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The International Council of Shopping Centers estimates nationwide retail store closures will total 144,000 in 2007, a 7 percent increase from 2006.  Although this a large number, in 2006 123,000 new stores opened and 139,000 closed.  New store opening have helped soften the effects of nationwide store closures.

There is no arguing that retail is presently a troubled sector with consumer confidence dropping and consumer disposable spending in negative double digits for 50 straight weeks.  The confidence confidence index serves as an important bellwether of consumer spending, which accounts for two-thirds of the U.S. economy and an essential economic driver for the retail sector.

Nationwide retail properties reported a vacancy rate of 7.8 percent in the Reis Inc. second quarter 2008 survey.  Locally we have seen a number of store closures, but nothing close to other troubled markets around the United States.  Starbucks recently posted the final list of approximately 600 company-operated stores in 45 states scheduled to close beginning this month through next March.  Our MSA has only one store scheduled for closure, the Starbucks located off Market and Garland in Spokane.

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A recent article in National Real Estate Investor gives insight on Standard & Poor’s March GRA Commercial Real Estate Indices.  Overall, national commercial property prices have risen over 5% from March 2007 to March 2008.  The strongest performing region in the month-over-month indice was the Pacific West region.  For more details, click on the link below.

Commercial Property Prices Still Gaining

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Deer Park looks to awaken - Spokane Business Journal

City approval of office tower is appealed - Spokane Business Journal

Big project planned in Rathdrum - Spokane Business Journal

Bankcda consolidating offices - CDA Press

Lounge aims to fill swanky void - Spokesman Review

Judge OKs county track purchase - Spokesman Review

Big projects eyed near raceway - Spokane Business Journal

Parker Toyota reconsiders expansion - Spokane Business Journal

Crown West plans project at SBIP, but sees slower growth - Spokane Business Journal

PARD will not take appeal to state supreme court - Daily Evergreen

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Mike King from our team was quoted throughout the following article from Inland Business Catalyst Magazine. The article gives an overview of our local commercial real estate market. Let us know what you think.

Inland Business Catalyst Magazine - A Flight to Quality

A Flight to Quality

Written by Linn Parish

Commercial real estate markets continue to stay hot as many tenants seek better space. While a lot of water-cooler talk currently focuses on recession fears and slumping home sales, much of the Inland Northwest commercial real estate sector is flying high. “You hear a lot about the national problems in real estate and credit markets. We just don’t see that in Spokane in the commercial market,” says Dave Black, CEO of NAI Black Inc., of Spokane. “Local banks are still lending, and the commercial market is still moving.”One factor that’s causing the market to soar is a flight to quality. The term flight to quality refers to a trend in which tenants who historically have occupied less-expensive space move into nicer digs. “People are looking to upgrade, moving from Class C space to Class B and from Class B to Class A,” says Mark McLees, a real estate agent with NAI Black. “Some also are looking for the historical look, and a number of tenants are willing to put in money for tenant improvements.” In downtown Spokane, large spaces—those with 10,000 square feet of floor space or more—are difficult to find, says Craig Soehren, sales associate at Kiemle & Hagood Co., of Spokane. Also, the inventory of buildings available for owner-occupants to buy is small, limiting options for some companies, he says. A spring 2008 commercial space vacancy survey is expected to be completed this month. The survey is conducted twice yearly by Auble, Jolicoeur & Gentry appraisal firm in conjunction with NAI Black, Kiemle & Hagood and Goodale & Barbieri Co. In the most recent vacancy survey, from last fall, the total office-vacancy rate in the Central Business District was 13 percent. McLees says the vacancy rate likely will stay in double digits through 2008 but it likely will be close to 10 percent later this year. The current conditions are causing rental rates to escalate. “Rents are definitely going up,” Soehren says. “There’s a lot of pricing shock in the marketplace. For tenants who are used to paying low rents, there aren’t that many options anymore.” As of last fall, the average annual rental rate for recently leased Class A space downtown was $20.28 per square foot, comparable to what it has been for four years. Experts say, though, those rates are going up this year, and they expect them to continue to increase. Currently, Black says, rental rates are substantially lower than the per-square-foot cost of new construction. He says the inventory of available office space will continue to constrict with little new development until rental rates rise and come more in line with the cost of new construction. That dynamic is perhaps most apparent in Spokane Valley. There, tenants have absorbed a lot of the vacant office space in recent years, and a relatively small amount of new space has come on the market, Soehren says. Consequently, vacancy rates continue to fall in that market. The most recent survey shows a 12.5 percent vacancy rate in the Valley, down considerably from a vacancy rate of 21 percent a year earlier. One project that currently is under way, however, will add a large amount of office space to the Valley. Spokane developer Walt Worthy has started work on a 250,000-square-foot office structure just east of the Interstate 90-Sullivan Road interchange. That structure is expected to be completed later this year, and when it comes on line, it will add 10 percent to the total inventory of office space in the Valley. In Coeur d’Alene, the office market remains tight, with little inventory of space for larger prospective tenants, says Mike King, associate broker at Coldwell Banker Schneidmiller Real Estate. “At times, it can be difficult to find the right configuration for tenants,” he says. “If we work with a large corporation, it’s usually a build-to-suit.” Coldwell Banker Schneidmiller Real Estate teamed up with Auble, Jolicoeur & Gentry for the first time last fall to conduct a commercial-space vacancy survey for Kootenai County. That survey showed an office-vacancy rate of slightly more than 2 percent. King says he expects the vacancy rate to remain that low through this year. Many of the office developers in that market wait until they have tenants committed to the planned space before breaking ground on a building. Northwest Place, a three-story commercial building at 1450 Northwest Blvd., recently was completed, and all of the second-floor and third-floor office space is leased out already. Some retail space on the ground floor is still unspoken for, King says. Retail activity varies depending on the part of the region. “If there is one part of the market we’d be concerned about, it’s retail,” King says. “That’s something that people are being cautious about.” He says some national tenants are slowing their expansion pace, but developers are “being smart about it” and scaling back their development plans. Last fall’s survey showed a retail-vacancy rate of 8 percent in Kootenai County. While the retail market has cooled in general, some pockets in Kootenai County remain hot. King says rumors persist that some huge retailers will announce plans later this year for new superstores near the new Cabela’s store in Post Falls. Rumors involve companies like Wal-Mart Stores Inc. and Lowe’s. In Spokane County, retail activity remains strong in downtown, though some say interest in other parts of the market has slowed. The vacancy rate in downtown retail last fall was almost 7 percent. McLees says, “That keeps declining rapidly, and I wouldn’t be surprised if that’s at 4 or 4.5 percent by the end of the year.” While some say retail-space interest has tapered off in parts of Spokane, there still are some big players looking for a presence here, Black says. “The tenants that aren’t here want to be here,” he says. The retail vacancy rate remains low on Spokane’s North Side. As of last fall, only 200,000 square feet of space out of almost 4.4 million square feet was available, giving it a vacancy rate of 4.5 percent. The similar-sized Valley retail market had a higher vacancy rate. Of its 4.4 million square feet of retail space, about 600,000 square feet was empty, giving the Valley a vacancy rate of 13.6 percent. The North Side’s average annual rental rate for recently leased retail space was $18 per square foot, substantially higher than recent annual rate of $13.74 per square foot in the Valley. On Spokane’s South Hill, which has a retail market that’s about a quarter the size of the Valley and North Side’s markets, the vacancy rate was 3.5 percent. The average rental rate for recently leased retail space on the South Hill was about $17 per square foot.

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Here are links to real estate & development news from the latest Spokane Journal of Business.

ALK-Abelló unit readies for growth

SRM buys, to redevelop Burgans site

Catholic Charities plans service center

Snap Fitness franchisees plan growth

Hampton Inn & Suites to rise in Spokane Valley

Two businesses plan to build near Esmeralda Golf Course

$3.7 million restaurant set in Valley

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SRM Development out of Spokane and an undisclosed party have made offers on the former Burgan’s Furniture location.  SRM plans a mixed-use development, but will need to find an anchor tenant before proceeding with the project.

SR.com: Two parties vying for Burgans property

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AOL Money and Finance has created a list of retailers facing problems. So far we have not seen too many closures in the Inland Northwest. The only closure of note in Spokane is the CompUSA. Take a look at the list below:

• Linens ‘N’ Things – closing 120 of 589 stores. Filed for chapter 11 bankruptcy protection in May.
• Disney Stores – closing 98
• Foot Locker – closing 140 of the 3,785 stores in addition to the 274 stores it closed last year.
• Wilson’s Leather – closing 160 stores.
• Home Depot – closing 15 stores.
• Ann Taylor – closing 117 stores.
• PacSun ‘Demo’ Stores – closing 154 stores in addition to the 74 stores it closed last May.
• Lonestar Steakhouse – closing 27 locations.
• Zales – closing 105 stores. Will have 2,145 locations open.
• Pier 1 Imports – closing 25 stores. Closed 79 in 2007.
• Friedman’s Jewelers – closing 120. Closing stores and laying off employees as it goes through bankruptcy proceedings.
• Dell – closing 140 stores.
• 84 Lumber – closing 140 stores. Directly impacting by the nation’s housing market. Closed 12 stores in December.
• Sharper Image – closing 90 stores. Filed for bankruptcy protection.
• Pep Boys – closing 31 stores.
• Ethan Allen – closing 12 of 300+ stores.
• Rite Aid – closing 28 stores.
• Sprint/Nextel Corp – closing 125 stores.
• Movie Gallery – closing 400 of 3,500 stores.
• Saks – closing 1 store.
• CompUSA – 103 stores will be shut down or sold.
• Kirkland’s – closing 30 to 130 stores.
• Fashion Bug, Lane Bryant and Catherine’s – closing 150 stores.

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Cameras have been installed on I-90 that scans license plates of passing vehicles.  The primary reason for these cameras is to find stolen vehicles, respond to Amber Alerts, etc…  However, there has been an ancillary benefit to the installation of these cameras.  Local economist Jim Stravens has used the data to analyze traffic and visitor patterns.  Stravens has found that 47 percent of the traffic passing the cameras is from visitors.

For a full rundown of the data please click through to the following article:
Security cameras show visitor patterns - CDA Press

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Several months ago the Senor Froggy building in downtown Coeur d’Alene was torn down. The lot has been vacant and fenced off since. Here is an article about the developer’s plans.
Development plans pending for vacant lot - CDA Press

Downtown Coeur d’Alene has seen a fair share of new projects with adequate absorption. However, it looks like development has been put on hold until users can be found. Developers are finding it more difficult to come out of the ground with speculative development. Please note, across from the previously mentioned site, we have a 1/2 city block development lot available for sale. You can view the listing at the link below: 724 E Lakeside Ave

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The Spokane Journal of Business is reporting that Avista has just tied up 3,200 acres near Rearden, Washington to build a wind farm. Here is the update from the Journal:

Breaking News
Avista ties up site to develop wind farm …
Avista Corp. said today it has acquired rights to to a site to develop a 50-megawatt, $120 million wind farm near Reardan, Wash. The 3,200-acre site is roughly four miles south of Reardan off of state Route 231, includes Magnuson and Hanley buttes, and mostly is farmland, Avista spokesman Hugh Imhof says. He says the company will lease the property from seven landowners, will order wind turbines for the project this year, and will build the wind farm in 2011. Avista says that because of the intermittent nature of wind, the project will generate an average of 15 megawatts of power, or enough to serve 11,250 homes, and it can carry the electricity on its own transmission system, which saves cost. Avista Chairman, President, and CEO Scott Morris says the wind farm will help Avista satisfy renewable resource requirements under Washington law. Imhof says the company, which plans to build or buy 300 megawatts of wind generation by 2017, is continuing to look for other wind-power sites, mostly near its own transmission system.

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