Spokane Journal of Business

Cooler housing market, gas prices slow retail sector

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Retail sales are expected to slow a bit next year from their rapid pace of the past few years, largely in response to a cooling housing market and rising food and gas prices, industry observers here say.

Spokane County and the cities of Spokane and Spokane Valley all have budgeted for more modest gains in sales-tax receipts next year than those they anticipate for this year.

The city of Spokane Valleys budget for 2008 includes a 2 percent increase in sales-tax revenue, compared with the 5 percent growth thats expected in those revenues on this years books, says Ken Thompson, its finance director.

With the slowdown in housing, and credit getting tighter, people will think twice about getting new cars and shopping, so were approaching the year with caution, Thompson says.

Spokane has budgeted for 3.5 percent growth in sales-tax revenues next year, says city spokeswoman Marlene Feist. Reported through October, the citys sales tax-revenues were 7 percent higher than in the year-earlier period.

Meantime, Spokane County is budgeting for a 5 percent increase in sales-tax revenue next year, says Marshall Farnell, its chief executive officer. Farnell expects sales-tax revenues this year to increase between 6 percent and 7 percent.

Randy Barcus, chief economist for Spokane-based Avista Corp., also forecasts 5 percent retail-sales growth rate in Spokane County next year, which would be half the 10 percent growth rate the overall county experienced this year. Barcus is less optimistic about retail sales growth for 2008 than he was six months ago, largely because gas prices have jumped while housing activity has returned to more normal levels. Retail sales will be buoyed here by nonresidential and public facilities projects, though, because materials used for those projects are subject to sales tax, he says.

Retail development and leasing activity will keep slowing next year as they have during part of this year, says Carl Guenzel, of Spokane-based commercial real estate concern Kiemle & Hagood Co.

I dont think were going to set any records, and I think were going to have to work pretty hard to land tenants, Guenzel says. The tenants are the ones that are going to be driving the deals.

While Guenzel says the market has hit a plateau, he says retail space vacancy rates are falling gradually, and once they get low enough, rents will increase, and more developments will be built. When that happens, major out-of-town retailers waiting for Spokane to grow a bit more will pounce, he says.

Boise-based discount grocery chain WinCo Foods Inc. has announced plans to enter the Spokane with a store on the North Side next fall. Wal-Mart Stores Inc. recently opened a Wal-Mart supercenter on the West Plains. Also, an Oklahoma businessman who has represented Home Depot Inc. in projects elsewhere is seeking a zone change for land on the South Hill to accommodate a major retailer.

Bob Smith, spokesman for River Park Square in downtown Spokane, says the mall is running at about an 8 percent increase in sales from last year. The mall is budgeting an about 5 percent increase for next year. While hes cautious about 2008, he says new tenants that are planning to open next year, such as Gymboree Corp., are expected to help boost business.

Jan Teague, president and CEO of the Washington Retail Association, expects that consumers will continue to spend next year, but on smaller gifts and comfort foods, rather than on furniture and vacations. She adds, Spokanes job growth will temper that a bit, so it wont see the same slowdown as other areas might.

  • Emily Proffitt

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