Retail sales are expected to rise sharply again in 2007, though perhaps not quite to the extent they did this year, industry observers here say.


Spokane County and the cities of Spokane and Spokane Valley all have budgeted for modest gains in sales-tax revenues next year, even though sales-tax receipts this year far exceeded expectations.


The trend is the same for everybody, and that is up, up, and up, says Ken Thompson, the city of Spokane Valleys finance director. But if you overestimate, you have a problem.


Thompson says Spokane Valley has budgeted for virtually no growth in sales-tax revenues next year, although he estimates those revenues will increase by 2 percent in 2007, compared with 5 percent growth expected this year.


The city of Spokanes budget for 2007 includes a moderate 2.5 percent increase in sales-tax revenue, compared with the 11 percent jump this year that Mayor Dennis Hession reported to the City Council in October.


Meanwhile, Spokane County is budgeting for a 3 percent increase in sales-tax revenue next year, says Marshall Farnell, its chief executive officer.


Randy Barcus, chief economist for Spokane-based Avista Corp., says hes optimistic about retail sales growth in 2007. Barcus expects an 8 percent growth rate in Spokane County next year, which would be less than the 11 percent growth rate the county enjoyed this year, but historically still very strong, he says. Barcus expects that healthy employment growth and a strong housing market will drive retail sales increases next year.


Retail development and leasing activity in 2007 are expected to build on the momentum they have gained this year, says Chris Bell, of Spokane-based Tomlinson Black Commercial Inc. Bell predicts that as construction costs rise, leasing activity at retail centers will pick up, and landlords will reinvest more heavily in their properties.


I think well continue to see vacancy rates tightening and strong retail growth as new retailers come in on the heels of housing activity, Bell says. Im clearing off my desk getting ready for the flood, both in leasing and sales for all sectors of the commercial market.


Wal-Mart Stores Inc. announced plans this year to open Sams Club stores in Spokane Valley and North Spokane. Sams Club is the members-only warehouse-store chain operated by Wal-Mart. In addition, the retail giant has begun construction on a Wal-Mart supercenter on the West Plains and also is seeking to open a store on the South Hill. Meanwhile, a host of smaller strip centers have been announced for next year.


Bob Smith, COO of River Park Square in downtown Spokane, says the mall is expecting to end this year with nearly double-digit increases in sales from last year, thanks in part to new tenants and nearby restaurants such as P.F. Changs China Bistro. Smith expects similar sales increases in 2007.


Jan Teague, president and CEO of the Washington Retail Association says, I think the Spokane retailers are going to do very well, predicated on economic growth, housing growth, and job growth. We should have a very good year next year statewide.