HomeMy WebLinkAbout21 - Bozeman Economic & Market Report
Draft Report
Bozeman Economic and Market
Update
Prepared for:
City of Bozeman, MT
Economic Development Department
Prepared by:
Economic & Planning Systems, Inc.
EPS #213051
December 14, 2021
Table of Contents
1. City Snapshot and Summary ................................................................................ 1
City Snapshot...................................................................................................... 1
2. Economy ........................................................................................................... 6
Economic Trends ................................................................................................. 6
Wages ............................................................................................................... 9
Economic Drivers ............................................................................................... 10
3. Commercial Real Estate ..................................................................................... 11
Office Market Trends .......................................................................................... 11
Industrial/Flex Market ......................................................................................... 13
Retail Market .................................................................................................... 15
4. Housing ........................................................................................................... 18
Construction ..................................................................................................... 18
Housing Prices ................................................................................................... 19
Apartment Market .............................................................................................. 20
Affordability ...................................................................................................... 22
Housing Demand ............................................................................................... 24
List of Tables
Table 1. Population and Housing Units, 2010-2020 ......................................................... 2
Table 2. MSU Enrollment, 2001-2020........................................................................... 3
Table 3. Peer City Summary....................................................................................... 5
Table 4. Job and Wage Growth, Top Sectors, Gallatin County ........................................... 9
Table 5. Educational Attainment, Bozeman, 2021 ......................................................... 10
Table 6. Office Summary ......................................................................................... 11
Table 7. Industrial Summary, Gallatin County, 2010-2021 ............................................. 13
Table 8. Retail Summary, Gallatin County, 2010-2021 .................................................. 15
Table 9. Bozeman Building Permit Unit Trends ............................................................. 18
Table 10. Home Price Trends, 2016-2021 ..................................................................... 19
Table 11. Multifamily Summary, Gallatin County ............................................................ 20
Table 12. Recent Multifamily Development Summary, Bozeman ....................................... 21
Table 13. Required Annual Income to Afford Median Home Price, 2016-2021 ...................... 22
Table 14. Bozeman Housing Demand Projection ............................................................ 24
Table 15. Bozeman Housing Demand Projection ............................................................ 25
List of Figures
Figure 1. Gallatin Valley Region ................................................................................... 2
Figure 2. Private Wage and Salary Employment, Bozeman and Gallatin County, 2020 ............ 6
Figure 3. Employment Growth, Bozeman and Gallatin County, 2015-2020 ........................... 7
Figure 4. Unemployment Rate, 2010-2021 YTD .............................................................. 7
Figure 5. Change in Employment by wage quartile, Gallatin County, 2015-2020 .................... 9
Figure 6. Income Gap to Afford Median Priced Home, Bozeman, 2016 ............................... 23
Figure 7. Income Gap to Afford Median Priced Home, Bozeman, 2021 ............................... 23
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1. City Snapshot and Summary
This report provides an overview of the City of Bozeman and Gallatin County,
Montana economy, key growth trends, commercial real estate trends, and the
housing market and housing demand. The intended audiences are economic
developers, real estate developers and investors, lenders, and policymakers. The
purpose is to provide useful information on growth trends by area, economic
growth by industry, wages, and housing demand and affordability to help the
community track trends, progress, and potential threats.
This report is a follow up to the Demographic and Real Estate Market Assessment
completed by EPS for the Growth Policy Update in 2018.
City Snapshot
Bozeman has a 2021 population of approximately 53,000 within Gallatin County
(pop. 118,960) with a diverse economy, an educated labor force, and high quality
of life not often found in this combination in small cities. Montana State University
(MSU) is an anchor in the community and a strong research institution with about
16,000 enrolled students and 4,200 faculty and staff. The area has excellent
access to year round outdoor recreation activities and uncrowded spaces. The
combination of these factors has supported strong job and wage growth and
demand for housing. One of the most pressing issues for the City and greater
Bozeman is increasing the housing supply as the average home price is now
$779,000 ($700,000 median).
Bozeman is one of the fastest growing cities in the U.S. Between 2010 and 2020,
the City added nearly 17,000 residents, which translates to a growth rate of
nearly 1,700 new residents per year or an annual growth rate of 3.9 percent
(Table 1). The City has also added about 700 housing units annually since 2010,
which is just under 60 percent of all housing development in Gallatin County.
Most of the County’s population is within the Gallatin Valley, which is the area
comprised of Manhattan, Belgrade, Bozeman (I-90 Corridor), and Four Corners
and Gallatin Gateway (both unincorporated). The most urbanized area of the
County is the “Triangle” area that includes Belgrade, Bozeman, and Four Corners
(Figure 1).
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Table 1. Population and Housing Units, 2010-2020
Figure 1. Gallatin Valley Region
Description 2010 2015 2020 Total Ann. #Ann. %
Population
Bozeman 36,440 40,319 53,293 16,853 1,685 3.9%
Belgrade 7,281 7,738 10,460 3,179 318 3.7%
Manhattan 1,396 1,191 2,086 690 69 4.1%Other/Uninc.44,541 51,491 53,121 8,580 858 1.8%
Gallatin County 89,658 100,739 118,960 29,302 2,930 2.9%
Bozeman % of County Pop.41%40%45%58%
Housing Units
Bozeman 16,761 18,293 23,535 6,774 677 3.5%
Belgrade 3,154 3,308 4,339 1,185 119 3.2%
Manhattan 574 653 872 298 30 4.3%
Other/Uninc.20,841 23,715 24,089 3,248 325 1.5%
Gallatin County 41,330 45,969 52,835 11,505 1,151 2.5%
Bozeman % of County Units 41%40%45%59%
Source: US Census; ESRI; Economic & Planning Systems
2010-2020
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The Bozeman economy has six key segments that distinguish it from other
midsized cities and recreation or resort oriented mountain communities.
• Higher Education – Montana State University (MSU) has approximately
16,000 students enrolled and 4,200 faculty and staff. MSU is one of 131 R1
research institutions with “very high research activity” within the Carnegie
Classification of Institutions of Higher Education (Indiana University).
Table 2. MSU Enrollment, 2001-2020
• Tourism and Recreation – Bozeman is a “gateway community” for world
class recreation including the Bridger Bowl and Big Sky ski areas, pristine rivers
and streams, and Yellowstone and Glacier National Parks. Thousands of visitors
pass through or stay over in Bozeman during their trips to these destinations
that draw international visitors. During the busy seasons, one can hear several
foreign languages spoken on the streets and in restaurants in Bozeman.
• Technology – Bozeman is a hub for technology and research and
development companies that have both started in or moved into Montana.
Major employers range from companies focusing on software development to
photonics R&D and manufacturing. MSU has received numerous grants,
including a $20 million grant from the National Science Foundation to accelerate
the development of quantum materials and devices. Photonics and optical
technology are an important technological cluster, as are technology firms such
as Oracle, Workiva, Zoot Enterprises, and numerous startups.
• Manufacturing – There are numerous manufacturing firms in Greater Bozeman
ranging from outdoor companies (Simms Fishing, Mystery Ranch) to optical
technology, materials science, electronics, and aerospace, and even a Gibson
Guitar factory.
• Retail and Hospitality – Bozeman retailers serve at least a 50-mile radius
trade area, making it the premier retail, services, and health care hub in
Southwest Montana. Downtown Bozeman is a vibrant main street with
independent shops, restaurants, and breweries serving locals and visitors.
Enrollment Trends 2001 2010 2015 2020 Total Ann. %
Undergraduate 10,538 11,579 13,707 14,240 3,702 1.6%
Graduate 1,208 1,986 1,981 2,009 801 2.7%
Total 11,746 13,565 15,688 16,249 4,503 1.7%
Source: Montana State University; Economic & Planning Systems
2001-2020
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BZN Airport
Bozeman Yellowstone International Airport (BZN) moves about 700,000
passengers per year through Greater Bozeman. the airport is critical to the
region’s economic development by making the city accessible to larger markets
and investor capital. BZN also supports the tourism and recreation economy of
the region, supporting numerous guide services and Big Sky and Bridger Bowl ski
areas. BZN has direct flights to numerous metropolitan areas.
Comparison Cities
Table 3). Bozeman is a young city
with a median age of 27.8. Like Boulder and Fort Collins, Colorado the age is
influenced by the presence of a large university. Bozeman is one of the highest
income cities in Montana, with an average household income among homeowners
of just under $89,000 compared to $73,100 in Billings and $73,400 in Missoula
(host of University of Montana). The average household income in communities
with a large college or university is often skewed lower by the large student
population (often renters).
The mix of jobs in each community is similar with retail trade and health care
being among the largest sectors in each community. In addition, sectors that
experienced the largest growth since 2015 among the peer communities included
health care, professional and technical services, and construction.
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In each community, the number of students as a percentage of population is
significant. In Bozeman, students equate to almost 35 percent of the population
similar to Boulder and Bend. In Fort Collins, the largest of the comparison cities,
the student population equates to about 20 percent of the population. The large
student population has an impact on the rental housing supply and the City is
interested in additional multifamily and student housing.
Table 3. Peer City Summary
Description Bozeman, MT Billings, MT Missoula, MT Fort Collins, CO Boulder, CO Bend, OR
Demographics
Population (2020)53,293 117,116 73,489 169,810 108,250 99,178
Median Age (2019)27.8 37.6 34.6 30.6 28.9 39.8
% Renters (2019)57%37%53%47%52%40%
Household Income
Owner $88,983 $73,100 $73,396 $95,423 $117,808 $80,785
Renter $39,516 $37,956 $32,640 $41,632 $41,876 $47,962
All Households $55,569 $59,656 $47,426 $65,866 $69,520 $65,662
Employment
# of Jobs (2020)29,035 53,519 38,938 94,563 59,744 50,225
Top 3 Sectors
#1 Retail Health Care Health Care Health Care Prof. & Tech Svcs.Health Care
#2 Health Care Retail Trade Retail Trade Education Education Retail Trade
#3 Hotel/Restaurant Accom. & Food Svcs.Accom. & Food Svcs.Accom. & Food Svcs.Manufacturing Accom. & Food Svcs.
Top 3 Growth Sectors ('15-'20)
#1 Health Care Health Care Construction Health Care Prof. & Tech Svcs.Health Care
#2 Prof. & Tech Svcs.Finance & Insurance Prof. & Tech Svcs.Information Manufacturing Construction
#3 Construction Transp. & Ware.Health Care Construction Health Care Accom. & Food Svcs.
Higher Education
Major Colleges/Universities Montana State
University
Montana State
University
University of
Montana
Colorado State
University
University of
Colorado
Oregon State
University
Enrollment (Fall 2020)16,249 4,000 10,015 32,646 34,975 33,359
% of Total Population 30.5%3.4%13.6%19.2%32.3%33.6%
Source: U.S. Census; BLS; ESRI; LEHD; Economic & Planning Systems
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2. Economy
Economic Trends
The City of Bozeman has a diverse economy driven by key segments that
distinguish it from other midsize cities. While retail trade and hotels and
restaurant are large sectors, Bozeman and Gallatin County also have significant
numbers of jobs in health care, manufacturing, professional and technical
services, finance and insurance, and business services (admin./waste mgt.
services) (Figure 2). The largest employers in the City, each with over 1,000
employees, include Montana State University and Deaconess Hospital. As of 2020,
there were approximately 59,071 private wage and salary jobs in the County and
at least 90,000 total jobs including proprietors and government (including MSU).
About half of the jobs in the County are within the City of Bozeman.
Figure 2. Private Wage and Salary Employment, Bozeman and Gallatin County, 2020
Between 2015 and 2020, Gallatin County added 7,012 private wage and salary
jobs (2.8 percent per year), with Bozeman capturing approximately 40 percent of
the growth. Employment growth was driven by Construction, Professional and
Technical Services, and Health Care (Figure 3). Construction jobs, which are
largely cyclical, experienced the third-highest amount of job growth in the
County, and were driven by large-scale projects in Big Sky.
5,592
4,220
1,983
5,061
2,772
1,570
1,449
887
754
1,139
511
520
508
514
62
461
8,197
6,920
6,413
5,994
4,829
3,599
2,323
2,260
1,819
1,619
1,463
1,302
1,197
834
701
698
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Retail Trade
Hotel/Restaurant
Construction
Health Care
Prof. & Tech Services
Manufacturing
Other
Admin/Waste Mgmt
Wholesale Trade
Finance/Insurance
Arts/Rec
Transport./Warehousing
Real Estate
Education
Ag./Forest/Hunting
Information
Total Jobs
Bozeman Gallatin
Source: Bureau of Labor Statistics; Economic& Planning Systems
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Figure 3. Employment Growth, Bozeman and Gallatin County, 2015-2020
Apart from the spike in unemployment due to COVID-19, Bozeman and Gallatin
County have seen a steady decline in the unemployment rate mirroring trends
seen across Montana (Figure 4). In September 2021, Bozeman and Gallatin
County both had unemployment rates of 1.3 to 1.9 percent, historic lows.
Figure 4. Unemployment Rate, 2010-2021 YTD
539
671
715
168
364
112
251
87
35
151
88
-44
92
1,659
934
881
613
562
530
329
317
237
177
172
147
120
-200 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Construction
Prof. & Tech Services
Health Care
Retail Trade
Manufacturing
Admin/Waste Mgmt
Other
Real Estate
Wholesale Trade
Education
Finance/Insurance
Ag./Forest/Hunting
Information
Job Growth
Bozeman Gallatin
Source: Bureau of Labor Statistics; Economic& Planning Systems
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Unemployment Rate
Bozeman Gallatin County Montana
Source: BLSLAUS; Economic& Planning Systems
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MAJOR EMPLOYERS
EMPLOYER NAME
INDUSTRY/
EMPLOYMENT
TYPE
NUMBER OF
EMPLOYEES
Bozeman Deaconess Hospital Health Care 1,000+
Montana State University Education 1,000+
Belgrade School District Education 500-999
Bozeman School District Education 500-999
Gallatin County Government 500-999
Oracle Prof. and Tech Svcs. 500-999
City Of Bozeman Government 250-499
Kenyon Noble Lumber & Hardware Retail Trade 250-499
Town Pump Convenience Stores Retail Trade 250-499
Wal Mart Retail Trade 250-499
Zoot Enterprises Prof. and Tech Svcs. 250-499
Albertson's Retail Trade 100-249
Target Retail Trade 100-249
Bridger Bowl Ski Resort 100-249
Community Food Co-Op Retail Trade 100-249
Costco Retail Trade 100-249
First Security Bank Finance/Insurance 100-249
First Student Education 100-249
Reach Inc. Health Care 100-249
McDonald’s Acc. and Food Svcs. 100-249
Murdoch's Ranch & Home Supply Retail Trade 100-249
Ressler Motor Retail Trade 100-249
Simms Fishing Products Retail Trade 100-249
Town & Country Foods Retail Trade 100-249
Williams Plumbing & Heating Construction 100-249
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Wages
Between 2015 and 2020 Gallatin County had robust wage growth averaging 5.4
percent per year (Table 4). Average wages in professional and technical service
jobs grew at 5.6 percent per year, increasing from $67,000 to $87,000 per year.
Growth in technology and professional jobs has been a major factor in the
evolution of Bozeman and the surrounding area.
Table 4. Job and Wage Growth, Top Sectors, Gallatin County
An analysis of job growth by wage quartile from 2015 through 2020 shows that
47 percent of new jobs in Gallatin County were in the 50 to 75th percentile of
wages, at $52,208 to $66,066 per year (Figure 5). These are good paying jobs at
hourly rates of $25 to $32 per hour. In addition, 22 percent of jobs added
between 2015 and 2020 were between the 75 and 100th percentile of wages, at
$66,066 to $89,804 per year. Large wage drivers include jobs in construction,
health care, and professional/technical services.
Figure 5. Change in Employment by wage quartile, Gallatin County, 2015-2020
`
Description
All Jobs/Sectors 6,568 $38,748 $50,313 5.4%
Construction 1,659 $46,904 $59,904 5.0%
Prof. & Tech Services 934 $66,664 $87,464 5.6%
Health Care 881 $44,876 $56,056 4.5%
Retail 613 $29,328 $37,960 5.3%
Manufacturing 562 $41,496 $53,508 5.2%
Admin/Waste Mgmt.530 $32,396 $39,000 3.8%
Source: Bureau of Labor Statistics QCEW; Economic & Planning Systems
2015-2020
Job Growth
2015 Avg.
Wage
Annual Wage
Growth 2020 Avg.
Wage
689, 10%
1,024, 16%
3,656, 56%
1,199, 18%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0-25% ($0-$39,104)25-50% ($39,104-$52,208)50-75% ($52,208-$66,066)75-100% ($66,066-$89,804)
Source: Economic& Planning Systems
Bozeman Economic and Market Update
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Economic Drivers
The regional workforce is highly skilled and well educated. Approximately 59.8
percent of Bozeman’s workforce has a bachelor’s degree or higher (Table 5). The
presence of MSU 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
choose to work and live.
Table 5. Educational Attainment, Bozeman, 2021
When compared to select peer cities, Bozeman has the highest percentage of its
population that has a bachelor’s degree, and the second highest percentage of its
population that has a bachelor’s degree or higher, second only Boulder, Colorado.
Description Bozeman Billings Missoula Fort Collins Boulder Bend
High School or Less, No Diploma 1.9%4.7%3.2%3.2%2.6%4.0%
High School Grad or Equivalent 12.4%28.3%17.9%15.0%5.9%17.0%
Some College, No Degree 19.9%21.6%20.1%16.6%10.0%22.9%
Associate's Degree 6.0%8.4%8.4%8.2%3.7%10.2%
Bachelor's Degree 38.8%26.2%32.0%32.8%36.9%28.0%
Grad/Prof. Degree 21.0%10.7%18.4%24.1%40.9%17.8%
Total 100.0%100.0%100.0%100.0%100.0%100.0%
Bachelor's Degree or Higher 59.8%36.9%50.4%57.0%77.8%45.8%
Source: U.S. Census; ESRI Business Analyst; Economic & Planning Systems
Percent of Total Population
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3. Commercial Real Estate
This chapter provides an overview of the commercial real estate trends and
conditions in Bozeman and Gallatin County. This analysis includes a summary of
the total inventory, rental rates, and vacancy rates. Commercial real estate data
comes from CoStar which, in Bozeman, does not include a complete inventory but
is useful for general trends and information on market conditions.
Office Market Trends
From 2010 to the fourth quarter of 2021, total office space in Gallatin County grew
by 657,484 square feet, or an annual average of 59,771 square feet (Table 6).
The City of Bozeman is the office space center in the County, with over 90 percent
of office inventory in 2021. In addition, Bozeman captured nearly 88 percent of
new office development since 2010.
Rental rates in Bozeman increased steadily over the past decade by a total of
$9.59 per square foot, and as of the fourth quarter of 2021, reached an average
of $20.94 per square foot. Average vacancy rates for office space in Gallatin
County and Bozeman have remained under 4.2 percent over the past decade, as
a majority of properties in Bozeman have reached stabilization. As of the fourth
quarter of 2021, average vacancy in the County averaged 3.8 percent, while
vacancy in the City was slightly higher, at 4.2 percent.
Table 6. Office Summary
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 2,490,762 2,561,763 3,046,337 3,067,513 576,751 52,432 1.9%
Gallatin County 2,720,990 2,871,924 3,357,298 3,378,474 657,484 59,771 2.0%
Pct. Of County 91.5%89.2%90.7%90.8%87.7%
Avg. Rent
Bozeman $11.35 $15.29 $21.09 $20.94 $9.59 $0.87 5.7%
Gallatin County $11.39 $15.00 $21.06 $20.90 $9.51 $0.86 5.7%
Avg. Vacancy
Bozeman 3.0%3.7%3.6%4.2%1.2%0.1%3.1%
Gallatin County 3.0%3.3%3.4%3.8%0.8%0.1%2.2%
Source: CoStar; Economic & Planning Systems
2010-2021
Bozeman Economic and Market Update
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Recent office construction in Bozeman has generally been concentrated to the west of the
city along Hwy. 191, and to the northeast, along I-90. Notable deliveries since 2018
include the 26,300 square foot AED building (software development) that came online in
early 2020 along Hwy. 191. In addition, a 17,305 square foot office building in northeast
Bozeman delivered along Hwy. 191 in 2019. The building has strong access to I-90 and is
occupied by Payne West Insurance. Other notable projects are detailed below.
Industry – Industry is an 87,000
square foot collaborative workspace
and incubator building proposed by
the developer of Industry in the
River North neighborhood in
Denver, CO. This is one of the
largest proposed office buildings in
Bozeman. The project will bolster
MSU’s 42-acre Innovation Campus,
with goals of providing workplace
innovation and creating open
collaboration between local and
national enterprise in conjunction
with MSU.
Cannery District – In addition, the
Cannery District project is
underway with approximately
111,000 square feet of office and
retail space available to rent along
Oak and Rouse Avenue. The project
includes the 52-unit Cannery Flats
multifamily project, which delivered
in 2020.
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Industrial/Flex Market
From 2010 to the fourth quarter of 2021, industrial space in Gallatin County grew
by 437,046 square feet, or an average of 39,731 square feet (Table 7). Over the
past decade, Bozeman captured just 37.2 percent of industrial growth in the
county, as lower land costs outside the city are attractive to some types of
heavier industrial uses. There is still a market in Bozeman however for higher
value industrial uses and flex/R&D space, especially for companies that want the
Bozeman location and City’s robust municipal infrastructure and amenities.
Table 7. Industrial Summary, Gallatin County, 2010-2021
Over the past decade, rents grew by 4.5 percent annually in Gallatin County,
while Bozeman experienced modest rental growth of 1.0 percent. As of the fourth
quarter of 2021, industrial rents in Bozeman averaged $10.43 per square foot and
$11.29 in Gallatin County. Vacancy for both the City and County has generally
decreased since 2012 and remained under 4.0 percent since 2015.
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 1,509,654 1,521,993 1,672,228 1,672,228 162,574 14,779 0.9%
Gallatin County 2,589,125 2,603,264 2,975,171 3,026,171 437,046 39,731 1.4%
Pct. Of County 58.3%58.5%56.2%55.3%37.2%
Avg. Rent
Bozeman $9.35 $6.12 $10.64 $10.43 $1.08 $0.10 1.0%
Gallatin County $6.96 $5.70 $10.98 $11.29 $4.33 $0.39 4.5%
Avg. Vacancy
Bozeman 3.6%2.5%0.8%0.6%-3.0%-0.3%-15.0%
Gallatin County 3.6%3.7%0.5%1.7%-1.9%-0.2%-6.6%
Source: CoStar; Economic & Planning Systems
2010-2021
Bozeman Economic and Market Update
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Notable sites that could drive industrial development include Pole Yard, North
Park, and Nelson Meadows, as detailed below:
Pole Yard Urban Renewal District – An 87-acre
site located between Interstate 90 corridor and
Montana Rail Link right-of-way. Portions of the site
include a partially delisted Superfund site owned
by the Idaho Pole Company. There are
environmental restrictions that limit residential
development at the property, and any restrictions
must be approved by the EPA and Montana
Department of Environmental Quality (DEQ).
Nevertheless, the site could still foster commercial
development activity in the future.
North Park Urban Renewal District – A 275-
acre area in north Bozeman east of I-90 and west
of Frontage Road. The site is currently vacant, but
previous plans at the site have included 790,000
square feet of light industrial space and nearly
500,000 square feet of flex space.
Nelson Meadows Business Park – A master
planned commercial subdivision located in
northwest Bozeman at the corner of Nelson Road
and Frontage Road. The site is comprised of 27
building lots that vary in size from 0.7 acres to
5.27 acres. The site has direct access to I-90 and
is zoned M-1 for Light Manufacturing. As of
December 2021, 23 of the 27 lots were under
contract or sold.
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Retail Market
The City of Bozeman is the regional trade hub for Gallatin County and a roughly
50 mile radius. The City has over 85 percent of the County’s retail inventory as of
the fourth quarter of 2021 (Table 8). In addition, nearly 93 percent of retail
space that delivered in Gallatin County since 2010 was in Bozeman.
Table 8. Retail Summary, Gallatin County, 2010-2021
Average rents for retail space in the City currently average $22.31 per square
foot, slightly higher than rents witnessed in the broader County, which recorded
at $22.06 per square foot. Rents in the City and County have both grown steadily
since 2010, growing by 3.1 percent and 3.0 percent respectively. Average
vacancy for retail space in Bozeman has been notably low since 2010, and
averages 2.2 percent as of the fourth quarter of 2021.
There are a wide variety of national grocery chains, big box retailers, and smaller
local stores. There are eight full service supermarkets (including the Walmart
Supercenter, and a Whole Foods currently under construction) in Bozeman plus
several smaller specialty food stores and independent grocers such as the
Community Food Co-op. Recent deliveries include the 75,000 square foot Winco
that delivered in early 2021, and a 50,000 square foot Costco expansion.
Bozeman also has several national general merchandise and home improvement
anchor retailers including Costco, Target, Home Depot, Lowes, Kohls, and Macy’s.
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 4,501,345 4,835,713 5,032,178 5,032,178 530,833 48,258 1.0%
Gallatin County 5,337,650 5,706,258 5,909,458 5,909,458 571,808 51,983 0.9%
Pct. Of County 84.3%84.7%85.2%85.2%92.8%
Avg. Rent
Bozeman $15.97 $13.65 $21.23 $22.31 $6.34 $0.58 3.1%
Gallatin County $15.99 $13.58 $21.00 $22.06 $6.07 $0.55 3.0%
Avg. Vacancy
Bozeman 1.8%3.3%1.6%2.2%0.4%0.0%1.8%
Gallatin County 1.9%2.9%1.5%1.9%0.0%0.0%0.0%
Source: CoStar; Economic & Planning Systems
2010-2021
Bozeman Economic and Market Update
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A major retail repositioning project underway is the redevelopment of the Gallatin
Valley Mall. Whole Foods will be a new anchor for the redevelopment, plus the
existing Macy’s, Barnes & Noble, Regal Cinemas, and JoAnn Fabrics. The
redevelopment strategy includes an additional 15,000 square feet of retail space,
with a general concept of creating public gathering space, a main street feel, and
a broad mix of tenants and entertainment.
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BOZEMAN RETAIL INVENTORY
DESCRIPTION
STORE
TYPE AVG.
SQ.FT. DESCRIPTION
STORE
TYPE AVG.
SQ.FT.
Supermarkets and Grocery Stores Shoppers’ Goods
Walmart Supercenter 220,000 Costco Wholesale 150,000
WinCo 85,000 Target 120,000
Town & Country Foods (2 stores) 70,000 Kohls 60,000
Safeway 65,000 Macy's 50,000
Albertsons 65,000 Sportsman's Warehouse 50,000
Smith's 50,000 Wholesale Sports 50,000
Rosauers 50,000 Dollar Spree 50,000
Whole Foods (Under Construction) 30,000 Dollar Tree 50,000
Huckleberry's Natural Market 20,000 REI 25,000
Heebs East Main Grocery 10,000 T.J. Maxx 20,000
Community Food Co-op 10,000 Ross 20,000
Other Shopper's Goods Sears
Gallatin Valley Furniture 35,000 JCPenney 20,000
Barnes and Noble 20,000 Play it Again Sports 20,000
Office Depot 20,000 Gap Outlet 10,000
Staples 20,000 Joann 10,000
Petco Animal Supplies 20,000 White House Black Market 10,000
PetSmart 20,000 Building Material and Garden
Mattress King 10,000 The Home Depot 150,000
Lowe's Home Improvement 150,000
Kenyon Noble Lumber and Hardware 100,000
Murdoch's Ranch & Home Supply 50,000
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4. Housing
This chapter provides an overview of the housing market in Bozeman. It
summarizes building permit trends, home prices, the rental market, and key
affordability indictors.
Construction
Between 2014 and 2020, the City of Bozeman issued approximately 5,600
residential building permit units (Table 9) which is an average of 800 per year
since 2014. 2020 was the highest year with 945 new construction permits issued.
Bozeman has a high percentage of multifamily and condominium construction at 62
percent over this time period. This trend is driven by student demand, young
workforce demand, and investor and second homeowner demand. Bozeman is
popular among affluent people who visit Big Sky frequently or own a home there
and wish to have a jumping off point close to the airport and to experience
Bozeman city life.
Table 9. Bozeman Building Permit Unit Trends
Description 2014 2015 2016 2017 2018 2019 2020 Total Avg.%
Single Family 252 263 300 350 229 167 150 1,711 244 30.5%
Multifamily /Condo 350 497 356 420 593 546 734 3,496 499 62.4%
Townhome 73 22 73 53 37 78 61 397 57 7.1%
Total 675 782 729 823 859 791 945 5,604 801 100.0%
Source: Economic & Planning Systems
2014-2020
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Housing Prices
Greater Bozeman has seen unprecedented appreciation in home prices. The
largest increases occurred between 2020 and 2021 (YTD) with an almost 30
percent increase (Table 10). The median home price in the city is now about
$700,000 compared to $359,500 in 2016. This rapid increase is likely not
sustainable as it is related to amenity migration away from large metro areas
during the COVID-19 pandemic. However, Bozeman has seen steady and rapid
appreciation over the past six years averaging 14.4 percent per year on the
average sale price. The surrounding communities and entire county have also
experienced similar trends with prices essentially doubling over the past six years.
The increase in prices has serious implications for affordability and workforce
attraction and retention and quality of life. From an investor standpoint it
indicates robust demand, tight supply, and opportunities to develop in a strong
market. The City is interested in ways to increase the housing supply responsibly
in a way that maintains community character.
Table 10. Home Price Trends, 2016-2021
Description 2016 2017 2018 2019 2020 2021 Total Ann. %YTD Oct.
Median Sales Price
Bozeman $359,500 $381,500 $427,500 $460,000 $540,000 $700,000 $340,500 14.3%
Belgrade $255,000 $287,250 $320,000 $340,950 $375,000 $520,000 $265,000 15.3%
Greater Manhattan $280,000 $307,000 $389,000 $416,000 $564,750 $620,000 $340,000 17.2%
Gallatin County $310,000 $331,150 $374,660 $397,500 $439,900 $675,000 $365,000 16.8%
Average Sales Price
Bozeman $399,912 $425,992 $478,343 $513,704 $590,742 $784,355 $384,443 14.4%
Belgrade $283,624 $322,039 $361,505 $390,600 $423,023 $629,816 $346,192 17.3%
Greater Manhattan $338,831 $373,322 $426,166 $463,858 $667,156 $777,303 $438,472 18.1%
Gallatin County $391,363 $435,596 $493,734 $536,359 $672,724 $972,050 $580,687 20.0%
Source: Gallatin Association of Realtors; Economic & Planning Systems
2016-2021
Bozeman Economic and Market Update
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Apartment Market
Apartment and other commercial real estate market information comes from the
CoStar database, a national real estate data subscription service. CoStar became
more active in the Bozeman market about five years ago and has basic market
information but may not capture the full inventory. In addition, CoStar focuses on
“investment grade” properties and may exclude smaller and lower value assets.
CoStar reports about 3,600 apartment units (in apartment buildings; does not
include all rented housing units) and inventory growth of about 100 units per year
on average (Table 11). The market has had consistently low vacancy since 2010
when the vacancy rate was under 5.0 percent. In 2021 the vacancy rate is
reported at 2.1 percent, which indicates that the market is undersupplied with
rental housing. More supply is needed to provide more housing to the labor force
and to ease pressure on rising rental rates.
Table 11. Multifamily Summary, Gallatin County
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 2,507 2,963 3,620 3,620 1,113 101 3.4%
Gallatin County 3,047 3,516 4,189 4,189 1,142 104 2.9%
Pct. Of County 82.3%84.3%86.4%86.4%97.5%
Avg. Rent (per sq.ft.)
Bozeman $1.19 $1.30 $1.55 $1.72 $0.53 $0.05 3.4%
Gallatin County $1.18 $1.29 $1.53 $1.70 $0.52 $0.05 3.4%
Avg. Rent (monthly)
Bozeman $1,079 $1,175 $1,400 $1,557 $478 $43 3.4%
Gallatin County $1,060 $1,153 $1,376 $1,526 $466 $42 3.4%
Avg. Vacancy
Bozeman 4.4%5.9%4.2%2.2%-2.2%-0.2%-6.1%
Gallatin County 4.2%5.5%3.8%2.1%-2.1%-0.2%-6.1%
Source: CoStar; Economic & Planning Systems
2010-2021
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Between 2015 and 2020 approximately 650 units were added to the inventory,
most of which are in the five new projects listed below (Table 12).
Table 12. Recent Multifamily Development Summary, Bozeman
Four luxury projects have come online with rents of approximately $2,300 to
$2,600 per month which is about $1,000 above the market average indicating
that the Bozeman market can support high end product. The Icon Apartments
have large units (2 bedroom ranges from 1,000 to 1,200 sq. ft.) with amenities
such as a pool and fitness center. The One 11 Lofts and Black Olive properties are
mixed use apartments in Downtown Bozeman. Creekside is a more conventional
property located in a retail district near North 19th Ave and I-90.
Name Address Year Built Units
Per Unit
Notable Deliveries
Icon Apartment Homes 4555 Fallon St 2020 216 $2,341
Creekside Apartments 3266 N 27th Ave 2020 142 $1,744
One 11 Lofts 111 W Lamme St 2020 55 $2,577
Black Olive 110 E Olive St 2019 47 $2,565
Total/Average 460 $2,307
Source: CoStar; Economic & Planning Systems
Avg. Effective Rent
Icon Apartments One 11 Lofts
Black Olive Apartments
Creekside Apartments
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Affordability
The rapid increases in housing prices has priced many people out of the market.
In 2016, a household earning about 120 percent of the HUD area median income
(AMI) could afford the median priced home. In 2020, a household needed to earn
171 percent of AMI to afford a median priced home and 219 percent of AMI in
2021. The combination of a shortage of inventory, a spike in construction costs,
and pandemic related migration have driven up housing prices sharply. Increasing
the supply of housing will be important to addressing the shortage of attainable
and affordable housing.
Table 13. Required Annual Income to Afford Median Home Price, 2016-2021
In 2016 the income levels needed to afford the median priced home were at 80 to
100 percent of AMI (Figure 6). In 2021 there are income gaps at all AMI levels
below about 220 percent of AMI. Households earning 150 percent of AMI
($103,880) would still need to earn another $38,000 per year to afford the
median priced home (Figure 7).
Bozeman Factor 2016 2017 2018 2019 2020 2021
YTD Oct
Median Home Price $359,500 $381,500 $427,500 $460,000 $540,000 $700,000
Mortgaged Amount (less: downpayment)5.0% down pmt $341,525 $362,425 $406,125 $437,000 $513,000 $665,000
Mortgage Interest Rate 4.5% int.4.5% int.4.5% int.4.5% int.4.5% int.4.5% int.
Loan Term 30-years 30-years 30-years 30-years 30-years 30-years
Monthly Costs
Mortgage Payment (Monthly)$1,730 $1,836 $2,058 $2,214 $2,599 $3,369
Less: Insurance $1,500 / Year $125 $125 $125 $125 $125 $125
Less: Property Taxes 0.9%$270 $286 $321 $345 $405 $525
Less: Miscellaneous $500 / Year $42 $42 $42 $42 $42 $42
Total Monthly Housing Costs $2,167 $2,289 $2,545 $2,726 $3,171 $4,061
Required Annual Income 30%$86,670 $91,566 $101,803 $109,035 $126,838 $162,445
AMI for Family of 4 117%123%137%147%171%219%
[1] rounded to nearest major AMI category
Source: US Census; Economic & Planning Systems
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Figure 6. Income Gap to Afford Median Priced Home, Bozeman, 2016
Figure 7. Income Gap to Afford Median Priced Home, Bozeman, 2021
In housing policy, a household is defined as cost burdened when they are paying
more than 30 percent of their income towards rent or mortgage payments.
Among renters there is a large amount of cost burdened households – more than
half of all renters. About a quarter of Bozeman homeowners are cost burdened
and the American Community Survey estimates these households declined slightly
from 2010 through 2019. The data mostly reflect people who already own their
homes and have not caught up with new buyers in the market at the higher prices
noted above.
$59,360
$74,200
$89,040
$103,880
$27,310 $12,470
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
80%100%120%150%
AMI (2.5-person household)
AMI (4-person household)Gap
Source: U.S.Census; Economic & Planning Systems
$86,670 Income Required to Afford Median Home Price (2016)
$71,120
$88,900
$106,680
$124,460$91,325 $73,545 $55,765 $37,985
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
80%100%120%150%
AMI (2.5-person household)
AMI (4-person household)Gap
Source: U.S.Census; Economic & Planning Systems
$162,445 Income Required to Afford Median Home Price (2021)
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Housing Demand
In this section, a housing demand projection is provided to inform the City as well as
real estate interests on the growth potential and need in Bozeman. The projection
links job growth to housing demand and estimates that the City needs nearly 900
housing units annually (Table 14) just to keep up with job growth at 2.0 percent
per year (compared to 2.8 percent annual growth over the past five years).
However, there are other strong market demand drivers that need to be accounted
for. The degree of price appreciation seen indicates that there are external factors
at work that are constraining the supply of housing. These factors are difficult to
account for as they are not apparent in the available housing and economic data.
First, because Bozeman is becoming more of a destination for second homeowners
and part time residents an additional 10 percent is added to the demand
estimate. Second, remote worker in-migration is occurring. There is no data
available today that tracks remote workers because their paychecks are
associated with the physical off location of their job. We have added another 10
percent to the demand projections.
In total, we estimate that the City can support demand for over 1,000 housing
units per year (Table 14). A potential housing mix based on past construction
and goals of supporting small homes and infill construction is suggested as well
(Table 15).
Table 14. Bozeman Housing Demand Projection
Description Factor 2020 2030 Total Annual
Total Jobs - Gallatin County 2.5%94,550 121,030 26,480 2,648
Less: Proprietor Jobs Overcount [1]-10.0%-9,460 -12,100 -2,640 -264
Employed People 1.10 jobs/empl.77,355 99,027 21,673 2,167
Employed Households 1.30 jobs/household 59,500 76,170 16,670 1,667
Normal Vacancy Adjustment 5%3,130 4,010
Housing Units - Gallatin County 62,630 80,180 17,550 1,755
Baseline Demand - Bozeman
Bozeman Market Share 50.0%31,320 40,090 8,770 877
Other Market Influences
Part Time Residence Adjustment 10%974
In-migration and remote worker adjustment 10%1,083
[1] Counting of partnerships and LLCs in Bureau of Economic Analysis data often results in double counting of employees.
Source: Economic & Planning Systems
2020-2030
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Table 15. Bozeman Housing Demand Projection
Description Factors 2020-2025 2026-2030 Total Annual
New Unit Demand in Bozeman 1,083/yr.5,414 5,414 10,827 1,083
Bozeman Construction Projection
Single-Family (Detached)35.0%1,895 1,895 3,790 379
Townhome/Triplex/Duplex 30.0%1,624 1,624 3,248 325
Multifamily 35.0%1,895 1,895 3,790 379
Total 100.0%5,414 5,414 10,827 1,083
[1] Mobile homes and other miscellaneous housing types are not included
Source: Economic & Planning Systems