Missoula, MT – Missoula’s economy, while currently enjoying an unemployment rate of just 3.2%, is beginning to show signs of strain, largely due to job losses in key sectors and the rapid rise in housing costs. According to the latest annual Market Watch report by Sterling CRE Advisors, the city’s economy still possesses the “right ingredients” to remain competitive on both regional and national levels. However, the local commercial real estate market could face a tough road ahead as housing prices continue to surge and key employers shutter their doors.
The closure of significant employers, such as Pyramid Mountain Lumber and Roseburg, has been a major blow to the city’s industrial sector. While Missoula has not experienced a net loss in jobs overall, the loss of export-focused jobs is expected to have a ripple effect across the economy. As Matt Mellott, managing partner at Sterling CRE, explains, the loss of these types of jobs could dampen population growth, which in turn would reduce demand for various types of real estate, including apartments, office spaces, and industrial properties.
Prior to the COVID-19 pandemic, Missoula’s population grew at a steady pace of 0.75% per year. However, during the pandemic, this growth rate spiked to 1.6%, putting significant pressure on the housing market. In 2019, the median price of a single-family home was around $332,000. By the end of 2024, that figure had jumped to a staggering $600,000, according to the Missoula Organization of Realtors.
Should the population growth return to pre-pandemic levels, the city could face a shortfall of up to 12,000 housing units over the next two decades. Mellott notes that while demand for new housing will persist, a return to slower growth could alleviate some of the strain on the housing market, potentially leading to a decrease in overall demand for residential and commercial real estate.
The continued escalation in housing costs presents an additional challenge. Sterling’s report highlights the difficulty employers face when considering expansion or relocation to high-cost markets, such as Missoula. Housing constraints are often a major deterrent for businesses looking to establish themselves in new areas. Commercial real estate, Mellott emphasizes, is driven by job growth—and with fewer export-focused jobs, both population and commercial growth may slow.
Despite these challenges, there are still signs of opportunity. While commercial development has slowed since 2022, there remains steady growth in the industrial sector. Vacancy rates in Missoula’s office market currently sit at 7.5%, while retail and industrial vacancy rates are at 3.2% and 5%, respectively. Sterling CRE Advisors reports that the city’s retail market is poised for expansion in 2025, especially due to Missoula’s appeal as a regional hub and tourist destination. Additionally, opportunities for high-end office space or redevelopment projects could favor landlords and sellers willing to invest in premium properties.
However, a potential shift in work patterns, such as increased remote work and return-to-office mandates, could further complicate the situation. As more remote workers leave the market, the overall demand for office space could diminish, adding another layer of uncertainty to the commercial real estate market.
Despite these hurdles, Mellott remains optimistic. “An out-of-balance housing market means there’s opportunities there for people to solve the pain of these high housing prices,” he said, pointing to the potential for innovative solutions in the real estate sector.
As Missoula grapples with these challenges, the balance between housing supply, job growth, and commercial development will be key to determining the future of its economy. While there are clear obstacles on the horizon, the city’s potential for growth and expansion remains undeniable, provided the right solutions are put in place to address the ongoing housing crisis and job market shifts.
