2014 NAI Black Market Report

NAI Black’s roots have been in Spokane
for over 50 years. We’re committed to
being an active partner in the Inland
Northwest’s great history and its vibrant
future. NAI Black is proud to manage,
lease and market for sale commercial
real estate properties throughout Spokane
and the region. We look forward to our
continued role in building a dynamic and
vital Inland Northwest.
Serving the Inland Northwest’s
Commercial Real Estate Needs
• Asset Management
• Tenant and Buyer
Representation
• Association Management
• Facilities Management
• Sales Investments
• Real Estate Development
• Consulting
• Business Opportunities
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n Letter From Our CEO
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n Retail
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n Office / Medical Office
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n Business Brokerage 11
n Industrial
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n Downtown
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n Apartments
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n Investment
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n Principals / Brokers
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AI Black has the unique distinction of being the oldest brokerage and property management
company in Spokane. Arthur D. Jones Company, which was started in 1889, was the company my
dad purchased in 1957, the year I was born, to start James S. Black & Company. With the end of
2013 and entering 2014, I couldn’t help but think that this will be the 30th anniversary year of my appointment
by my father as President of James S. Black & Company, Inc., now NAI Black. My dad was diagnosed with cancer
in 1984, and with no siblings interested, I agreed, with only two years of experience, to purchase James S. Black
& Company on a 30-year note to my mother. 2014 marks my last payment year on that note, and my 33rd year
in the business!
Real estate companies are only as good as the people who work for them, and I’ve consistently felt that we’ve
always had the best. When I bought the company in 1984, I purchased an operating brokerage and property
management company that was losing money, mainly due to high interest rates. However, I strongly felt we
had the best real estate people in the business, and some are still here today. I didn’t buy a profitable company,
but I did buy a very good toolbox with a solid, well-known name. It was time to sink or swim!
We operated as James S. Black & Company from 1984 until 1995 when we merged our residential company with
the Tomlinson agency, bought their commercial brokerage business, and operated as Tomlinson Black until 2007.
That was a good run, and we had a huge impact on our industry and our Spokane area community. In late 2007,
we decided to affiliate with the global-operating NAI program and have since been known as NAI Black.
We have a great connection to privately owned firms throughout the NAI network worldwide, as NAI has more
offices than any other commercial brokerage company or network. We also have tremendous technological
access to many operating tools and systems, business leads, and educational support via our NAI affiliation.
Under the incredible leadership of Jeff K. Johnson, 2013 was our best year ever in commercial brokerage. We
added Bryan Walker as our land and subdivision specialist and Scott Martin as a business opportunity broker.
Both had outstanding 2013 years. We also added new agents Drew Ulrick and Jody Johnson. We fully remodeled
the 5th floor of our building to better accommodate our 25 brokers and staff in a beautifully new, updated,
fresh work environment; and are very excited about our future.
2013 was also a record year for our property management division, though sadly in October we lost John Bennett,
president of our property management company, to a heart attack. John was a dedicated and irreplaceable
member of our team, and his passing reminded me of those months in 1984 when my dad died and I was
struggling to learn new things and manage a company I didn’t know everything about.
Since John’s loss we’ve made and continue to make appropriate business adjustments.
John joined his father’s company in the mid-1970s. My dad purchased Jerry Bennett’s
property management business and he and John became part of James S. Black Company.
When Jerry retired in the 1980s, I appointed John to run our property management
business. John was fully at the top of his game when he died, and we all miss him
dearly. Our company was his family, he was very generous and articulate, was our secret
John Bennett
weapon working day and night, and being very active in area community and political
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In Memoriam
David R. Black
CCIM, SIOR
organizations. 2013 was a record in revenue and profit for our management company as well, and John was the
driving reason for its success. Fortunately, we are deep with talent and experience and Senior Vice President
Tom Hix, who was part of Tomlinson in the 1995 business merger, is now managing the commercial portion of
property management. Along with my appointment of Kim Sample as Vice President of our multifamily
operations, we are in highly capable hands with Tom and Kim. Gloria Ries, our CFO, continues to be the glue
that keeps our accounting division tightly on track. We’re very lucky to have had Gloria all these years, as
well as John’s former assistant and lease draft specialist Susan Welton, Human Resources head Julia Guinn,
and technology guru Mary Kay Knudson, who keeps our firm on the cutting edge.
On the development side, we are finally getting our South Target project off the ground and we also did a
build-to-suit for Miller Paint. We’ve entered into agreements to develop a number of different residential plats,
including Painted Hills Golf Course. On the multifamily side, Jeff Johnson is leading a new development group
in North Spokane and has broken ground on a 50-unit complex. We also have our sights on a 100-unit complex
in South Spokane, hopefully breaking ground this year, and are very excited about all of these opportunities.
We are so lucky to live in a region with incredible outdoor recreational opportunities and a growing business
climate. Our region now has a population exceeding 500,000 in our metropolitan statistical area, and Spokane
continues to be recognized as a great place to live and work. This will undoubtedly fuel our region’s growth
into the future.
I want to thank all of our clients and customers with whom we did business in 2013, as you are what makes
our company what it is today. I want to emphasize that all our clients are in great hands with a team of
people now numbering about 65, not including all of our residential multifamily site managers, support staff,
and our engineering team. Our legacy of being the biggest and best commercial real estate company in the
region continues, and I’m totally confident and excited about the years that are ahead of us!
David R. Black
NAI Black, Chief Executive Officer
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Steady Progress in Retail Market
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he retail market’s steady progress in 2013 provided a solid base for continued improvement in
2014. Spokane’s retail market is made up of over 13 million square feet of leased retail space.
The average market rental rate at the end of 2013 was $16.27 and the average overall vacancy
rate was 9.89%. New to market retail concepts and repositioning retailers will bring increased leasing
and sales activity as the year progresses.
North Spokane continues to be the first trade areas retailers look to when entering the Spokane market.
It also continues to see steady demand from local tenants. The driver of the North Spokane trade area is
strong population demographics and traditional retail properties such as the Northpointe Power Center and
the NorthTown Mall. Redevelopment opportunities near Francis and Division (such as Lowe’s relocation to
its new store on Division) will continue to provide opportunity for retail tenants to enter the Spokane
market. The vacancy rate for North Spokane at the end of 2013 was 11.37%. Recent rental rates for
second generation space made solid improvement and are up from $11.45 to $14.19 year over year.
In July, South Spokane will see the opening of the first major retail development in many years when Target
completes its new store that is under construction on Regal and the Palouse Highway. The center will also
have over 38,000 square feet of pad space to accommodate other new retailers. New construction rents
over $30 per square foot NNN are expected from tenants in that center that will push even farther away
from the highest average rental rate in Spokane, currently at $25.10. These record rates are driven by
construction costs and by the lack of available space on the South Hill, as indicated by the 4.08% vacancy
rate. Developers and investors are flocking to the South Hill to capitalize on these high rents. Other retail
development projects proposed along the Regal corridor will provide opportunities for retailers to enter the
high barrier to the South Hill market. The South Hill also saw the sale of Manito Shopping Center,
anchored by Rite Aid and Super One Foods, in the first quarter of 2014 at a sub 7% cap rate. This welllocated property sold to an out of town investor after only being on the market a very short time.
The Valley market is heating up with infill and absorption around the Valley Mall and steady activity along
Sprague Avenue from Pines to Sullivan Road. A couple highlighted transactions were Buffalo Wild Wings
opening on the last pad at the Spokane Valley Mall, and Total Wine, Sleep Number, and Café Rio opening in
the Valley Mall’s shadow center to the west. These transactions confirm that the Sullivan and Evergreen
intersections remain the most desirable sites for national retailers in the Valley. Local tenants continue
to take advantage of second generation space and average rental rates at $10.26 per square foot to infill
traditionally strong retail opportunities on the Sprague Corridor. The overall retail vacancy rate in the
Spokane Valley ended 2013 at 10.95%.
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Christopher D. Bell
David B. Wright CPM®
The downtown core and periphery market continue to reshape the image of Spokane in many visitors’
eyes as new developments continue to locate in and around River Park Square. Lululemon opening near
River Park Square and the RPS’s strong tenant roster continue to highlight downtown Spokane’s shopping
strength. Continued efforts by the Downtown Spokane Partnership to keep our core safe and clean will
continue to enhance the downtown shopping experience. Walt Worthy’s new hotel tower across from
the Convention Center will be a catalyst to redevelopment between downtown and the University District
to the east. We anticipate continued strength and growth in Spokane’s retail market in 2014.
Historical Vacancy - CBD Retail
Source: Valbridge Property Advisors / Auble, Jolicoeur & Gentry, Inc.
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Spokane Office Space a Buyer’s Market
T
he best characterization of the Spokane office and medical market in 2013 is to say that it was
another good year for tenants. Tenants in the market last year got some great deals on leasing
office space. Overall vacancy for all classes of office space increased from 1,815,669 square feet
in October 2012 to 2,078,547 square feet in October 2013. This resulted in a negative absorption of
152,986 square feet of space and the overall vacancy rate increasing from 14.25% to 16.18%. Tenants
with leases coming up last year spent time testing the market by sending out Request for Proposals (RFPs)
for new space, but the majority renewed leases in their existing locations due to hungry landlords.
Landlords worked hard to retain their existing tenants, finding it necessary to reduce rents down to
current market rates, provide refurbishment allowances, and offer other incentives to retain their tenants.
In general, we saw rents compressed in most market areas of Spokane last year, resulting in rents going
down from 5% to 15%. We are hopeful that with the recovery in full swing nationally, and some positive
job growth in Spokane County, 2014 will be a recovery year for Spokane’s office market.
Current Market Conditions by Area
CBD - Class A comprised of nine buildings surveyed showed a negative absorption of <30,203> with
vacancy increasing from 8.89% in October 2012 to 11.61% in October 2013. Average recent market
rent went from $20.32 per square foot to $20.03 per square foot.
CBD - Class B comprised of 43 buildings surveyed showed a negative absorption of <35,000> with
vacancy increasing from 16.37% in October 2012 to 19.51% in October 2013.
CBD - Class C comprised of 15 buildings surveyed showed positive absorption of 4,566 square feet and
vacancy staying flat for the year.
Suburban Office
Periphery of CBD comprised of 120 buildings surveyed showed positive absorption of 55,453 square feet
and vacancy decreased from 15.67% to 13.82%. Most of this is due to the leasing activity in the Rock
Pointe complex. Rental rates showed positive growth increasing from $14.74 per square foot to $15.27
per square foot.
The Spokane Valley market comprised of 120 buildings surveyed showed weakness with vacancy
increasing from 15.83% to 21.56%. Rental rates decreased from $14.97 per square foot to $13.34 per
square foot. There were a number of major tenants that shifted locations in the Spokane Valley over
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Kevin M. Guthrie Jon J. Jeffreys SIOR
Historical Vacancy - CBD Office
Source: Valbridge Property Advisors / Auble, Jolicoeur & Gentry, Inc.
the last year. The sharp increase in vacancy may be, in part, due to a more accurate
assessment of vacancies compiled for the Fall 2013 Market Report.
The west market comprised of eight buildings surveyed showed weakness with vacancy
increasing from 10.58% to 16.61%. One major contributor was Molina Health Care vacating
30,000 square feet on the Sunset Highway and moving to the periphery of the CBD. 9
M E D I C A L
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( c o n t i n u e d )
MEDICAL OFFICE
National economic conditions continued to keep the medical office market flat in 2013. Health care
providers continued to evaluate their space needs and costs. The additional layers of requirements
under ObamaCare, which are now going into effect for 2014, are making it difficult for health care
providers of all sizes to remain profitable. On a whole, most health care providers expect their
volume to be mostly flat, but consider that a positive in the current health care environment.
Survey of Medical Office Vacancy in Spokane County
Source: Valbridge Property Advisors / Auble, Jolicoeur & Gentry, Inc.
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BUSINESS BROKERAGE
B
usiness brokers across the country saw
increased levels of sales in 2013. The
consensus among business owners and
brokers was that it’s finally a good time to sell.
The economy in much of the U.S. has turned
around, providing business sellers with better
John T. Powers, III
Scott Martin
financials. According to an article in the W.S.J. on Oct. 24, 2013, “the small business for sale market
is heating up”. This is due to the fact that more business owners can finally display three years
of increasing revenue; the typical track record that banks and buyers rely upon when assessing a
business’s value. With a good record of financial statements, banks are more willing to provide the
financing, and buyers are more likely to buy when they can better project future business profits.
Bizbuysell.com, the world’s largest online small business market place, reported 1,685 small businesses
sold between July and September 2013, up from 1,189 during the same period in 2012. That 40%
increase in sales was a needed boost to the small business brokerage market. Nationally, the small
business for sale market is expected to continue this upward trajectory in 2014. Continued revenue
growth will make selling profitable for business owners, attracting a steady supply of potential buyers.
The continued stream of business buyers has been augmented by people who lost their jobs during
the recession turning to business ownership as an option to finding a new job.
Spokane businesses benefited from this increase in sales in 2013 as well, with increased listing and
sales activity in the small to middle market, which is defined as businesses with a value of less than
$5,000,000. We are seeing companies being priced and sold at three to five times Earnings before
Interest, Taxes, Depreciation and Amortization (EBITDA). This valuation formula determines the
gross value of the business, regardless of the amount of interest-bearing debt owed by the seller.
In the transactions we completed in 2013, we saw buyers utilizing traditional bank, SBA, and seller
financing to consummate business purchases. Seller financing is historically a popular way of
financing a business purchase - where the seller, after receiving a substantial down payment, agrees
to carry the balance of the purchase price on a note secured by a personal guarantee from the buyer
and the stock or assets of the company. The interest rate on these seller-financed notes provide for
an interest rate to be paid by the buyer in the range of 5 % - 6%. Seller financing is usually short
term and paid off by the purchaser in seven years or less. With a large down payment and a well
secured note, these transactions are a great benefit to the seller by providing them with a better
return than if they sold for cash and put their proceeds in a bank CD or bonds. The NAI Black
business brokerage team was involved in the sale of a variety of small businesses during 2013
including coffee shops, construction, auto, frozen yogurt, grocery stores, restaurants, and bars.
We anticipate 2014 will be another solid year for both business buyers and sellers in our market.
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Sight Improvement in Industrial Market for 2014
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AI Black and its market survey partners surveyed 27,594,012 square feet of industrial space
in 1,228 buildings in our Fall 2013 survey. Overall, the composite vacancy rate for the West,
CBD, North, East, Valley, and Liberty Lake industrial markets was 9.41% in October 2013,
with 2.6 million square feet vacant. Over the last year, the level of industrial space absorption or
increased vacancy varied by submarket. In the Spokane Valley market, where over 53% of the leasable
space is located, the vacancy rate dropped from 8.45 % in 2012 to 8.30% in 2013. The North Spokane
industrial market also saw a slight improvement in the overall vacancy, decreasing from 8% in 2012
to 7.9% in 2013.
The East market was hit the hardest and saw its vacancy factor increase from 10.46% in 2012 to over
15% in 2013. The CBD market didn’t fare much better; the 2013 vacancy is up from 2012 where it stood
at 8.81% to 12.58%. The Liberty Lake, Valley, and West Spokane markets did not show much significant
change. The chart on the next page illustrates a slight increase in recent and average rental rates yearover-year for industrial office space. Industrial property owners have been more aggressive in lowering
their expectations on office rents to attract industrial tenants whose needs tend to be more warehouse
oriented.
Over the last year there has been increased activity by user purchasers of small, medium and large sized
industrial buildings. As long as the cost of financing remains attractive, these owner users will continue
to be the major purchasers of industrial buildings in Spokane. In 2010, there were 35 sales of industrial
buildings; 28 in 2011; 17 in 2012; and approximately 30 in 2013. NAI Black brokered the sale of a
125,000 square foot former Caterpillar Distribution facility located on Mission to an owner-user. The sale
price for that property equaled $22 per square foot including the value of the land. Industrial land prices
held steady in major industrial corridors, but declined in secondary and outlying industrial areas due to
lack of demand. Land sales in the far East Valley were as low as $.50 per square foot. Northeast Spokane
land sellers reduced prices as low as $2.00 per square foot to attract purchases. Land sales between
downtown and Sullivan Road resulted in sales between $2.25 and $4.00 per square foot.
The overall industrial market appears to have bottomed out, and we anticipate a slight improvement in
2014. The number of industrial property sales should increase as the market continues to rebound and
the economy starts to strengthen. Land sales should increase to users as financing rates for new
construction remain attractive. Increased market absorption of vacant space should be influenced by
the lack of new spec development. There will need to be a significant increase in rental rates before
developers come back into the market. So overall, we see a slow but steady improvement in the
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© Auble, Jolicoeur & Gentry, Inc., 2012
James S. Black,III CCIM
Heidi A. Irvine
industrial market in 2014. Our industrial brokerage team forecasts leasing activity to be slightly
better in 2014 than in 2013, as the regional and nationally economies continue their recovery.
Spokane Industrial Vacancy Survey
Source: Valbridge Property Advisors / Auble, Jolicoeur & Gentry, Inc.
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The Downtown Renaissance Continues
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Downtown Spokane continues to be a vibrant place to work, shop, and own real estate!
There has been almost one million square feet of new investment in major development
projects and office buildings completed in downtown Spokane since 2005, and there are
more great projects on the way. More than 25,000 people, or about 13% of Spokane’s workforce,
work downtown every weekday. There are more than 2,300 businesses located in downtown.
Eight of Spokane’s top ten banks and financial institutions have main offices downtown, along with
24 of Spokane’s largest law firms. In addition to downtown’s solid employment base, its shopping
and entertainment options not only serve those working downtown, but draw visitors from the whole
Inland Northwest, resulting in a very vibrant active downtown.
The adjoining residential and commercial development projects under construction at Kendall Yards just
across the Spokane River to the west, and Walt Worthy’s convention hotel under construction across
from the Opera House and Spokane Convention facilities, will both add to downtown Spokane’s vitality.
Worthy’s hotel will not only help to grow Spokane’s visitor and convention business, but it will also
strengthen the link between downtown Spokane and the University District to the east.
All of this activity and investment bodes well for downtown businesses and property owners. The result
has been the continued upgrading and rehabilitation of a number of downtown area buildings. During
the past year, developers and investors have continued their quest to redevelop and repurpose historic
properties in and around downtown, resulting in more reuse and rehab projects in 2013 than we’ve seen in
the last three years combined. Most of the sale transactions, with the exception of solid income-producing
properties, involved cash sales or seller contracts with large cash down payments. Many of the purchases
have been completed by experienced investors who have cash and strong banking relationships.
A number of the transactions completed in 2013 and underway in early 2014 are:
100 Block of West Pacific Avenue. Three historic buildings with over 58,000 square feet are being
renovated for owner-users and tenants.
The Sherwood Plaza at 510 West Riverside Avenue was purchased by a local contractor, and the entire
65,500 square foot building is under a complete renovation. Upon completion, this will be one of
downtown Spokane’s newest premier retail and office buildings.
The Numerica Building at 502 West Riverside Avenue was purchased by a local developer, and this
24,000 square foot rehabilitated historic building is near full occupancy.
Walt & Karen Worthy’s 721 Room, 15-Story Convention Hotel is under construction at the corner of Spokane
Falls Boulevard and Washington Street on a 2.75 acre site that was purchased from the City of Spokane.
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Mark C. McLees
Kevin M. Guthrie
Redevelopment of the Former Huppin’s and Dutch’s Buildings at 417 and 421 West Main Avenue
for retail, office, and residential mixed use.
Sale of the Former First Covenant Church to Mars Hill Church of Seattle. This new ownership will
provide a much needed improvement to downtown Spokane’s major entry point and will include
improving the vacant Best Western site next door.
Sale and Renovation of a 10,000 Square Foot Historic Building at 209 South Washington Street for
the new headquarters of ROW Adventures.
The Downtown Spokane Partnership continues its active role to enhance the downtown experience
for all, actively working to provide a clean, vibrant, safe, and thriving downtown. The City of Spokane,
in partnership with the Downtown Spokane Partnership and others in the business community,
opened a new police facility in the Peyton Building this year, adding a real police presence to our
city core. The future is bright as Downtown Spokane continues its momentum forward in 2014.
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Apartment Occupancies High, Rents Increasing
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013 proved to be an excellent year for apartment owners, despite a large amount of data that
predicted a drop in apartment occupancy rates. With many new units coming on the market in
2013, the predictions pointed to increased vacancy and a return to concessions to attract tenants.
Fortunately, a couple of key trends keep apartment occupancies high and rents increasing. Although single
family home financing is still a barrier to many potential purchasers forcing them into the rental market, a
larger trend is that many people are renting, as it provides a more flexible lifestyle. Apartment developers
continue to add new units to the market with the hope that this trend will continue into 2014 and beyond.
Spokane County
We saw a continued stabilization in the market place and the upward trending in rents in 2013. Concessions
have been practically non-existent as the demand for units remains steady. Lenders are positive about
the future demand for apartments here and developers are finding financing readily available. Average
rents for all unit types in September 2012 for the Spokane area were $676. By September of 2013, average
rents had risen 6.5% to $720. This hike is largely due to new construction coming online at higher rental
rates. Average overall vacancy rates in September 2012 was 4.2%, and that decreased to 4.1% by
September 2013; well below the 5% vacancy rate viewed by many as a point of equilibrium. North Spokane
and the South Hill continue to be very strong markets for landlords, with vacancy rates averaging 3.3%
and 3.6%, respectively. The Spokane Valley, where much of the construction is occurring, lags behind
with a vacancy rate of 4.6%. The west side, also at 4.6%, is still dealing with some overbuilding, but
the future looks good overall. The downtown apartment market has the highest vacancy rate, at 6.1%,
partly due to the fact that downtown has the most expensive rents in the market place.
Kootenai County
In September 2012, Kootenai County had an average apartment vacancy rate of 2.9%; by September 2013
it was 5.2%. The majority of new apartment construction in Kootenai County has been in the affordable,
low-income housing sector. Outside of Coeur d’Alene, vacancies continue to be low, averaging 1.6% in all
other areas of Kootenai County. Average rents have crept up due to the higher rents realized in the new
projects being constructed. Rents are up 6.8% over 2012, averaging $727 per month.
2014 Forecast
The 2014 forecast for Metropolitan Spokane is for some softening of occupancy rates due to continued new
construction. We anticipate rental rates to be flat in the submarkets where the majority of new construction
is occurring, primarily in the Spokane Valley where the greatest number of units are under construction.
As is typical in these cycles, there will likely be trickle down impact on the vacancy of Class A, B, and C
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Mitch D. Swenson CCIM
Kim Sample
Jason J. Jackson ARM
markets, as tenants move from the older to the newly created inventory. There is no corresponding uptrend
in population, employment, or job growth forecasted for the Spokane area in 2014 that corresponds
to the current rate of construction of new multifamily housing. We can likely expect rental rates to
possibly start trending downward by third or fourth quarter 2014. Rental concessions with the new
construction projects are likely, and we may start to see concessions in the Class B and C properties by
year’s end as the result of tenants moving to newer projects and vacancy increasing in the older projects.
Spokane Valley will probably be the hardest hit area with 821 units at or near completion at this time
and another 279 units that are under construction in the first quarter of this year. Kootenai County can
expect to see vacancy rates stabilize with the absorption of new construction impacting both Post Falls
and Coeur d’Alene. The apartment resale market remains very solid in Spokane County. Bolstered by
a large 297-unit transaction that closed near the end of the year, Spokane County multifamily sales
were just over $57,000,000 for 2013. Cap rates remain in the 7% range for typical garden-style units
with well located or newer units garnering lower cap rates. Smaller, older properties are also in demand,
selling at cap rates over 8%. Apartment investments nationwide remain a very strong asset class with
high demand and a low supply of good product. This is true in many West Coast markets like Seattle
where demand has driven cap rates under 5% for quality properties. This lack of product has motivated
investors to expand their search for properties to markets like Spokane. Spokane will continue to be
attractive to outside investors due to the availability of properties for sale and higher cap rates.
As more units are being constructed in 2014, apartment occupancy rates could decline slightly, along with
rents, resulting in year-end vacancy rates in the 4% - 6% range. Even with this change, the result will
still be a solid apartment market for the area. 2014 could see interest rate increases, which could slow
down the construction of new multifamily units. Both of these factors would assist in maintaining a
stable, profitable market for investors. We anticipate that 2014 will continue to be a very profitable year
for the entire real estate investment market, and specifically, the multifamily investment market.
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ith the spread between cap rates
and interest rates at historically
attractive margins, the demand for
retail, office, and industrial investment properties
in the Spokane market increased substantially
Jim A. Orcutt
Jeff K. Johnson CCIM, SIOR
in 2013. This historically high spread between cap rates and interest rates has increased the positive
leverage generated when investors borrow funds to purchase real estate at interest rates lower than
the cap rate, resulting in higher returns than most investors can obtain in the securities market.
Thus demand for good properties at every price point exceeded the supply of properties listed for sale.
The recession took many investment property owners out of the market. Property owners were
reluctant to sell unless they had a need for cash, had a problem property, or were tempted to take
a large profit. Additionally, investors were reluctant to sell as they were not sure if they would be
able to find replacement properties to invest in. These factors all contributed to a general lack of
investment properties to choose from.
The most active part of the market was properties selling in the $500,000 to $2,000,000 range. This
past year also saw increased demand from small investors in the sub-$500,000 market. Our firm
completed numerous transactions in that market category. The majority of those sales were of older
commercial buildings on secondary arterials. Demand was high enough that investors purchased
some of those properties vacant and took on the risk and expense of lease up. It was common
for those buyers to pay cash and deploy capital that was getting little or no return in a financial
institution or their local bank. A few examples of investment property sales this year were:
Moran Prairie Shopping Center on E.57th, South Hill sold for $3,075,000 and a reported cap rate of 8.1%
Spokane Pavilion Strip Center at 9625 N. Nevada sold for $3,650,000 and a reported cap rate of 7.38%
Two Tire-O-Rama Stores on North Division each sold for $1,500,000 and a reported cap rate of 7%
West One Bank Building at Pines and Broadway sold for $6,200,000 and a reported cap rate of 7%
Manito Shopping Center sold for $13,000,000 and a reported cap rate of 7%
Columbia Paint Building at 7228 North Division sold for $488,750 and a reported cap rate of 10%
Spokane continues to be considered by a steady stream of investors from Seattle, California and other
major west coast markets looking for better returns and lower price points than in their own communities.
These attractive traits continue to draw such investors to the Spokane area. A Seattle investor once
said to us, “I invest in Seattle for appreciation and then invest my profits in Spokane for steady cash
flow”. Spokane may not have the dramatic appreciation of some markets, but it’s very stable and
steady, which is an attractive characteristic to many investors.
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P R I N C I P A L S & B R O K E R S
Commercial
Property Management
Commercial Real Estate
Services, Worldwide.
Black Commercial, Inc.
Black Realty
Management Inc.
509.623.1000
David R. Black CCIM, SIOR
Chief Executive Officer
Jeff K. Johnson CCIM, SIOR
President
Gloria A. Ries CPA
Chief Financial Officer
Thomas P. Hix CPM®
Senior Vice President
Kim Sample
Vice President MultiFamily
C. Brian Anderson
Christopher D. Bell
James S. Black, III CCIM
Kaitlin Caudle
Earl L. Engle CCIM
Kevin M. Guthrie
Jamie R. Hutchison Heidi A. Irvine
Jason J. Jackson ARM
Don B. Jamieson
Jon J. Jeffreys
Jody A. Johnson
Mike P. King
Scott Martin
Jeff A. McGougan
Mark C. McLees
Jim A. Orcutt
J. Grant Person
Mark G. Pinch CCIM Stephen B. Pohl
John T. Powers, III
Aaron J. Reugh
Darren Slackman
Jeffrey A. Swanson
SIOR
Member of International
Council of Shopping Centers
Mitch D. Swenson CCIM
Ryan Towner Drew Ulrick
Bryan A. Walker
David B. Wright CPM®
Commercial Real Estate Services, Worldwide.
107 South Howard Street, Spokane, WA 99201
509.623.1000 • www.naiblack.com
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