HomeMy WebLinkAbout21 - Bozeman Economic & Market Report Final VersionEconomic & Planning Systems, Inc.
The Economics of Land Use
Prepared by:Prepared for:
City of Bozeman, MT Economic Development Department
Report
Bozeman Economic and Market Update
December 14, 2021 EPS #213051
ii Bozeman Economic and Market Update
Table of Contents
2
3
4
1 City Snapshot and Summary 1
City Snapshot 1
Economy 7
Economic Trends 7
Wages 9
Economic Drivers 10
Commercial Real Estate 11
Office Market Trends 11
Industrial/Flex Market 13
Retail Market 15
Housing 17
Construction 17
Housing Prices 17
Apartment Market 19
Affordability 21
Housing Demand 22
Economic & Planning Systems, Inc iiiTablesFiguresTable 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 10
Table 5 Educational Attainment, Bozeman, 2021 11
Table 6 Office Summary 12
Table 7 Industrial Summary, Gallatin County, 2010-2021 14
Table 8 Retail Summary, Gallatin County, 2010-2021 16
Table 9 Bozeman Building Permit Unit Trends 18
Table 10 Home Price Trends, 2016-2021 19
Table 11 Multifamily Summary, Gallatin County 19
Table 12 Recent Multifamily Development Summary, Bozeman 20
Table 13 Required Annual Income to Afford Median Home Price, 2016-2021 21
Table 14 Bozeman Housing Demand Projection 23
Table 15 Bozeman Housing Demand Projection 23
Figure 1 Gallatin Valley Region 2
Figure 2 Private Wage and Salary Employment, Bozeman and Gallatin County, 2020 8
Figure 3 Employment Growth, Bozeman and Gallatin County, 2015-2020 8
Figure 4 Unemployment Rate, 2010-2021 YTD 9
Figure 5 Change in Employment by wage quartile, Gallatin County, 2015-2020 10
Figure 6 Income Gap to Afford Median Priced Home, Bozeman, 2016 21
Figure 7 Income Gap to Afford Median Priced Home, Bozeman, 2021 22
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
1. City Snapshot and Summary
Economic & Planning Systems, Inc 1
Table 1. Population and Housing Units, 2010-2020
2010-2020
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
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)
Figure 1. Gallatin Valley Region
2 Bozeman Economic and Market Update
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
2001-2020
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
•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
•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 medical offices
clustered around the hospital and located throughout 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
Economic & Planning Systems, Inc 3
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
Bozeman is compared to several other western cities with similar characteristics such
as Missoula, MT; Fort Collins, CO; Boulder, CO; Bend, OR; and Billings, MT to include one
of the largest cities in Montana (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
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
4 Bozeman Economic and Market Update
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
Economic & Planning Systems, Inc 5
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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 mgmt 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
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
Chart Title
Bozeman Gallatin
Source: Bureau of Labor Statistics; Economic& Planning Systems
2. Economy
Economic & Planning Systems, Inc 7
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
Figure 3. Employment Growth, Bozeman and Gallatin County, 2015-2020
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
Chart Title
Bozeman Gallatin
Source: Bureau of Labor Statistics; Economic& Planning Systems
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
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
Chart Title
Bozeman Gallatin County Montana
Source: BLSLAUS; Economic & Planning Systems
[link to source][link to source]
8 Bozeman Economic and Market Update
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
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
2015-2020
Job Growth
2015 Avg.
Wage
2020 Avg.
Wage
Annual Wage
Growth 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
Economic & Planning Systems, Inc 9
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
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
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
Percent of Total Population
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
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
10 Bozeman Economic and Market Update
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 705,416
square feet, or an annual average of 64,129 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 89 percent of new office development since 2010
Rental rates in Bozeman increased steadily over the past decade by a total of $9 49
per square foot, and as of the fourth quarter of 2021, reached an average of $20 84 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 2 0 percent, while vacancy in the City was slightly higher, at 2 2 percent
Table 6. Office Summary
Change 2010-2021
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 2,615,953 2,702,904 3,219,460 3,240,636 624,683 56,789 2.0%
Gallatin County 2,854,965 3,021,849 3,539,205 3,560,381 705,416 64,129 2.0%
Pct. of County 91.6%89.4%91.0%91.0%88.6%
Avg. Rent
Bozeman $11.35 $15.34 $21.08 $20.84 $9.49 $0.86 5.7%
Gallatin County $11.39 $15.05 $21.05 $20.81 $9.42 $0.86 5.6%
Avg. Vacancy
Bozeman 2.8%3.7%3.4%2.2%-0.6%-0.1%-2.2%
Gallatin County 2.8%3.3%3.2%2.0%-0.8%-0.1%-3.0%
Source: CoStar; Economic & Planning Systems
3. Commercial Real Estate
Economic & Planning Systems, Inc 11
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
12 Bozeman Economic and Market Update
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
2010-2021
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
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
Notable sites that could drive industrial development include Pole Yard, North Park, and
Nelson Meadows, as detailed below:
Economic & Planning Systems, Inc 13
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
14 Bozeman Economic and Market Update
Retail Market
The City of Bozeman is the regional trade hub for Gallatin County and a roughly 50 mile
radius The City has nearly 85 percent of the County’s retail inventory as of the fourth
quarter of 2021 (Table 8) In addition, over 90 percent of retail space that delivered in
Gallatin County since 2010 was in Bozeman
Table 8. Retail Summary, Gallatin County, 2010-2021
2010-2021
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 4,516,131 4,859,836 5,072,917 5,072,917 556,786 50,617 1.1%
Gallatin County 5,381,853 5,777,341 5,997,157 5,997,157 615,304 55,937 1.0%
Pct. of County 83.9%84.1%84.6%84.6%90.5%
Avg. Rent
Bozeman $15.97 $13.59 $21.23 $22.19 $6.22 $0.57 3.0%
Gallatin County $15.99 $13.52 $21.00 $22.19 $6.20 $0.56 3.0%
Avg. Vacancy
Bozeman 1.8%3.2%1.6%1.0%-0.8%-0.1%-5.2%
Gallatin County 1.9%2.7%1.5%1.0%-0.9%-0.1%-5.7%
Source: CoStar; Economic & Planning Systems
Average rents for retail space in the City currently average $22 19 per square foot,
matching the rents witnessed in the broader County Rents in the City and County have
both grown steadily since 2010, each growing by 3 0 percent Average vacancy for retail
space in Bozeman has been notably low since 2010, and averages just 1 0 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
Economic & Planning Systems, Inc 15
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
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
16 Bozeman Economic and Market Update
This chapter provides an overview of the housing market in Bozeman It summarizes
building permit trends, home prices, the rental market, and key affordability indicators
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
2014-2020
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
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 3
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
4. Housing
Economic & Planning Systems, Inc 17
Table 10. Home Price Trends, 2016-2021
2016-2021
Description 2016 2017 2018 2019 2020 2021 Total Ann. %
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 $535,000 $280,000 16.0%
Greater Manhattan $280,000 $307,000 $389,000 $416,000 $564,750 $640,950 $360,950 18.0%
Gallatin County $310,000 $331,150 $374,660 $397,500 $439,900 $685,000 $375,000 17.2%
Average Sales Price
Bozeman $399,912 $425,992 $478,343 $513,704 $590,742 $784,017 $384,105 14.4%
Belgrade $283,624 $322,039 $361,505 $390,600 $423,023 $631,343 $347,719 17.4%
Greater Manhattan $338,831 $373,322 $426,166 $463,858 $667,156 $809,283 $470,452 19.0%
Gallatin County $391,363 $435,596 $493,734 $536,359 $672,724 $997,747 $606,384 20.6%
Source: Gallatin Association of Realtors; Economic & Planning Systems
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 nearly 4,000 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 4 0 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
2010-2021
Description 2010 2015 2020 2021 Total Ann. #Ann. %
Inventory
Bozeman 2,580 3,048 3,825 3,935 1,355 123 3.9%
Gallatin County 3,125 3,606 4,403 4,513 1,388 126 3.4%
Pct. of County 82.6%84.5%86.9%87.2%97.6%
Avg. Rent (monthly)
Bozeman $1,133 $1,228 $1,464 $1,667 $534 $49 3.6%
Gallatin County $ 1,114 $1,206 $1,440 $1,635 $521 $47 3.5%
Avg. Vacancy
Bozeman 4.5%6.2%5.5%4.0%-0.5%0.0%-1.1%
Gallatin County 4.4%5.8%4.9%3.7%-0.7%-0.1%-1.6%
Source: CoStar; Economic & Planning Systems
18 Bozeman Economic and Market Update
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
Name Address
Year
Built Units
Avg. Effective Rent
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
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
Icon Apartments One 11 Lofts
Black Olive Apartments Creekside Apartments
Economic & Planning Systems, Inc 19
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)
Figure 6. Income Gap to Afford Median Priced Home, Bozeman, 2016
$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)
Z:\Shared\Projects\DEN\213051-Bozeman MT TIF Econ Dev Support\Data\[213051-Income Affordability_09-28-21.xlsx]T-AMIGap
Bozeman Factor 2016 2017 2018 2019 2020 2021
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
20 Bozeman Economic and Market Update
Figure 7. Income Gap to Afford Median Priced Home, Bozeman, 2021
$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)
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
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
Economic & Planning Systems, Inc 21
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
2020-2030
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
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
22 Bozeman Economic and Market Update