Spokane Journal of Business

Construction activity soars

Combined year-end figures for city and county display sharp rise

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Spokane city and county recorded a dramatic $188 million combined increase in building permit activity in 1998, zooming past numbers posted during a mostly lethargic construction season the previous year.

Together, they issued permits last year for $565.7 million worth of construction, including new construction, remodels, and alterations, which was up about 50 percent from the $377.2 million worth of construction permits issued in 1997.

New construction activity accounted for the entire increase, as the permit values for remodels and alterations decreased slightly. The overall number of permits also was up sharply, to about 20,500 permits in 1998 from about 17,900 in 1997.

Each major new-construction categorysingle-family residential, multifamily residential, office/professional, and mercantileexperienced a double-digit increase in permitted activity in 1998, based on permit values. In two categories, office/professional and commercial, the dollar volume of permits more than tripled.

The 1998 permit figures are skewed by the $88.3 million River Park Square redevelopment project downtown, but even without that big project, the volume of activity increased substantially. If River Park Square is taken out of the equation, total construction activity still was up 26.5 percent, or $100 million.

The explosive jump in permit values makes up for a 15 percent decline in 1997 and also improves on 1996 figures. It also suggests that the construction market here, during 1998 at least, regained some of the momentum lost after the last real estate boom peaked in 1993.

The economy here is probably better than a lot of people expect it is, says Ken Dunham, executive director of the Inland Northwest Associated General Contractors.

In the single-family residential market, the city and county together issued permits for about $193.6 million worth of new homes in 1998, a 35 percent increase over the $143 million in new homes permitted during the previous year.

In 1997, builders had requested fewer permits for new homes than they did in 1996, because a large inventory of new houses remained on the market from an overbuild during the previous year, Condron Construction Inc. President Craig Condron says. Buyers absorbed much of that inventory in 1997, he says, and residential construction activity picked up once again.

Nonetheless, Condron says, As we go out of 1998 and into 1999, I see the inventory of my fellow builders starting to increase again, and thats not necessarily a good thing.

While the biggest dollar volume involved permits for new homes, the biggest increase in permitted values occurred in the new construction of office and professional buildings. Last year, the city and county issued $33.6 million worth of permits for new office or professional buildings, up 250 percent from the $9.6 million in 1997.

Toward the end of 1997, a tight office market concerned some local real estate experts. At that time, one Realtor estimated the vacancy rate to be as low as 3 percent in high-demand areas. After meeting that demand with the surge of construction activity, the market now appears to be on a more even keel, sources say.

In the multifamily residential market, the city and county issued permits for $52.7 million worth of new construction in 1998, a 90 percent increase over the $27.7 million in activity the previous year.

With permits issued for more than 1,000 apartment units this year, there are concerns about high vacancy rates if all proposed projects are completed. A couple of months ago, some small apartment building owners predicted that vacancy rates will remain around 8 percent this year, with the potential to go into double digits.

Mercantile, or commercial, construction jumped 225 percent to $109.3 million in 1998, compared with $33.6 million a year earlier. However, with the big River Park Square job excluded, the amount of activity permitted was $21 million, or about 37 percent lower than the previous year.

David Shea, president of Shea Construction Inc., of Spokane, says he didnt notice a drastic change in commercial activity between 1998 and 1997.

He says commercial construction has continued at a healthy pace for the last five years, and most contractors and subcontractors are keeping busy, but have the ability to take on additional work.

Shea expects the same pace to continue in 1999.

The big-box retailers have had an unheralded expansion across the country side, he says. The economists say that may slow down in the coming years, but well have to wait and see.

Linn  Parish
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Editor Linn Parish has worked for newspapers and magazines since 1996, with the bulk of that time being at the Journal. A Montana boy who has called Spokane home for some time now, Linn likes Northwest trails, Deep South foods, and lead changes in the ninth inning.

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