There is the Rocky Mountain West they show in the movies: cowboys and elk, jagged peaks, endless plains, and all those wide-open spaces. Yeah, we got that stuff, but the West we actually live in has more than most people realize: great local breweries and funky downtowns, guys with tremendous beards, thriving start-up industries and the occasional spelling bee champ.

The same holds true for our commercial real estate market: there are a few things you’d expect, and a few things that set us apart.

A new study from the Sonoran Institute’s Community Builders initiative, which examines land-use issues in the Rocky Mountain West, takes a detailed look at the commercial real estate market with these ideas in mind. The report, called, “RESTORE: Commercial and Mixed-Use Development Trends in the American West,” assesses everything from online shopping to demographic preferences to gauge where commercial markets are heading, and what towns like Bozeman can do to capitalize on the information (Read the report and more at www.communitybuilders.net/restore.)

“The national trends have been well documented by the National Association of REALTORS, and others,” said Randy Carpenter, Director of the Sonoran Institute’s Northern Rockies office in Bozeman. “Their studies show a growing demand for mixed-use, walkable commercial developments, particularly in downtown areas.

“That was very encouraging to see, because there’s loads of evidence that creating places that mix uses also make a strong contribution to a thriving economy. But we were curious – is that sort of development viable in our geography?”
It turns out that yes, it’s viable in the Rocky Mountains, too.

“If you’re a developer or investor in McCall, Idaho, you’re going to react to these trends in a different way that if, say, you were in Fort Collins, Colorado,” Carpenter said. “This isn’t a one-size-fits-all situation, but at the same time there are sensible things that folks can do to put themselves on strong economic footing.”

The RESTORE study analyzed 32 towns and small cities throughout the West and classified them into three tiers (A, B, and C), based on their market potential to support different types of mixed-use development. These communities are representative of the Intermountain West as a whole, so that, even if your town isn’t included, you can still find a comparable neighbor who was part of the study.

Gen Y, Baby Boomers, and the rise of online shopping
No matter how you slice it, shopping isn’t what it used to be before the internet came along. As RESTORE points out, more than two-thirds of internet users in the US say they have made a purchase online, and 68 percent of internet users say that using the internet saves them time.

Early on, this created a lot of fuss and fear in the retail sector, but as online shopping has taken hold, retailers have found that shoppers still love to shop at brick-and-mortar stores – they just shop differently. As an Urban Land Institute study discovered, more shoppers in key demographics are seeking a complete shopping experience.

Shoppers, it seems, want to be within easy walking distance of other activities during their shopping day.

The same holds true for office workers, who increasingly want to be able to walk or bike to work, or at least shave some time off that commute. Among the many reports that confirm this trend is the Sonoran’s RESET report, a 2013 report that analyzed residential market trends (www.communitybuilders.net/reset).

RESTORE shows how these trends have created a “right-sizing” phenomenon in retail outlets throughout the country, leading to smaller store sizes in mixed-use buildings. It’s also spurred some developers to take a closer look at the benefits of building mixed-use, rather than single-use, developments.

RESTORE indicates that in smaller, slow growing communities, smaller, Main Street mixed-use developments or historic restoration are the most likely to succeed.

In larger, faster growing communities characterized by higher income levels and a well-educated workforce, developers will have more flexibility to attempt more complex projects like vertical mixed use or complete neighborhoods.

In addition to matching the appropriate development type to the characteristics of the community, RESTORE recommends a variety of additional tools, like public-private partnerships, joint-ventures, creative use of government incentives for redevelopment and restoration, community engagement and more.

The report also recommends a few key strategies for developers and local governments: understanding the local market, efficiently communicating expectations, forming effective partnerships, and providing incentives for desired development.

Bozeman on the leading edge
Andy Holloran, founder of the development company HomeBase Montana, has read both the RESTORE report and its sister study, RESET, a 2013 analysis which focused on residential market trends. He said that the Sonoran Institute is keying in on trends that will have a strong impact on the future of the West as a whole and Bozeman in particular.

HomeBase has developed several projects in the Bozeman area. Some, like The Crossing and Southbridge, are so-called ‘typical’ suburban developments. Others, like Block M and a 104-room Element by Westin hotel, are the kind of mixed-use, downtown development that the RESTORE report indicates are on the rise.

HomeBase is also in the early planning stages of a project currently titled “Mendenhall” that would add a mixed-use project to downtown Bozeman on the corner of Tracy and Mendenhall, a spot currently occupied by the American Federal Bank building. The plan currently allows for commercial retail and service on the first floor (including a new incarnation of the bank) plus 40,000 square feet of office space on floors 2-3, and residential on floors 4-5.

“I do think there is a trend, and it is not just Bozeman, of people wanting to live and work in more walkable neighborhoods,” Holloran said. “For example, from Block M you can walk to restaurants, bars, coffee shops, fitness centers, the library, and incredible shopping, and that’s pretty compelling.”

Holloran thinks downtown development can be mutually beneficial for businesses and city hall.

“As a city, we have these incredibly dynamic companies that are growing, and if we don’t find space for them, where are they going to go? They’re going to forced to locate to a more suburban location,” Holloran said. “From an employee perspective, they’re going to want to work downtown and enjoy all the benefits an urban setting has to offer. From an owner perspective, that will increase your chance of bringing in quality talent.”

Bozeman, Holloran said, is doing its part to be on the leading edge of the trend. In particular, he notes the Bridger Downtown parking garage as an investment that has catalyzed many of the downtown area’s revitalization efforts.

“The city has been really good to work with,” Holloran said. “They’ve been predictable, collaborative, and positive. And the Downtown Bozeman Partnership has been excellent as well.”

Barry Brown, who is redeveloping the Cannery District along with his partner Scott Dehlendorf, had “A” grades as well for the city and for the Downtown Bozeman Partnership. Although The Cannery District isn’t right square in the center of town, it does include a strong mixed-use component and fits within RESTORE’s recommendations.

Building such projects isn’t easy. Brown and Holloran agree that taking on mixed-use projects is more difficult, and complicated, than creating suburban-sprawl developments on new ground, far away from town centers.

“There are so many more anomalies and unknowns that present themselves in a redevelopment project like the Cannery District,” Brown said via email. “We try our best to vet them all out but it’s impossible to identify all of them. “

If a city can create a predictable, economically-minded environment, Brown said it can go a long way toward making a mixed-use, downtown core redevelopment happen.

“The city’s decision to hire Brit Fontenot as Director of Economic Development is a testament to the City’s fore site in understanding that it has to be proactive in attracting regional and national businesses to Bozeman,” Brown said. “Overall, the City had done a good job in balancing robust growth with the costs associated with that growth.”

Brown, Carpenter, and Holloran all agree that re-investing in downtown is good for Bozeman’s fiscal stability.

“I don’t think any community should take this suburban sprawl concept, and just allow development on an endless supply of land, because frankly you can’t service it from an infrastructure perspective,” Holloran said. “We in Bozeman, and any community, have to be smart and proactive about how we can handle suburban development in an appropriate and manageable way that we can service.”
Read the RESTORE study, and view other insights into Western land use and development at www.communitybuilders.net/restore   

Tom Boyd is a freelance writer living in Denver Colorado. His work has appeared in the Denver Post, the Rocky Mountain News, 5280 Magazine, and other publications throughout the Rocky Mountain West. He is also the managing editor of CommunityBuilders.net, a project of the Sonoran Institute.