Residential and commercial real estate sales are expected to remain strong here in 2007, although below their record-setting paces in 2005 and 2006.


Spokane-area home sales during the first 11 months of this year were running about 5.4 percent behind the year-earlier period, in terms of number of units sold, but were on pace to make 2006 the metropolitan areas second best year historically, says Rob Higgins, executive vice president of the Spokane Association of Realtors. That moderate downturn likely will continue, he says.


Meanwhile, the vacancy rate here for Class A office space had fallen sharply to 11.5 percent in October, compared with the 15 percent rate the market generally has seen in recent years, according to a survey by Auble Jolicoeur & Gentry, a Spokane appraisal company. Longtime commercial Realtor Larry Soehren, vice president at Kiemle & Hagood Co., of Spokane, says hes optimistic that the rate could fall another two or three percentage points in 2007.


Overall, there should be healthy activity in the commercial market next year, says Soehren.


From a company perspective, were bullish on commercial real estate for lease and investment, he says. Spokane is still being discovered as a good place to do business, and that should continue two to five years barring some national calamity.


In the industrial sector, some construction and higher rental rates are expected next year, says Scot Auble, president of Auble Jolicoeur & Gentry.


A survey his company conducted this fall indicates the vacancy rate for industrial space, currently at 6.71 percent, is on a downward trend, and rental rates are rising slightly, Auble says.


Industrial shows characteristics that it might make a move, he says, suggesting that market demand for industrial space could trigger new construction and higher lease rates. The vacancy rate is continuing to decline. At some point, when theres no place to rent and you have to rent new, costs of rent will go up.


Overall, the retail market is stable and likely will continue that way in Spokane, where the vacancy rate was found in the survey to be 8 percent, Auble says.


Hes says hes not seeing significant improvement in occupancy rates in Spokane Valley, where theres a 14 percent vacancy rate in retail space.


Auble holds out some hope for improvement in the retail real estate market based on job creation. About 10,400 jobs were created in Spokane County in 2006. New jobs create demand for retail services, houses, offices, and everything else, he says.


The Association of Realtors Higgins says that although total home sales are off this year, the dollar volume of home sales will be up in 2006, due to rising home prices. The median residential sales price here for November was $175,000, up a whopping 17.4 percent from the year-earlier median price of $149,000. Through November 2006, sales volume totaled $1.37 billion, up 13 percent over the year-earlier sales volume of $1.19 billion.


Higgins says interest rates and job growth look favorable for average home prices to continue to rise in 2007, probably in the range of 5 percent to 8 percent, although hes expecting a continued downward adjustment of 3 percent to 5 percent in the number of homes sold.


It may still be our third or fourth best year, he says of the number of home sales predicted for 2007. Thats a very good year as far as residential sales.


Auble says that, depending on location, single-family lots also are appreciating at rates averaging 7 percent to 12 percent, which indicates demand for residential property still exceeds supply.


In the condominium market, more units are proposed in the downtown and periphery area than usual, Auble says. Of 539 units proposed, about 140 are under construction, and 116 are presold.


Thats a whole lot, Auble says. Time will tell what the market will absorb.