Idaho Cooling Costs Reveal a Bigger Housing and Commercial Real Estate Challenge

When thousands of Idaho households are choosing between a comfortable home and a lower electric bill, the issue goes beyond the thermostat.

It points to a larger affordability challenge involving housing costs, energy efficiency, building quality, and household spending. Those same pressures can eventually affect Boise commercial real estate, from retail sales and restaurant traffic to apartment development and operating costs.

According to reporting by IBR Staff in the Idaho Business Review, more than 63,000 lower-income Idaho households regularly reduce or stop using air conditioning to save money. The findings come from research by Advance America using U.S. Census Bureau data. You can read the original Idaho Business Review article here.

Energy Costs Are Becoming Part of the Affordability Conversation

The study looked at households earning less than $50,000 annually and found that roughly one-third of those Idaho households limit their use of air conditioning.

The research also estimated that affected households go without cooling for an average of 11 nights per month.

This isn’t unique to Idaho. Nearly 13 million households nationwide reportedly reduce air-conditioning use because of cost concerns. But the Idaho numbers are worth watching because they add another layer to the affordability discussion taking place across the Treasure Valley.

Housing affordability usually focuses on rent, mortgage payments and home prices. Those costs obviously matter, but they aren’t the entire picture.

What matters to a household at the end of each month is its total cost of living.

That includes electricity, transportation, food, insurance, healthcare and other necessities. A household might technically be able to make its rent payment while still feeling squeezed by everything surrounding it.

That distinction also matters for real estate.

Why This Matters for Boise Commercial Real Estate

The connection between an air-conditioning study and commercial real estate may not be obvious at first.

Follow the household budget, however, and the relationship becomes much clearer.

The research found that some households are changing other spending habits to afford cooling. About 31% reported reducing takeout food purchases, while 19% said they cut back on clothing purchases.

Those choices matter to businesses occupying commercial space.

Restaurants, clothing stores and other discretionary retailers depend heavily on the amount of money consumers have left after paying for housing and necessities.

If utilities, rent, insurance and food consume more of the household budget, there is less money available for restaurants, entertainment and retail.

For professionals involved in retail leasing Boise, that means affordability should be considered alongside traditional measures such as population growth, household income and traffic counts.

A growing trade area isn’t automatically a stronger trade area if household expenses are rising just as quickly.

Retailers Need Disposable Income, Not Just Rooftops

Boise development has benefited tremendously from population growth.

New rooftops create demand for grocery stores, restaurants, fitness concepts, medical providers and neighborhood services. That’s one reason commercial development has followed residential growth throughout Meridian, Kuna, Star, Nampa and other Treasure Valley communities.

But developers and landlords should pay attention to what happens after those residents move in.

Consider a household facing higher costs for:

• Housing
• Electricity
• Insurance
• Transportation
• Groceries
• Childcare
• Healthcare

Each additional expense competes for the same paycheck.

That doesn’t mean Boise retail demand suddenly disappears. It means site selection and tenant underwriting need more depth than simply saying an area added thousands of new residents.

The strongest retail locations will generally combine population growth with solid incomes, convenient access and enough discretionary spending to support tenants over the long term.

Energy Efficiency Is Also a Real Estate Issue

There’s another side of this story that applies directly to property owners and developers: the building itself matters.

Air conditioning is one of the largest seasonal demands placed on many buildings. Poor insulation, aging mechanical equipment, inefficient windows and older construction can increase cooling costs substantially.

That applies to residential and commercial properties.

For Boise commercial real estate investors, energy efficiency can influence operating expenses, tenant satisfaction and ultimately the competitiveness of a property.

This becomes especially important with triple-net leases.

A tenant may focus heavily on base rent during negotiations, but its real occupancy cost can include CAM charges, taxes, insurance, utilities and other expenses.

Two buildings with similar asking rents can therefore produce very different total occupancy costs.

As utility and operating expenses receive more attention, landlords who invest in efficient HVAC systems, insulation, controls, roofing and other building improvements may have another tool for attracting and retaining tenants.

For developers, designing efficient buildings from the beginning can also help protect future tenants from unpredictable operating costs.

Boise’s Growth Makes the Issue More Important

Idaho’s climate creates an interesting challenge.

Many people associate extreme air-conditioning expenses with places such as Texas or Florida. Yet the study found lower rates of AC cutbacks among lower-income households in several traditionally hot southern states.

Texas was reported at 18%, Florida at 19%, Alabama at 21% and Louisiana at 24%.

Idaho, by comparison, was around one-third.

The study found some of the highest rates in parts of the Northeast, Midwest and Mountain West.

That is worth considering as the Treasure Valley continues to grow.

Boise isn’t Phoenix, but summer heat can still place significant demands on buildings. As more people move here and more homes, apartments, offices and retail projects are constructed, energy efficiency becomes part of the region’s long-term infrastructure discussion.

New construction standards, HVAC design and building materials aren’t just technical decisions. They eventually become operating-cost decisions for whoever occupies the building.

Local Insight: Watch Total Occupancy Costs

From a Boise commercial real estate perspective, the biggest takeaway isn’t really about air conditioning.

It’s about affordability.

Residential tenants think about total monthly living costs. Businesses think about total occupancy costs. Investors think about operating expenses and net operating income.

The principle is essentially the same.

A retail tenant doesn’t care only about asking rent if utilities and CAM expenses make the location too expensive to operate. Likewise, a household doesn’t care only about rent if electricity, transportation and food leave very little money at the end of the month.

That’s why I think energy costs deserve more attention in commercial property analysis.

For landlords, an efficient building may become a stronger leasing advantage.

For tenants, understanding historical utility expenses before signing a lease can help prevent unpleasant surprises.

For investors, older HVAC systems and inefficient buildings should be considered when evaluating future capital expenditures.

And for developers, energy-efficient construction may help differentiate new projects as businesses become increasingly focused on total occupancy costs.

The Bigger Boise Real Estate Picture

Idaho’s population growth continues to create opportunities for developers, investors and businesses.

But growth alone doesn’t guarantee stronger real estate fundamentals.

The health of a commercial market ultimately depends on whether households and businesses can afford to participate in it.

More than 63,000 Idaho households limiting their air-conditioning use is one small window into that larger affordability equation.

For Boise commercial real estate, the lesson is worth remembering: household budgets eventually reach commercial properties.

When consumers have more disposable income, retailers and restaurants generally have more room to grow. When operating costs remain manageable, businesses can support stronger rents. And when buildings operate efficiently, owners and tenants are both better positioned for the long term.

As Boise development continues across the Treasure Valley, affordability and energy efficiency shouldn’t be viewed only as residential issues.

They’re becoming part of the commercial real estate conversation too.

Mike Gioioso (joy-OH-so) has for 16+ years been helping companies of all sizes buy, build, and lease perfect places for business in greater Boise, Idaho and beyond.
www.streetsmartidaho.com mike@streetsmartidaho.com 208-209-9166

Tags: #boisecommercialrealestate, #boisedevelopment, #idahocommercialrealestate, #retailleasingboise, #boiseretailrealestate, #treasurevalleycommercialrealestate, #energycostsidaho, #boisehousingaffordability, #commercialpropertyoperatingcosts, #boiseretailleasing, #energyefficientbuildings, #idahodevelopment, #boiseinvestmentproperty, #treasurevalleydevelopment, #commercialrealestateinvestment