A crush of apartment construction is under way in the Spokane area, following relatively little activity in that building sector in recent years.


Spokane County and the city of Spokane issued building permits for $93.1 million in multifamily residential construction last year, up nearly $60 millionor about 170 percentover permitted activity in 2003.


Some market observers say more multifamily housing is being built in response to pent-up demand for new rental units. Also, they say, developers are preparing for expected increases in the number of apartment dwellers over the next few years.


This is secondary evidence that the economy in the Spokane area is picking up strength, says Glenn Crellin, director of Washington State Universitys Washington Center for Real Estate Research.


Robert Gibson, vice president of development for Portland-based PacifiCap Properties LLC, which owns the Deer Run Northpointe apartment complex here and is developing the Deer Run West apartments here, says the Spokane market currently has demand that isnt apparent in other markets in which PacifiCap has properties.


The apartment market in Spokane is outperforming many similar-sized markets in the West, Gibson says. Spokane continues to be one of our better markets.


A number of large apartment complexes currently are being built, and their completion will bring living units on the market later this year:


On Spokanes South Hill, Lanzce G. Douglass Inc., of Spokane, has started work on the first few buildings in a $24 million, 328-unit apartment complex. The complex, being built at 5015 S. Regal, just south of the Palouse Highway-Regal Street junction and across Regal from the South Spokane Sports Complex, eventually will include 15 apartment buildings, 21 garage buildings with 305 stalls, and a 2,500-square-foot recreation center, according to plans submitted to Spokane County.


On the West Plains, Cedar Builders Inc., of Spokane, is well under way on a $22 million, 383-unit apartment complex along Hayford Road, north of a planned retail center at the northeast corner of U.S. 2 and Hayford. That project will include 26 apartment buildings and 21 duplexes.


In West Spokane, work is under way on the $12.6 million, 192-unit first phase of the Canyon Bluffs apartment complex. The planned complex is located about 500 yards west of U.S. 195, about a mile south of the U.S. 195-Interstate 90 interchange. The city of Spokane has given preliminary approval for an additional 517 rental units on the site, as well as 84 single-family homes.


In Liberty Lake, Vandervert Construction Inc., of Spokane, has begun site work on a $12 million, 192-unit complex. The planned 17-building development, which is being constructed at the southeast corner of Country Vista Drive and Henry Road, is being built in two stages, and the first few buildings are scheduled to have living units available for rent this summer.


Rudeen Development Inc., of Monroe, Wash., has started work on a $9.8 million, 114-unit apartment complex, at 4909 E. Upriver Drive, in East Spokane. Kevin Rudeen, owner of Rudeen Development, says the first units there will be available to rent in February, and the complex will be completed in April.


In Cheney, Rudeen Development is constructing a 145-unit, $7.9 million complex to be called the Boulder Apartments. The first units there will be completed in May, and the entire project is scheduled to be finished in July.


PacifiCap Properties LLC received building permits from the city of Spokane late last month for the $8.8 million, 108-unit Deer Run West apartment complex on Spokanes North Side. The complex is slated to be built next to the Deer Run Northpointe apartment complex, on part of the former Birdies Golf Center site, just east of Nevada Street.


With the exception of Deer Run West, which includes living units for low-income families, all of those projects include market-rate living units.


Multifamily construction activity has increased here, partly because in the few years prior to 2004 there hadnt been much built in the way of market-rate apartment complexes, Rudeen says. Consequently, there is pent-up demand for new living units.


In addition, Crellin says, demand for rental units likely will increase in the next two or three years if mortgage rates rise, as projected. Higher mortgage rates make homeownership more expensiveand thus less attainable for some first-time home buyers, he says.


Even if those renters arent apparent in the market today, they are going to be there in the next two to three years, Crellin says.


Stable vacancy rates


The surge in multifamily construction activity is occurring at a time of stable vacancy rates and nearly static rental rates in the Spokane area, according to a recent survey completed by the Washington Center for Real Estate Research.


That survey, conducted in September, shows an overall apartment-vacancy rate of 4.9 percent here. Thats up slightly from the 4.5 percent vacancy rate a year earlier, but down from the 6.1 percent rate in the June 2004 survey.


Crellin says vacancy rates likely will creep upward when the crush of new units comes on the market later this year, but doesnt expect dramatic swings in vacancy in the next few years. Vacancy rates here likely wont reach the 7 percent range, he says.


While the apartment-vacancy rate here is stable, its lower than the current 7 percent vacancy rate in Seattle and the 11 percent rate nationally, Crellin says.


Other communities in Washington state, however, have apartment-vacancy rates closer to that in Spokane, according to Crellin.


The current vacancy rates in Tri-Cities and the Vancouver, Wash., area are 6.1 percent and 4.9 percent, respectively, he says.


The overall average rental rate in the Spokane area as of September was $555 a month, virtually the same as the $554 average monthly rate a year earlier and up only somewhat from the $540 average in the September 2002 survey.