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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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Jun

10

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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May

28

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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Apr

26

The Spokesman Review and Coeur d’Alene press both featured articles on the new Silver Rapids Waterpark at Silver Mountain resort in Kellogg, ID.

A few quick highlights:

• Set to open May 20, 2008
• 42,000 sq. ft. indoor water park
• Open 365 days a year
• Bar and two hot tubs on second floor mezzanine for adults

To read more take a look at the following articles:
Developer unveils new way to lure condo buyers - Spokesman Review
Water park set for soft opening May 30 - CDA Press

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Apr

23

Formal announcements of the long rumored Wal-Marts were published in today’s Coeur d’Alene press.

Hayden store to begin construction

Store to face Honeysuckle, sport Northwest look

HAYDEN — Construction on a new Wal-Mart Supercenter at the southwest corner of Honeysuckle and U.S. 95 in Hayden is expected to start this summer, city officials said.
The company has purchased the property, and the city has commented on the site and building plans that were resubmitted about two months ago, city administrator Jay Townsend said.

Wally’s world

Developer announces second store near Cabela’s

POST FALLS — Wal-Mart has found a second home in Post Falls.
Jeff Vitek of Foursquare Properties, the developer of the fledgling Pointe at Post Falls project anchored by Cabela’s, said Wal-Mart has finalized its deal on property in the development near the state line.
“We’re very pleased to announce a new Super Wal-Mart,” Vitek said on Tuesday, adding that construction could start this year on a 200,000-square-foot building on about 17 acres at the intersection of Baugh Way and Pointe Parkway in the northwest part of the project.

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Apr

11

Review

Job growth in Kootenai County manufacturing employment has driven high demand for this product type. Of the 2,215,420 square feet surveyed in Kootenai County, only 87,869 square feet is vacant (3.97%). The majority of the vacant space was found in smaller buildings with fewer than 3,000 square feet. These vacancies are due to substantial construction of small spaces over the last several years. Even with low vacancy, leasing rates have resisted upward movement and remain fairly static. Tepid rate trends have failed to keep pace with increased construction costs, which in-turn, have kept developers from building large speculative industrial space.

Over the past year, low interest rates and favorable owner-occupied financing have converted several leased industrial spaces to owner-user space. This shift could make room for additional lease space in the near future.

Industrial land rates in Hayden have edged higher than Post Falls. In Riverbend Commerce Park, offering rates are $4.00 to $4.50/sq. ft. Light industrial lots in EXPO at Post Falls range between $5.00 and $8.00/sq. ft for half to one-acre lots. Industrial land prices are slightly higher in parts of Kootenai County than Spokane County, with some asking prices above $10.00/sq. ft.

Forecast

Only a few new projects are proposed at this time. The Riverbend Commerce Park is currently finishing up two buildings with a combined total of approximately 87,000 square feet. The Park has a 43,000 square foot building slated for construction in the near future, but no formal decision has yet been made. Riverbend Commerce Park is moving forward on Phase 4 plans, with 24 lots ranging from 1.0 to 1.5 acres, of which several lots are currently pending sales.

Businesses looking for large spaces will need to consider build-to-suit options due to the lack of supply. The aforementioned static rental rates should begin trending upward to keep up with construction costs. The manufacturing employment underpinnings of the industrial market remain positive.

Furthermore, low vacancy rates and strong demand will create a healthy industrial market in 2008.

Industrial Vacancies

Manufacturing Employment

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Apr

10

Review

Sales volume of multi-family product in Kootenai County was off 57% as compared to 2006 ($35 million in 2007 vs. $15 million in 2006). Values declined approximately 11% from 2006 levels as the average sale price fell from $345,000 to $306,000 in the multi-family arena. Unsold stock remains higher than previous years, especially in the condo market.

The good news is Kootenai County apartments achieved an average rent of $0.77 per net square foot in 2007. Overall, apartment vacancy decreased to 4.3% from 5.7 % the previous year. Remarkably, studio apartments (a small segment in our market) recorded no vacancies in the final 2007 apartment survey conducted. Some newer units with exceptional amenities or superior locations are achieving rent of over $1.00 per net square foot.

Affordability remains a key concern for Kootenai County. A household is considered cost-burdened if annual rental rates exceed 30% of a household’s yearly gross income. Presently, one in seven US households is severely housing cost-burdened. Kootenai County’s affordability has declined over the past decade and is now less affordable than neighboring Spokane County. The growing low-income rental population is driving an increase in demand for affordable housing.

Forecast

Values will continue to be soft, presenting opportunities for liquid buyers. Vacancy rates will decline to levels not seen in years as prospective homeowners sit on the sidelines waiting for the housing market to hit bottom. Additionally, the recent melt-down in the “sub-prime” mortgage arena has caused tightening of underwriting standards for new home loans, thereby closing the door on many first time home buyers who are currently renting. The result is lower vacancy rates and increased rents for apartment housing.

Apartment Market Survey - September 2007


Historical Apartment Vacancies

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Apr

9

Review

New construction in the area has slowed alongside the national housing market. Lots platted in Kootenai County decreased from 2,462 in 2006 to 1,362 in 2007. The largest decreases were seen in Rathdrum and unincorporated areas throughout Kootenai County. While the number of lots platted decreased, major developers positioned for future growth. A number of significant land acquisitions were made along the Highway 41 Corridor, North Hayden area, and Cabela’s development area.

Over the past decade, single-family home construction throughout the region has been stimulated by population influx to Kootenai County from neighboring states. One of the best indicators for tracking buyer relocation trends is the origin of surrendered driver’s licenses. The Idaho Transportation Department has tracked the origin of surrendered licenses since 1997. The number of surrendered licenses from California ballooned from 834 in 2001 to 1,383 in 2006. The top two sources of immigration for Kootenai County are California and Washington respectively. This data shows an increased attraction to Idaho from across the Western region.

Forecast

Census Bureau statistics project that by 2030, Idaho population will increase to over 2 million residents. This reflects a 52% increase over 2000 population, and a 45% faster growth rate than the national average. Idaho is predicted to need an additional 390,000 new housing units to absorb the population influx. An increase in housing units goes in step with an increase in jobs, retail stores and office space. Unquestionably, Kootenai County is a highly desirable destination that will continue to be viewed as a market with great investment opportunities.

Lots Platted

2007 Building Permit Summary

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Apr

8

Review

2007 marked the completion of numerous retail centers across Kootenai County. Major project completions included the opening of Cabela’s near Stateline, Kohl’s just south of Prairie Avenue on Highway 95, and Sportsman’s Warehouse adjacent to Costco.

Retail vacancy was measured at 8.1%, with over 3.8 million square feet surveyed. The highest vacancy rate was measured in Rathdrum with 12.95% vacant. The rapid development of strip centers throughout the county has outpaced retail absorption. Small users have numerous options forcing landlords of Class B properties to attract tenants with move-in specials and aggressive tenant improvement allowances.

Taxable sales attributed to Kootenai County in 2007 rose to over $1.2 billion, an increase of 7.91% over the previous year. National retailers continue to expand to meet the needs of the growing population and economic base.

Forecast

Phase II of the highly successful Sportsman’s Warehouse strip centers is scheduled for completion in summer of 2008. Tenants in Phase I have quickly realized the benefits of Costco and Sportsman’s Warehouse serving as shadow anchors.

The Pointe at Post Falls has attracted major national retailers. The project has slated over 800,000 square feet of retail to big-box, hotel, theater, restaurants, fast food and inline space. As of the end of February 2008, there are no signed contracts, but negotiations are underway with Wal-Mart, Lowe’s and Sam’s Club. A large hospitality component is also expected in the near future.

Barnes & Noble is set to open July 2008 in the Village at Riverstone. Other planned tenants include Red Robin and Ironwood Athletic Club. In first quarter 2009, nine undisclosed national retailers are scheduled to open.

Ongoing softness in the housing market will continue to affect retail absorption. Inevitably, if consumer spending continues to slump and unemployment increases, the national retail market will further soften. Kootenai County’s retail market still remains comparatively healthy, particularly in the high-end retail sector. However, a softening would likely send vacancy rates higher and exert pressure on landlords to reduce asking rental rates.

Owners and developers of retail real estate are well aware of the challenges facing retailers. Nonetheless, local conditions still remain relatively robust compared to the national situation. Kootenai County’s close proximity to Canada could also aid the retail market as tourism spending should be bolstered by the weak United States dollar.

Kootenai County Taxable Sales

Retail Survey Breakdown

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Apr

7

Review

The office sector of our market claimed the lowest vacancy rate across all sectors surveyed. Overall vacancy is at 2.37% with over 1.5 million square feet surveyed. Office tenants have trended towards fewer turnovers and a greater amount of lease renewals. Lessees have found it clearly more cost effective to renew or expand in their current location than move to a new space. Rising tenant improvement costs have contributed to the increased level of renewals. In addition, rising land prices and construction costs are driving up asking rents on new projects.

Existing buildings have continued to increase rents to compensate for higher operating costs. However, rents at existing buildings are still significantly more economical than new office space entering the market.

One major new project to note is the recently completed 46,300 square foot Riverview Tower on Northwest Boulevard. Parkwood Business Properties is offering space in this project at an annual rate of $18/sq. ft. net. As of the end of February 2008, they have successfully leased 90% of available lease space in this property.

Forecast

Year end 2007 unemployment for Kootenai County remained remarkably low at 3.5%, significantly better than the 4.8% national year-end unemployment rate. Job growth and unemployment trends are a key indicator of future office space needs. These positive factors typically foreshadow upward movement in office leasing activity as job growth and business expansion continues.

Expect to see increased build-to-suit activity in the office market as rising land and building prices make speculative construction cost-prohibitive, and developers risk ongoing holding expenses. The “credit-crunch” will remain a pervasive problem that could limit sales of office condos and new office development. Completion of the federal courthouse should keep market conditions stable throughout the year. Completion of the federal courthouse in North Coeur d’Alene will drive development of office space for tenants in associated professions. A combination of modest growth and minimal planned office construction should keep market conditions stable throughout the year.

Kootenai County Non-Farm Payroll Jobs

Office Survey Breakdown

Riverview Tower

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