MISSOULA — Commercial real estate is one of the backbones that make up the economy at large.
Here in Missoula, the commercial real estate market continues to move towards stabilization after the pandemic.
But, not everything is coming up roses.
“Steady but cautious. Like steady, with something,” Matt Mellot, managing principal at Sterling Commercial Real Estate, said.
Mellot helped present a state of commercial real estate report on Tuesday at Sterling Commercial Real Estate’s Market Watch.
The report touched on the current market state for offices, commercial, industrial, multi-family buildings and land.
To get the full picture of the market, it’s important to first look at the overall economic state of Missoula.
According to Sterling Commercial Real Estate, as of November 2025, Missoula’s unemployment rate sat at 3.1%, with the average weekly wage coming in at $1,160.
Total employment in Missoula did slightly fall in 2025 however, but just by under 1%.
Most of the job losses came from manufacturing, hospitality and professional services, while healthcare continued to grow.
With that economic background, Mellot says that it led to a more concrete equilibrium of the market as a whole, with some caveats.
“If you're not in a boom-bust cycle, it's stable. It's just not as... From this standpoint of new things coming to the market are slower to get here because it's hard to make the numbers come to life,” Mellot said.
Different sectors of the commercial real estate market moved in different directions in 2025.
For office spaces, vacancy barely moved, sitting at 7.66%. Rent per square foot increased by nearly 3%, landing at $19.32 per square foot. The sale price of office spaces also increased by 8%, with the average sale price coming out to $233 per sq ft. But the size of office spaces sold significantly decreased, with the average sale size landing at 3,800 square feet, or a 46% decrease from 2024.
For retail spaces, the vacancy rate saw little change, sitting at 3.87% by the end of 2025. Rent for retail spaces significantly dropped, seeing a nearly 20% decrease, landing at $19 per square foot. Sale prices of these spaces also took a significant hit, with the average sale coming out to $295 per square foot, or a 17.5% decrease.
Industrial real estate saw the biggest mix-up in 2025, with companies like UFP in Milltown and Yellowstone moving out of their spaces. For that reason, vacancies jumped 9.33%, landing at a total vacancy rate of 14.4%. The size of the spaces sold decreased by 44%, with the price per square foot landing at $158.
Multifamily dwellings saw an increase in the average rent, jumping 10.5% to just over $1,530 per month. But, the sale price of such properties dropped by nearly 20%, landing at $154,700 per unit.
Finally, commercial land saw a bit of a boom in 2025, with a 300% increase in sales (ending at 16 total sales in 2025) and the average price per square foot finishing at $6.38. But, the average lot size in the sales saw a huge dip, decreasing in size by 76%, down to 6.8 acres from 28.4 acres.
Mellot says that the biggest risk to the market’s stability right now comes from the national level, with investors and property owners looking at the financing costs.
The cost of lending directly coincides with the national debt, something that Mellot says needs to be addressed in some capacity.
“When the debt is through the roof, the bottom line is it results in inflation. It's a main contributor to inflation happening and then inflation is killer. It hurts the personal working class, it hurts, it’s the worst thing you can do. You're basically taxing them through devaluing their money. And so that's the reason why,” Mellot said.
Overall, while the commercial real estate market in Missoula is in a good spot, there are still problems that need to be addressed in 2026. Mellot points to the recent shift in property taxes, which raised some of his cilents' taxes by 50%.
“What I'm hoping for is that the state takes some initiative and shows some leadership in terms of trying to figure out how to address some of the constraints on our markets to be able to get the affordability piece worked out. And so a lot of that is these big-ticket infrastructure items for wastewater or roads or water systems and all that kind of stuff,” Mellot said.
So, as 2026 continues on, Mellot says that there may be a bit of a slugfest ahead.
