft Report contains a Summary of Findings addressing each major land use type (residential, retail, office, industrial) as well as overall socioeconomic trends. As a discussion guide for our October 3 meeting, we have outlined the potential implications of the baseline trends documented in the Report. For the upcoming Land Demand Forecast task, we will likely wish to modify some of these assumptions, based on Planning Board input, in a scenario(s) and develop metrics to estimate the effects of different policy strategies. Memorandum September 28, 2017 Draft Market and Demographic Analysis Report Page 2 Housing Market • Existing Conditions – Bozeman has a strong housing market that is supported by strong job growth and the quality of life/desirability of the community. Affordability, however, is a growing issue. • Future Implications – Housing costs are likely to continue to increase although the pace may moderate. The combined pressures of MSU student growth, outside wealth and income moving in, the desirability of Bozeman, and a short supply of construction and trades labor are driving up costs. Costs in surrounding communities have also increased at a similar pace to Bozeman, plus there are increased household transportation costs, impacts on City transportation as commuting increases, and impacts to quality of life. Rental housing in particular is in demand. • Initial Forecast Assumptions – The forecast will estimate the demand for rental and student housing along with single household housing. The implied housing demand for multifamily housing may be higher than recent construction trends. Retail Market • Existing Conditions – Bozeman has a strong retail market and a robust supply of major national anchor retailers, plus a diverse mix of home-grown restaurants, breweries, and bars supported by the local population, the Southwest Montana Region, and visitors. National retail market trends combined with the large regional retail inventory in Bozeman suggest that Bozeman may not experience significant additional retail growth in the near future. • Future Implications – Bozeman will continue to be the trade and commerce center of Southwest Montana for the Plan’s forecast period. It has the largest nearby trade area population in the region, and the ability to provide infrastructure and services to development sites. The surrounding communities in Greater Bozeman may capture more of their own local/community serving retail as they grow. Given that there is no sales tax in Montana, the fiscal case for pursuing retail is not that compelling. • Initial Forecast Assumptions – The baseline forecast will assume that Bozeman continues to be the primary location for regional retail. However, surrounding communities may grow more of their own community-serving retail (e.g., supermarkets and convenience goods). Office Development • Existing Conditions – Bozeman captured 80 percent of the 1.1 million square feet of office space built in Greater Bozeman from 2000 through 2016. With the most central location and largest labor pool, and superior location, Bozeman will likely to continue to be the most desirable location for office development. • Future Implications – Bozeman can expect to continue to capture the vast majority of the office and technology employment sectors. Its share could even increase over time as more employers are moving to downtown and other amenity-rich locations. • Initial Forecast Assumptions – Bozeman’s share of the office market will continue at similar levels (70 to 80 percent market share). Memorandum September 28, 2017 Draft Market and Demographic Analysis Report Page 3 Light Industrial Development • Existing Conditions – Bozeman has lost market share for industrial development, accounting for 10 percent of the space built over the past 16 years. Belgrade and Four Corners have captured the majority of new industrial development due to lower land and construction costs and more flexible land use policies in the County. Interviews indicate, however, that some higher value manufacturing or wholesaling operations still value the Bozeman location because of the brand identity associated with the location. • Future Implications – Land costs in Bozeman are currently too high for land intensive industrial operations. • Initial Forecast Assumptions – Bozeman’s share of the industrial market will continue at roughly 10 percent market share. Infill and Redevelopment As the report points out, there has been an increase in demand for infill and redevelopment housing sites around Downtown area neighborhoods with an estimated 100 homes built since 2010. While this represents less than 5.0 percent of City construction, it is a sensitive topic for residents of these areas. Given the strength of the housing market and downtown housing values, the forecast will likely assume a moderate increase in infill demand. B-1 and B-2 Zoning The Summary of Findings in the report includes initial recommendations on optimizing the B-1 and B-2 zoning areas. • A key finding is that housing densities in Bozeman are not high enough to support significant retail in the B-1 areas assuming a half mile service/trade area. B-1 areas provide locations for important commercial services (e.g., childcare and small office/studio space), a function that should not be overlooked. • B-2 areas could be made more flexible to promote higher density housing which benefits retail development.