The Spokane-area apartment market is showing signs of stabilizing, with vacancy rates declining during the first half of this year, and recent proposals have been made for sizable apartment projects here, market watchers say.
The Spokane County apartment vacancy rate in June was 7.4 percent, according to data compiled by the Washington Center for Real Estate Research at Washington State University (WCRER). While that's slightly higher than the 7.1 percent vacancy rate in June, 2009, it's down from 7.7 percent three months ago, and 8.2 percent in December when the rate peaked, says Glenn Crellin, director of the WCRER.
"The vacancy rate is trending downward, although not as rapidly as we might like it to trend," Crellin says.
Some developers are eager to be in the forefront of any shift in the apartment market, Crellin says.
"It takes awhile to get new projects built," he says. "If developers see declining vacancy rates, they'll think it's time to get something out of the ground now."
More than 1,000 new apartment units are in the planning phases or currently being constructed in the Spokane-Coeur d'Alene area.
Spokane developer Harlan Douglass is developing the $28.6 million, 256-unit Shelley Lake Apartments complex, at 215 S. Conklin, in Spokane Valley.
The Wolff Co., a Scottsdale, Ariz.-based company with Spokane roots, plans to develop a $25.7 million, 256-unit apartment complex called Pine Springs Farm on 55 acres of land at 3711 S. State Route 27.
Riverview Venture LLC, headed by Kevin Rudeen, has applied for building permits for a $6.2 million first phase of a planned 203-unit apartment complex at 3901 W. Seltice, in Coeur d'Alene.
Spokane developer Lanzce Douglass has said he plans to start construction soon on a 384-unit second phase of the Eagle Point Apartments complex, in Cheney.
In Kootenai County, the apartment vacancy rate in June was 5.4 percent, down sharply from 7.4 percent in March and 11 percent in December, and down slightly from 5.6 percent a year earlier, the survey says.
Crellin says property managers consider a vacancy rate of 5 percent or lower to be indicative of a healthy market.
Prior to last fall, the overall apartment vacancy rate in Spokane County had hovered at under 4 percent for at least four years, previous WCRER surveys say. Apartment construction came in waves then and the pre-recession economy absorbed it, says Vicki Mundlin, a principal with the Spokane-based real estate appraisal firm Auble, Jolicoeur & Gentry.
Terry Snow, a Spokane attorney who heads Ridge at Midway LLC, which is developing a $13 million, 180-unit apartment complex north of the Wandermere neighborhood, says one- to three-bedroom apartments there have been leasing as fast they have come on line.
"In a tough economy, if people can't buy homes, they have to have somewhere to live," he says.
Snow says the complex at 16320 N. Hatch Road began leasing in May and is 38 percent occupied, although only four of seven buildings are completed. Two of the remaining buildings will be ready for tenants this month, and the final building will be completed in October, he says.
One of the brightest spots in the June apartment vacancy survey in Spokane County was the two-bedroom, two-bathroom category, which showed vacancy rate of 4.3 percent then, down from 5.8 percent in the year-earlier survey, Crellin says. Monthly rents for such units averaged $721 in both surveys.
Mundlin cautioned that the relatively tight two-bedroom category might be a reflection of people moving from larger quarters to save money.
"People are looking to cut corners where they can," Mundlin says.
In Kootenai County, June vacancy rates for two bedroom, two-bath apartments also edged tighter at 6.2 percent, compared with 6.4 percent a year earlier, and average monthly rents for them remained steady at $746.
The survey shows that the overall average rent for an apartment unit in Spokane County in June was $628, down from $645 a year earlier.
"Some landlords have flat-out lowered the rent," Mundlin says.
Renters tend to prefer newer developments, but whether people will choose to move from older apartment buildings will depend largely on rent, she says.
"Landlords generally have to charge more rent for newer apartments to cover the cost of construction," Mundlin says.
Snow says the Ridge at Midway is targeting the upper end of the apartment market. Two-bedroom, two-bath units there are offered at $845 a month, and three-bedroom, two-bath units are offered at $1,100 a month.
"Three-bedroom units were hot to start, because there weren't many available in town," he says. "It seems there is more interest in one or two bedrooms recently."
Snow says the development is offering incentives in anticipation of an expected seasonal slowdown in leasing this fall and winter. Such incentives include slight rent reductions or a period of free rent, depending on the length of lease, he says.
Snow says the Ridge at Midway also is being marketed to business travelers who will be in town for extended periods.
"A furnished apartment would be a lot nicer place to stay than a motel," he says.
Diamond Rock Construction, of Spokane Valley, recently completed construction of Appleway Terrace Apartments, a 66-unit complex at 10108 E. Appleway Blvd. That development, like the Ridge at Midway, is being marketed as a luxury apartment complex, with rent for a two-bedroom, two-bathroom unit advertised at $740 a month, and for a three-bedroom, two-bath unit at $1,125 a month, its Web site says.
Mundlin notes that hundreds of units are proposed or under construction in Spokane Valley, where the June vacancy rate, at 9 percent, was the highest in the Spokane area, although it was down from 9.8 percent a year earlier.
"It will be interesting to see what effect new developments will have on the Valley," she says.
She says apartment development tends to come in waves. "Over the last few years, 600 or 700 apartment units have come on line, and vacancies have been ticking upward," Mundlin says.
Says Crellin, "My perception is that foreclosures have prompted some people to move back into the rental market."
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