In these unusual times, casual observers impressions of the Spokane-area economy and where its headed could vary dramatically depending on what business receptions they attend or what corporate executives they lunch with.
While the manufacturing, technology, and wood-products industries here continue to struggle to stem already substantial declines, market sectors such as real estate, finance, and security are flourishing.
Some business executives and economic-development experts here attribute the sharply split market partly to historically low interest rates and investors pursuit of safer harbors for their money. Heightened safety concerns that arose following the Sept. 11 terrorist attacks also arguably have lifted some business sectors. A worry in some quarters, though, is what happens when interest rates rise and the other catalysts propping up some industries here begin to wane.
I think this is kind of an unusual time, says Mark Turner, president and CEO of the Spokane Area Economic Development Council. It would suggest to me that were not in a classic recession, affecting all businesses across a broad spectrum. It is kind of an uneven economic environment.
Technology and telecommunications businesses are continuing to experience a shakeout locally, he says, while some business-service sectors appear to be holding their own.
Its sort of every industry for itself, Turner says.
Dave Black, a principal with the Tomlinson Black Group of Cos., one of the Inland Northwests largest real estate conglomerates, and CEO of Tomlinson Black Commercial Inc., says, There is a real dichotomy going on in the economy right now. Its palpable enough, he says, to make him hesitant at times about telling other business people how well Tomlinson Black is doing.
We had a record year in our commercial brokerage, a record year in property management in terms of new accounts, and a record year in home sales in 2002, and are up again so far this year, he says. Its been really good.
Black adds, Theres a real balanced market between buyers and sellers now. In commercial, because of the mixed economic scene, we have a lot of people doing a lot of things. Many people are buying investment real estate as well, including lake properties that they have concluded are a better value than leaving their money in the stock market or sticking it in a checking account, he says.
Ive refinanced almost all of my properties in the last year, he says. I just think the lower interest rate has really fueled a lot of real estate activity. I think the real estate market is going to remain good even if interest rates start to edge back up.
Revenues at Kiemle & Hagood Co., another big Spokane-based commercial real estate and property management concern, are up 20 percent over last year and pretty much on a record pace, says Tom Quigley, the companys president and CEO.
The investment side of what were doing is particularly strong. Its the favorable relationship between interest rates and capitalization rates that have made real estate an attractive investment again, he says. Capitalization rates are the discount rates used to determine the present value of a stream of future earnings.
Leasing and management have been terrific for us, Quigley says. Office remains for the most part the weakest; retail is pretty good.
Historically, we have not seen the interest rate implications weve seen today, Quigley says. The rush of money hasnt been there that were seeing today. Our biggest challenge is getting our hands on product.
In the security industry, Spokanes Argus Services Inc. has been a shining star. It now employs about 1,000 people in eight Western states, with an additional 100 to 400 temporary employees working for the company at any given time. It opened an office in Phoenix in February, and has tentative plans to open offices in Albuquerque, N.M., and Las Vegas later this year.
Jeannene Kurtz, Argus director of sales, says the company is continuing to grow, but that its growth rate has shrunk because many of its clients have been forced to tighten their budgets due to the slow economy.
Were fortunate to say we are healthy financially, and were maintaining and growing, when many companies are not, she says.
Phil Kuharski, a longtime economic observer here, says, Its really surfaced what were all about here, and what were about is the health industry is big time here, and banking, and finance, and insurance. Whats hurting is the manufacturing, fabrication, and assembly.
He says, There is a split. Its a split to some degree thats going on nationwide and statewide. Its a metamorphosis, if you will, that may be much more long-lasting and consequential than what we might be prepared for or like.
Were getting to a point where manufacturing is almost a non-issue in Spokane, Kuharski says. Its going to become less and less of a percentage, and well be looking at more and more service kinds of jobs.
In contrast, Pete Stanton, chairman and CEO of Spokane-based Washington Trust Bank, says he regards the current economic dividewith some sectors continuing to prosper in the face of a protracted recessionas sort of a short-term unsustainable phenomenon.
It cannot be sustained if the basic industries cannot turn it around, he says, citing manufacturing, retail, agriculture, and wood products as examples.
In his own industry, for example, the sheer volume of real estate transactions resulting from historic low interest rates has really been a boon for the banks, Stanton says. Refinancings will slow down at some point, however, and people will stop borrowing money if they dont begin to see some signs of an economic rebound, he says.
From his own vantage point, Stanton says he sees very few sectors that are doing well, despite some isolated examples to the contrary, and senses a lot of continuing apprehension about when this economy is going to turn around.
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