Market Report 2021 Greater Spokane and Kootenai County
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Market Report 2021 Greater Spokane and Kootenai County
Table of Contents Letter from CEO........................................................ 1 Retail .........................................................................3 Industrial ...................................................................5 Office/Medical Office ................................................7 Downtown .................................................................9 Apartments .............................................................11 Investment ..............................................................13 Property Management ...........................................15 CDA/Kootenai County ............................................17 Principals/Brokers/Property Managers................. 20
Letter from
the CEO
Spokane is usually insulated a bit had to figure out how to deal
from the major ups and downs with pandemic-related tenant
of the national economy. Not this issues and keep moving forward.
time! My career has spanned 2020 brought the addition of
decades from the eruption of Josh Gutzwiler (a former real
Mt. St. Helens, to the high teen estate director at Wells Fargo in
interest rates of the 80s, to the Portland) to our team, who has
advance of technology in the done a fantastic job with our
90s (when I got a computer and largest clients.
a cell phone), to 9-11 in New
2020 will go down in the York (I was there), and the Great Our entire property management
history books as the most Recession starting in 2008! team has been providing
uncertain, tumultuous, Nothing has affected us more incredible service to our amazing
and volatile year in our than the pandemic! clients throughout this pandemic.
history! The year started Our multifamily team has kept
out with the best economy Through all the challenges of our properties physically and
America has ever seen. It 2020, we have remained calm economically full, and we have
was hitting on all cylinders as a company, and went about increased revenue for our clients
until the Covid-19 pandemic our business. We transitioned without evictions. Thanks go to
hit the world hard. Travel staff to remote working while our great team, including our
bans were enacted, lock- retaining a core work force accounting staff led by new CFO
downs were mandated, for our “Essential” property Holly Poquette! Holly came from
some businesses moved to management company, Black Inland Northwest Bank and has
remote working, and others Realty Management, Inc. (BRMI). been a tremendous addition
were closed. Downtown We grew BRMI this year with to our Executive Team. Our
Spokane experienced riots revenue up over 10%. We added Operations Director Mary Kay
and looting! What a year some family real estate portfolios Knudsen and HR Director Julia
for me to be board chair with retail, self-storage, and Guinn have worked especially
of the Downtown Spokane multifamily properties. Under smart and diligent this year
Partnership! No matter how the leadership of Kim Sample handling pandemic-related
you slice it, 2020 affected the (President) and Tom Hix (Vice issues. These ranged from getting
lives of EVERYONE in President) we grew our business people set up to work remote,
the world! and worked harder than ever. to deciding what to do when
someone breathed someone
We had national tenants (and less else’s potential Covid breath!
local tenants) QUIT paying rent Thanks to Mary Kay and Julia!
starting in March, even though
they hadn’t yet experienced Black Commercial, Inc., led
the brunt of the pandemic. Our by President Jeff Johnson,
dedicated property managers was down mid-year over
1 | NAI Black Annual Report 2021
Letter from CEO
20%, but ended the year on a bold entrepreneurs opened new
really strong note with several restaurants this year!
major transactions. It was a
challenging year for our brokers I keep hearing about a “NEW
as they adjusted to working with NORMAL” and certainly things
Governor Inslee’s Stay at Home have changed! Virtual meetings
order but continuing to serve are not going away! The Inland
their client’s needs. Our brokers Northwest is growing and North
had to work extra smart and be Idaho is booming. People don’t
diligent while staying Covid safe. have to live where they work
I appreciate their hard work! anymore. Given these factors, our
Despite Covid, we actually had entire area will continue to grow. I
several brokers with a record year predict that with the new vaccine
in 2020. we will return to an amazing
economy. The Spokane region
On the investment and continues to be attractive to out
development side we had an of area investors, home buyers,
amazing year. I have never seen and major employers!
a bigger spread between cap
rates and interest rates! Positive The term “HAPPY NEW YEAR”
leverage in 2020 was truly had special meaning this year!
unprecedented. An 8% cap turns A big thank you to all of our
into a 14% cash on cash return clients, our great employees,
before tax, based on current and brokers for sticking with us
interest rates. We continued this crazy year!
the development process on
four or five subdivisions and we
exchanged into a legacy 20-
acre retail property in Mead. We
also moved forward with the
conversion of our former office
building (the James S. Black David R. Black
Building) into 50 apartment Chief Executive Officer
units. We renamed the building
after my mom, “MARJORIE
APARTMENTS”. We also are
remodeling the Wave restaurant
on the ground floor.
The biggest challenge in 2020
was our hospitality tenants,
specifically full-service
restaurants. As a landlord to over
50 restaurants, this year has been
unprecedented. We helped many
of our restaurants get PPP loans
and other grants so they could
try to stay in business. The jury
is still out on this sector of our
economy, but that said, several
2
Retail
By Stephen Pohl and delivery options; many aspects of enjoys a unique retailing vitality.
Matt Walsh which will likely be permanent. In an otherwise stable market, the
During the fall of 2020, North shuttered Albertson’s on Grand
NAI Black annually tracks Spokane’s vacancy rate increased Boulevard and the Shopko on
average rental rates, occupancy, to 11.45% compared to a 2019 Regal Street continue to “weigh”
and vacancy by submarket, vacancy rate of 8.55%, with on the South Hill vacancy factor.
comparing and contrasting to the average rent remaining stable
prior years as a measurement of at $16.84 PSF. This submarket Central Business District retail
market trends and performance. typically enjoys the attention of space showed an increased
The extraordinary and challenging national retailers first entering the vacancy rate of 7.49% in 2020
headwinds of 2020, which carried Spokane market. In 2020,Texas compared to 6.92% vacancy
forward into 2021, will present Road House and Chick-Fil-A in 2019. Average rent remained
a significant adjustment to the opened their doors in this stable at $16.00 PSF. The Cosmic
norm. As frequently predicted exciting submarket. Cowboy Grill and LUSH, Fresh
by national observers, the Handmade Cosmetics opened
anticipated “Retail Apocalypse” Also in 2020, Spokane Valley in River Park Square in early
is giving way to a new paradigm experienced a lower 3.69% 2020. Wooden City restaurant
- the Omni Channel marketing vacancy rate with rents averaging opened their doors on Riverside
platform (blending internet $13.00 PSF, compared to a and Tavolata Italian restaurant
and physical stores), which 2019 vacancy of 5.70% and announced plans to open in Old
has been accelerated by the unchanged average rent. Several City Hall. The new $53 million
pandemic. More than ever, long shuttered big box spaces Sportsplex with completion
traditional retailers are reinventing (Shopko and Toys R Us) provided planned for the fall of 2021 on the
themselves! new locations for Ashley Furniture North River Bank should provide
and Burlington Coat. a boost to CBD retail!
Turning our focus on the year
2020, our veteran retailing Spokane’s South Hill experienced With the introduction of several
industry adapted and adjusted. an increase to 13.48% vacancy new retail projects, the West
As retailing was tested to the core during 2020 with average rents Plains 2020 vacancy rate rose
with mandated shut-downs and of $18.22 PSF, compared to a to 13.63% from 2.61% in 2019.
Covid-19 protocols, the creativity 2019 vacancy rate of 12.47% Average rental rates decreased to
and incredible resourcefulness and average rent of $18.49 PSF. $13.51 PSF compared to $16.46
of many determined operators Natural Grocers opened in 2020 PSF in 2019.
resulted in new ways to sustain taking the old Hastings store, and
sales and extend consumer Thai Bamboo started construction Attempting to evaluate the
interaction. Talented marketing on their newest restaurant in comparative performance for
efforts substituted in-house the Grape Tree development 2020, clouded by mandated
shopping experiences with curb on 29th Avenue. The South Hill closures, rental concessions,
side pick-up, increased digital retail market is one of Spokane’s foreclosure prohibitions, and
shopping platforms, and home smaller suburban submarkets but other COVID-19-related factors,
3 | NAI Black Annual Report 2021
Retail
is tough. Faring well were source of repeat customers for more substitutive percentage
grocery operators, drug stores, retail properties); an increase rent, and provide free rent in lieu
pet supplies, fast food drive- in fast food delivery/QSRs; of TI dollars to attract and retain
thru or in-store pick up, medical “ghost kitchens” (off-premises great retailers. E-commerce
retail providers, big box home food prep) facilitated by Uber will continue to log impressive
retailers such as Walmart and Eats and Door Dash services; digital sales fueled by the
Target, sporting goods, and and experienced-based pandemic. “Clicks and Bricks”
home improvement stores. indoor restaurant operators will continue to merge, producing
Correspondingly, cinemas, addressing curb side pick-up a new blended retailer who
sit-down full dining experience and outdoor dining options. provides a shopping experience
restaurants, small business, Artificial Intelligence will expand based on convenience and
bars, health club/exercise the ability of retailers to alert delivery efficiency.
facilities, travel industry, and retail shoppers of buying options
entertainment venues such as based on buying patterns Retail, clearly in transition, will
arcades and gaming suffered. and search results. There will continue to evolve in 2021 with
Many resulting in store closures. be a continuation of product new brands, concepts, and
transparency, displaying what is ideas increasingly coupled with
Our predictions and trends for better for a consumer’s health; new mixed-use developments.
2021 envision: increased healthy and, finally, the emphasis on Spokane continues to be a
choices in grocery, especially ethical, sustainable clothing and viable market for retail expansion
farm-to-market; a steady advance renewable items, surpassing $7 based on its economic stability,
of medical retailing in traditional billion in sales last year. Prudent growing in-migration, labor force
shopping centers; athletic landlords will master Covid-19 availability, and a strong regional
facilities, including gyms (a great relief lease language, embrace customer base.
4
Industrial
LB Stone Properties saw plans to building two more
By Darren Slackman and
continued success with the buildings in 2021. Asking lease
Drew Ulrick
Playfair Commerce Park project, rates are estimated to be $0.75
with initial asking rates of $0.70 PSF for shell space.
2020 saw significant industrial PSF. That project has filled all but
development in the Spokane one of its recently constructed The Montgomery Logistic Center
area driven by the growth of buildings, leaving only 60,800 completed their second building
E-commerce, low vacancy SF available at the end of 2020. of three in 2020. The second
rates, and developers Playfair has four more available building is 36,000 SF and offers
anticipating demand for larger sites for additional buildings. 30’ clear height, ESFR sprinklers,
spec industrial space. The The next industrial project for and dock high loading. At the end
fall survey of industrial space LB Stone Properties will be to of 2020, they also had 50,000 SF
showed a vacancy rate of develop additional quality tilt up available in their first building. The
3.23% out of 34 million SF buildings on their 20-acre site on project owners said that activity
surveyed. North Freya Street in northeast was starting to pick up at the end
Spokane (The Yard). of the year with the receipt of
For users seeking space, there several LOIs.
continued to be a large range Spokane Industrial Park
in lease rates. New buildings completed the first of four Selkirk Industrial Park off of
with amenities such as dock 120,000 SF buildings that they Barker Road continued to move
doors, ESFR sprinkler systems, announced in 2019. 96,000 SF forward in 2020 by completing
and 30’ plus clear height, not to of the first building was leased the first of four buildings. Krueger
mention the continued increase to two national tenants prior Sheet Metal will occupy the entire
in construction costs, kept the to completion of construction. 60,000 SF building in building
lease rates near $0.70 PSF NNN. With only 24,000 SF remaining one. The next two buildings are
Property owners of existing available in the first building, The planned to be 67,500 SF each
buildings having fewer amenities, Park started construction on their and will share a truck court
lower ceiling heights, and a second 120,000 SF building at area. Site work is complete for
lack of 3-phase power or fire the end of 2020 with a planned the entire project; however, the
sprinklers, were able to command completion date of May 2021. developer will wait for a build-to-
lease rates in the $0.40 - $0.45 suit before starting construction
PSF NNN range. This gives the Developer Harlan Douglass, on the next building. Asking lease
end user a range of options to who purchased over 100 acres rates are $0.70 PSF NNN for the
consider when they are shopping adjacent to Amazon on the West warehouse shell.
for warehouse space. With limited Plains at the end of 2019, has
options, it’s never been more begun construction on 96,000 Amazon is expanding its
important for tenants to seek SF of concrete tilt up with plans presence in Spokane, this time
professional help with their search for approximately 1.5 million total to Spokane Valley, per numerous
for space. square feet of warehouse space media reports. Public documents
on the 100-acre site. In addition have indicated that a national
to the current building, Douglass developer started construction
5 | NAI Black Annual Report 2021
Industrial
on a new Amazon facility on of shovel-ready buildable sites. E-commerce will continue to
land owned by Centennial Centennial Properties, Inc., be a key driver of demand
Properties. The plans at the city recorded a Binding Site Plan of for industrial space in 2021.
show the building to be over 20 lots of industrial land off of
1 million square feet in size. In Barker Road at the end of 2019. With low vacancy rates and
addition, there are currently three During 2020 they completed land becoming more limited
other potential Amazon deals the infrastructure improvements for development, the industrial
happening in our market involving for the BSP which included a market will continue to favor
their expansion. Last mile new road, Garland Avenue, and landlords in 2021. Tenants will
distribution and other uses are bringing utilities to each site. This have limited choices; especially
growing for the tech giant faster created shovel-ready sites in a tenants seeking smaller industrial
than anticipated. market that desperately needed spaces. All of this bodes well for
that product. By the end of 2020, a dynamic and active Spokane
all but one lot was either sold or industrial market in 2021!
Land Outlook under contract. These lots traded
between $3.25 and $4.50 PSF.
Currently, the growth of our Other buildable infill sites in the
industrial market is only being Spokane area are seeing values
held back by a limited supply exceeding $5 to $6 PSF.
6
Office - Medical Office
By Jon Jeffreys and Chris Bell rate of 15.33% to 15.52% with handful of smaller office buildings
an average rental rate of $16.47 that sold, such as 9921 North
The Spokane Office market PSF per year full service. Class C Nevada containing approximately
saw limited office leasing and softened, going from a vacancy 11,600 SF selling for $1,550,000.
sale activity in 2020 due to rate of 12.63% to 15.55% with The Seller was represented by
the uncertainty surrounding all an average recent rental rate of Jon Jeffreys of NAI Black, and
commercial real estate markets, $12.39 per square foot per year. Darren Slackman of NAI Black
but there were pockets that Tenants in the market continue represented the Buyer. 101 West
showed promise leading into to be drawn to properties with Cataldo, a 17,000 SF office
2021. As a whole, rents continued amenities such as strong ground building on the North Bank of the
to increase and vacancy rates floor retail tenants, exercise CBD sold for $2,100,000.
held flat due to absorption and facilities, and on-site parking.
a lack of new inventory being We continue to see CBD office The South Hill saw a decrease in
introduced in the market. Many buildings being removed from vacancy in 2019 to 4.18% from
tenants put off discretionary the market completely and being 17.97% in 2020. Recent rental
leasing decisions and used their converted to multifamily. rates held steady at $18.81 PSF
time to analyze their long-term per year full service. The major
office occupancy needs. The North Spokane was a bright reason for the absorption on the
good news is many office tenants spot in the office leasing market. South Hill was leasing activity
weathered the storm and there Vacancy rates in the North in the Ben Burr Building at 5915
should be pent up demand as submarket dropped substantially South Regal (the building is now
tenants desire to get back to to 8.68% from 15.96% a year full) together with other leases
in-person collaboration. 2020’s prior. Average rental rates are being completed in a market with
changing office environment currently $16.41 PSF per year a limited supply of space. The
was followed closely by full service. North Spokane in South Hill market is one of our
investors looking to capitalize on 2020 had one major change; smallest submarkets and easily
opportunities in the market. Spokane International Academy feels the effects of a few larger
leased approximately 100,000 office leases or vacancies. The
The CBD, comprising of close to SF of space in the property South Hill office market is more
3,000,000 SF of Class A, B, and located at 777 East Magnesium. a bedroom community office
C office space, saw the overall There were no new notable market consisting of smaller,
vacancy rate inch up slightly from office construction projects local tenants. No notable office
2019 levels at 14.21% to 15.03% completed and very few large buildings traded hands in 2020 on
at the end of 2020. Class A office office building sales in 2020 the South Hill.
space increased its vacancy in the North Spokane market.
slightly up from 12.62% to 220 West Rowan was one of The Spokane Valley submarket
14.21% and average rental rates the largest office building sales. held steady at 11.68% vacancy,
staying flat at $20.63 PSF per The approximately 46,000 SF slightly down from 12.58% the
year full service. Class B office medical office building sold year prior. Average rental rates
space held flat from a vacancy for $6,850,000. There were a remained steady at $15.34 PSF
7 | NAI Black Annual Report 2021Office-Medical Office
per year full service. The Spokane
Valley was similar to the rest
of the Spokane submarkets
where very few office buildings
traded hands. The few that did
were a pair of neighboring office
buildings at 8815 East Mission, an
approximate 13,500 SF building
which sold for $1,900,000 (Buyer
was represented by Jon Jeffreys
of NAI Black) and 8775 East
Mission, an approximate 13,600
SF office building that sold for
$2,825,000.
The medical office market held
steady with the current vacancy
now at 9%, up slightly from
8.41% with the average rental
rate at $21.72 PSF per year. We
saw hospital systems retract
their space requirements in 2020,
which we believe contributed
to the slight uptick in vacancy.
Medical office is one of the office
sectors that continues to see
new construction from investor
build-to-suits and owner-user
projects. With a large regional
pull and multiple medical schools
in Spokane, we feel Spokane’s
medical office market is and will
continue to be very healthy.
As far as the outlook for 2021,
some companies with leases
coming up for renewal may
consider downsizing their space
as a result of Covid-19 and the
shift to remote working. That
said, many employees look
forward to returning to the office,
post Covid-19, to maximize
collaboration and enjoy their
business culture. The Spokane
office market appears that it
could hold steady in 2021.
8Downtown
As long as the pandemic buildings on the corner of First
By Mark McLees and Tom Hix
subsides and business can return Avenue, and a few future potential
to a “new” normal, downtown redevelopment sites. Year 2020
Reset 2021. Year 2020 was the Spokane is positioned for a saw West periphery projects
most bizarre year for all classes robust recovery. Just drive down completed, including the former
of real estate. the streets of downtown Spokane Watt’s Automotive historical
and see for yourself. Buildings building, which was converted to
The downtown and periphery are being well maintained, the the Brick West Brewing Company;
real estate transaction activity streets are clean, loitering and the former Otis Apartments
took a long pause before moving homeless issues are being converted to Hotel Indigo, a 108-
in slow motion to produce a dealt with, and many building unit room hotel; and remodeled
limited number of sales and lease owners/landlords are making automotive dealerships along
transactions through the end building improvements with auto row (Second and Third
of the year. Those few sale and the anticipation of better days Avenue couplet).
lease transactions that did occur ahead. Spokane has a safe and
resulted in sale prices and lease secure downtown thanks to the The North periphery growth
rates remaining stable, indicating efforts of the Downtown Spokane continues with Kendall Yards’
that the Spokane real estate Partnership (DSP), the Mayor and mixed-use and urban (By Nature)
market remains resilient to a City Council, and the Spokane development still growing. North
major national crisis. Police Department, which recently periphery growth also includes
opened a new police precinct the new state-of-the-art indoor
As we begin to move past the downtown. With mandated multi-sport venue called the
pandemic, lease rates for retail business closures and social Podium, located on the north
and multifamily will most likely distancing abated, downtown is edge of Riverfront Park, which
begin to increase. The major waiting with open arms for the will be completed and ready
driver of increasing rental rates return of customers, residents, to host sporting events by
is low vacancy rates and limited and visitors coming back to September 2021. The Podium is
options. The surge of new enjoy all that downtown has to part of a larger athletic venue, a
out-of-state residents moving offer, including movies, concerts, 135,000 SF development called
into Spokane is placing a high dining, shopping, sporting events, the Sportsplex. Construction is
demand on downtown housing exploring, and hospitality. underway for the Flatiron three-
options. With the exception With most downtown historic story, 13,000 SF building and
of a few restaurant closures buildings already redeveloped the Jefferson five-story building,
(Luigi’s and Rocky Rococo’s) and occupied for current use, the which are mixed-use projects.
most downtown office and retail options for downtown to grow are The Papillon buildings are in the
businesses are still occupying to the West and East peripheries, final design which will include
and maintaining their space as well as across the river to a six-story, 36,000 SF mid-
while working through all of the the North periphery. The West rise tower, along with a 12- or
new social distancing regulations periphery still has a few historic 14-story, 178,500 SF high-rise
and costs associated with buildings for development, and a 468-stall parking garage.
the pandemic. like the Jefferson and Norman
9 | NAI Black Annual Report 2021Downtown
The greatest growth potential is Medical Examiners office and River shorelines.
in the South University District. 60,000 SF being occupied by
That area east of downtown Eastern Washington University. The CBD office core shows Class
adjacent to the South Hill This project and others are tied A space with 159,594 vacant
Medical District, five universities, to the North U District by the U square feet (or 14.21%) with rates
11,000 enrolled students, District bridge, which provides starting at $20.63 PSF. Class B
and all located in a Qualified pedestrian and bike access space has 257,511 vacant square
Opportunity Zone. The South between the two districts. feet (or 15.52%) with rates at
University District is an area with A number of other ground- $16.47 PSF. Class C space has
redevelopment opportunities breaking, new developments 28,913 vacant square feet (or
mixed in with fully occupied and are underway in the U District in 15.55%) with rates at $12.39 PSF.
income producing properties, 2021. Although the majority of The future revitalization and/
as well as new developments the unobstructed Spokane River or redevelopment of many
like the 159,000 innovative and and U-District views are already fully occupied light industrial
collaborative science, medical being developed, there are other warehouses will be the staging
and higher education hub; the potential sites offering panoramic point of much commercial real
Catalyst Building which will views of downtown, Mount estate transactions in the
be occupied by the Spokane Spokane, and the Spokane coming years.
10Apartments
would result in a significant unit in the Spokane market
By Mitch Swenson and
loss of rental income. Thus, exceeded $110,000! In 2020 the
Kim Sample the 2020 multifamily volume average sales price per unit was
of sales was 37% below 2019 approximately $113,610. This
numbers. Multifamily investment is a 4% increase over 2019’s
Multifamily Investment Sales
sales transactions totaled average sales price per unit of
$84,752,800 in 2020 compared $109,535. Price per unit in 2018
The year 2020 brought a very with 2019 sales of $134,569,000. was $103,558 and 2017 came
robust and active multifamily Additionally, the number of units in at $81,309 per unit. These
investment sales market to traded was down by 39% from substantial increases in sales
a crawl! 1,228 units changing hands in price per unit over the last four
2019 to 746 units closing escrow years was mainly attributed to a
Sales of apartments in the in 2020. few very large, newer multifamily
Spokane metro market projects that were sold at high
declined substantially due to Despite the effects of Covid-19 price/unit values.
the uncertainty of Covid-19’s on the volume of transactions
impact on the market. Investors in 2020, the amazing part of Cap rates were driven down over
were fearful that job losses the multifamily market was the last year and have remained
and Governor Jay Inslee’s the large increase in the sale low due to a lack of inventory,
emergency “NO EVICITION/ price per unit. For the first time high investor demand, and record
NO RENT INCREASE” mandate the average sales price per low interest rates.
So, what’s in the wings for 2021?
A very small inventory of
multifamily product for sale,
low vacancy rates, a housing
shortage, low interest rates, and
more investors discovering the
Spokane market should result
in continued record setting
sale prices for apartments.
With increasing in-migration, a
dwindling supply of multifamily
development land, and the rising
cost of single-family homes,
the demand for multifamily
rentals should remain strong
for the foreseeable future. The
multifamily market will be further
strengthened by the lessening
effects of Covid-19 and the
11 | NAI Black Annual Report 2021Apartments
end of governmental-related above median average rents. is the result of new employment
restrictions on landlords. Absorption for new apartment in healthcare and education,
This should result in investors projects averages 12 – 18 the stability of employment at
who own multifamily investment months. The average rental rate Fairchild Air Force Base, and
properties continuing to enjoy for all units regardless of size, new jobs at Amazon. Strong in-
excellent returns in the class, location, and style was just migration and a very tight single-
years ahead. over $1,000 per month at the end family home market have added
of 2020. to the demand for multifamily
rentals as well.
Multifamily Rental Market
Economic occupancy in the
Spokane market remains 1,054 new apartment units were
The Spokane multifamily market fluid with properties reporting brought online in 2020 and at
for 2020 can be described anywhere from 0% to 10% in year-end another 1,084 units were
as a challenge successfully delinquent rents due to the under construction. Absorption
met. With the shocks of the moratorium on evictions and rates for new construction
pandemic impacting all sectors the inability for landlords to is predicted to remain
of commercial real estate, the collect delinquent rents. Class C steady; however, some rental
multifamily market felt the effects properties, workforce housing, concessions will likely remain in
of an economy in a downturn and student housing have been the marketplace.
and a state-wide moratorium on the most severely impacted
rental increases. These effects; by Covid and have the largest The forecast for 2021 is for a
however, resulted in property number of delinquent rents. continued strong multifamily
owners and managers stepping The overall vacancy rate in the market with rental rates inching
up to the plate and adapting to Spokane market landed at 4.9% upward as new construction
the changing market, and by at year-end. Submarket vacancy apartments come online and
year-end generally coming rates reported: downtown as higher rents are achieved at
out ahead. Spokane 3.5%, West Spokane unit turnover. Vacancy rates are
6.1%, North Spokane 1.7%, predicted to average 5% overall
Rental rates over the past 12 Spokane Valley 4%, South Hill with the exception of the student
months have astonishingly 4.3%, and Cheney at 10%+. housing market in Cheney.
increased by 5.2%. This rental Student housing in Cheney, Further extensions of the state-
rate growth was achieved dependent on EWU students, wide moratoriums on eviction
through new construction leasing experienced the highest vacancy and rental rate increases will
and rental rate increases upon rates in Spokane County. most likely have a dampening
apartment turnover. Premium Demand for apartments in effect on future rental rate growth
new construction Class A the Spokane market remains and rent collections.
apartments are leasing at 20% moderate to strong. This demand
1213 | NAI Black Annual Report 2021
Investment
By James S. Black III and low supply of quality income- also contributing factors to
Jim Orcutt producing properties. Spokane the prices being paid. Another
investment property owners recent transaction was the sale
The investment real estate have a long history of a buy and of a Valvoline Instant Oil Change
market stayed strong locally, hold investment philosophy. property located in the Spokane
regionally, and nationally in Significant appreciation is rarely Valley, which traded at a 5.75 cap
2020. With lending institutions the case in the Spokane area, and had 15 years remaining on
ready and able to loan, so buyers here tend to hold their the lease in place.
appetite for investment real properties for the long haul. Most
estate remains very high. Many local investors have the goals The investment market will
local investors are looking of long-term income and equity continue to remain strong locally,
for higher yields than can be build up through debt reduction. as well as nationally, in 2021.
obtained through traditional Sellers are also faced with the We anticipate a slight increase
banking instruments, CDs, question of what they will do in cap rates as interest rates will
money markets, etc. Interest with their proceeds if they sell. most likely rise as a result of the
rates in 2020 remained With few alternatives equaling Covid stimulus money printed by
extremely low and the stock their existing real estate yields, the US government. This, in turn,
market continued influx. Bank there is a strong reluctance for would probably decrease prices
deposit yields continues to be many sellers to dispose of their slightly. Investors will continue
in the .5-1% range. properties. This has created to chase yield in Spokane/Coeur
substantial competition for d’Alene, which should make 2021
Money from larger cities quality income properties as they eerily similar to the year we had in
continues to flock to the Inland become available. Our firm has 2020. Should you or anyone you
Northwest as investors seek out been involved in property sales know be interested in purchasing
higher yield in tertiary markets with multiple offers over the an income-producing property
like Spokane and Coeur d’Alene. last year because of these this year, please do not hesitate
There is a lot of cash sitting market dynamics. to contact us.
idle on the sidelines looking
to be invested. Baby boomers Cap rates have stayed low in
seeking to retire are looking to 2020. One example here locally
increase their monthly income was the sale of a Texas Road
with minimal risk, and, as a House ground lease to a Spokane
result, NAI Black has seen many buyer doing a 1031 exchange.
all-cash investment real estate This property traded at a sub
transactions. 5% cap. Average local deals
are trading in the 5-7% cap rate
The biggest problem facing range and vary depending on
potential investors wanting the quality, age, and location
to buy in the Spokane/Coeur of asset. The length of lease
d’Alene market has been the and replacement costs are
14Property
Management
By Kim Sample and Tom Hix exceptional communication
with our property owners and
Black Realty Management all other stakeholders. We
is a leader in the multifamily strive to optimize both gross
and commercial property and net operating income
management field with a large while maintaining the physical
portfolio of multifamily units infrastructure to preserve the
and commercial properties income streams over the
managed throughout long-term and enhance
Washington, Idaho, Utah, property values.
Oregon and Montana.
Our philosophy has earned us the
Our property management reputation of an entrepreneurial
team is a group of specialists leader in the management field.
who are dedicated to providing Each property we manage
excellence and exceeding requires individual treatment
client expectations. We deliver as a uniquely distinct business
a platform designed to provide enterprise that is operated
comprehensive, long-term, pursuant to the objectives and
profitable client services. instructions of the property owner.
We customize each property’s
Our management company is the operating procedures and
only Spokane firm to have been strategy to address the short-,
designated as an Accredited mid-, and long-term objectives
Management Organization® that the owner has established for
by the Institute of Real Estate the asset.
Management, demonstrative
of its management expertise, Our clients are the reason we
professional competence, are here and we have been
financial responsibility, integrity, in business since 1958. If we
and ethics. continue to be successful in
meeting our client’s needs and
Our property management objectives, our company will
services are dependent upon remain on the path of growth and
a clear focus on quality service prosperity. To do this, we must
to our clients and residents, continually earn the loyalty of our
resulting in high employee/tenant/ clients by providing them with
client retention; insightful and services that they acknowledge
detailed operational, strategic, being of superior value.
and financial planning; and
15 | NAI Black Annual Report 2021Property Management
Our commitment to success is
a combination of our core values
which are:
• Pursue excellence in all we do.
• Hire and develop great people.
• Keep our promises and honor our commitments.
• Embrace change as an opportunity.
• Enjoy the work we do.
• Respect the environment and support green
initiatives.
• Make a profit for our clients and ourselves.
• Be a dynamic contributor in our community through
ongoing charitable giving, civic involvement, and
active participation in local city, state, and regional
associations.
To learn more about the value and benefits of our property
management services and how we can assist you in reaching
your goals, please call us at 509.623.1000.
16CDA-Kootenai County
By Steve Ridenour and 50%. This doesn’t mean North vacancy rate going into 2021 sits
Jim Koon Idaho didn’t feel the sting of the at 5.2% of almost 4,000,000 SF
downturn, but it profited from out- of GLA in Kootenai County. We
The North Idaho commercial of-state tourism and commerce. expect rental rates to remain in
real estate market paused for a the $18 to $22 Class A and $14
moment in 2020. Perhaps the most significant and to $16 Class B ranges with rental
positive effect of the pandemic incentives being offered to fill
Offset Single -
While the effects of the Covid-19 going into 2021 is the shift to vacant space.
pandemic and broad national remote work. Additionally,
economic shutdown were overreaching governmental
certainly felt, there is no question policies in other Western
that North Idaho weathered the states resulted in substantial
storm much better than other population in-migration and
Shifted West
western states. Idaho stayed business relocation to North
“open for business”, relatively Idaho. According to US News
speaking, as state and local and World Report, Idaho is now
leadership instituted responsible the fastest growing state and
but common-sense policies that Kootenai County is the fastest
fit Idaho’s unique demographic growing county in Idaho. The
characteristics. This avoided the Census Bureau reports that 75%
long-term negative effects that of the Kootenai County growth
a sustained shutdown would is in-migration from other states.
have had on the population and Out of state commerce combined
business sectors. with increasing population growth
Consequently, businesses in the
will provide the engine for North
Idaho’s 2021 commercial real 3
service sector from restaurants estate market.
to hair salons saw less volume
loss than similar businesses Office –
in neighboring Spokane, The office market is a reflection of
Washington. In many cases, the national trend of downsizing
they benefited from consumer due to the Covid-19 effect with
traffic in-flow from the “closed” increased numbers working
states of Washington, Oregon, from home. However, due to the
and California. For example, smaller nature of the North Idaho
INTERCHANGE
during the summer and height office market, we expect that it
PROJECT
I-90
of the pandemic, North Idaho will remain stable without major
experienced hotel occupancy work space reductions. The main
in the 75% + range while West change in this market sector will
Coast hotels slipped well under be less new construction. The
17 | NAI Black Annual Report 2021
ID-41CDA-Kootenai County
Industrial – the greater Kootenai/Spokane The project will also contain 40
Substantial land acquisition market and will drive 2021 new acres of high-density workforce
and planning for new projects construction activity. housing. INTP is being developed
occurred during 2020 with by BGI, Inc., a GVD Commercial
construction starts scheduled for Inland Northwest Tech Park Properties, Inc./Jerry Dicker
2021 in response to low vacancy (INTP) - company. Land pricing is from
and a lack of inventory. Land This 350-acre project is following $2 PSF.
values generally range from $1.50 the four-lane expansion of
PSF for larger parcels without State Highway 41 (completion Rathdrum Industrial –
utility service to $6 PSF for high 1st quarter 2022) with grading Industrial development in the
visibility and freeway-oriented and interior road construction City of Rathdrum has progressed
properties. Rental rates range commencing in the spring. and includes projects near the
from $5 PSF gross for Class B Plans range from large format Highway 41 corridor. Expect 300
to $9 PSF NNN for Class A small distribution to incubator tech acres coming to market within
format buildings. The North Idaho industries, with INTP having this business-friendly city. Land
industrial vacancy rate of 1.61% unique access to rail service from will be available at a lower cost
le -Point Urban Interchange
continues to be the lowest in an existing Union Pacific rail spur. than Coeur d’Alene or Post Falls.
Offset Single-Point Urban Interchange
Shifted West
1 OFFSET SINGLE-POINT
URBAN INTERCHANGE
(O/S SPUI)
1 2
I-90 BRIDGE OVER ID-41
3 I-90 BRIDGE OVER EB
OFF RAMP
2
4 I-90 BRIDGE OVER EB
ON RAMP
4 POTENTIAL PEDESTRIAN
5 5 TUNNELS UNDER I-90
AND EB ON RAMPS
18CDA- Kootenai County
Riverbend Industrial Park – Planned multifamily construction four-lane expansion. This project
Most of Riverbend’s acreage has will hopefully keep up with will have a forward architectural
been absorbed. It still offers the growing demand. Post Falls is look and will include 15 acres of
occasional vacancy or sublease now one of the fastest growing lifestyle apartments as part of
opportunity for users that require cities in the country and its 2020 the project.
immediate proximity to the I-90 4.74% growth rate could exceed
corridor at the Idaho/Washington 5% in 2021. Athol Crossroads Center, north of
state line. Land pricing from Coeur d’Alene at Highway 95 and
$5 PSF. Retail – Highway 41, opened with huge
Continued disruption or a new super market volumes in 2020.
The Pointe at Post Falls - day of opportunity? This is the big This project is anchored by Super
Located at the Beck Road/I-90 question for retail in 2021. Even 1 grocery stores and will offer
Freeway Exchange, The Pointe with the pandemic, North Idaho outparcels for sale in 2021. There
saw UPS open a new facility in retail weathered the vacancy has been a very strong retail
2020 and Crown Distributing storm much better than other response to this underserved part
purchased a 15-acre site. parts of the country. Across the of Kootenai County.
Approximately 24 acres with board landlords worked to assist
freeway identity remains with their tenants in getting through Retail Investment -
parcels priced from $6 PSF. 2020, and we expect to see that Single purpose and essential
The owner, Wadsworth pay dividends in 2021. There is retail from grocery stores,
Development, has commenced no question that bricks and to Starbucks, to urgent care
construction on a 20,000 SF mortar is giving way to digital properties will continue to be
divisible building with additional on-line shopping. That shift, investor favorites in 2021. We
spec development planned. accelerated by the pandemic, anticipate that cap rates will
has caused retailers to adjust to remain stable in 2021, provided
Coeur d’Alene Commerce Park- new ways of retaining and serving that interest rates remain low
While Coeur d’Alene is not as their customers. and there are not any substantial
“industrial rich” as Post Falls, increases in construction costs.
it is still an important part of The retail strength of the North
the conversation. Especially Idaho market will continue, Forecast -
for companies who do not and most new major retail and With 2020 vacancy rates
require immediate highway or shopping center construction will averaging a surprising 4.88%
freeway access and want to be occur in Post Falls in response during 2020 in a year crippled by
in Coeur d’Alene. Coeur d’Alene to the explosion of growth on the the pandemic, we expect 2021
Commerce Park is a high-quality Prairie. The Post Falls/Rathdrum to be a year of growth for North
development with very high trade area is expected to sail Idaho retail.
occupancy. Pricing from $5 PSF. past Coeur d’Alene, tripling in
population to over 100,000 by
Multifamily – 2035. The epicenter of most
Multifamily will continue to be significant retail projects in 2021
strong into 2021. Kootenai and will be State Highway 41 and
Bonner County have a housing Prairie Avenue. The 50-acre
shortage which has led to mixed use shopping center,
average single-family values over Prairie Crossing, will be the first
$350,000. This has resulted in an project to come out of the ground
increasing demand for multifamily this summer. It will be on track to
housing and an explosion of open for business in the spring of
multifamily development. 2022, along with the Highway 41
19 | NAI Black Annual Report 2021Principals/Brokers/Property Managers
Dave Black CCIM, Jeff Johnson CCIM, Kim Sample ARM Thomas Hix CPM® Holly Poquette CPA
SIOR, CEO SIOR, President, Brokerage President, Management Vice President, Management Chief Financial Officer
Christopher Bell SIOR James S. Black III Jason Dolloph CPM® Julia Guinn Olivia Gutierrez
CCIM Human Resources Director
Josh Gutzwiler Don Jamieson Jon Jefferys SIOR Brent Johnson Jody Johnson
Mary Kay Knudsen Jim Koon Johnathan Larsen Jeff McGougan Mark McLees
Corporate Operations Director
Devin Mecham Jim Orcutt Mark Pinch CCIM Stephen Pohl John T. Powers III
Steve Ridenour Darren Slackman SIOR Mitch Swenson CCIM Barclay Tollefson Drew Ulrick SIOR
Bryan Walker Matt Walsh
20801 West Riverside Avenue, Suite 300 Spokane, WA 99201 509. 623.1000 105 North 1st Street, Suite 300 Coeur d’Alene, ID 83814 208. 665. 6475
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