2010 Commercial Market Report

8/9/2019 2010 Commercial Market Report

1/12

Kootenai CountyCommercial Market

Review & Forecast

2010

SCHNEIDMILLER REALTY

Activity, Trends & Indicators


2/12

Phone: (208) 765-4300Toll Free: (800) 829-2555

2000 Northwest Blvd., Ste 200Coeur dAlene, ID 83814Fax: (208) 765-9150 www.cbcsr.com

IntroductIon 1

ExEcutIvE Summary &S ur vE y m Et ho do lo gy 2

offIcE 3

rEtaI l 4

land &n Ew co nS tru ctI on 5

multI - famIly 6

InduStrIal &flEx-tEch 7

IncomE producIngInvEStmEntS 8

a b ou t ko ot E na I c ou nt y 9

S p on So rS & So ur cE S 10


Table of ContentsWelcomeDear Coldwell Banker Commercial Clients & Colleagues,We are pleased to present our third annual Coldwell Banker Commercial MarketReport. Access to reliable information is a powerful tool, especially in an en-vironment of unprecedented change and challenge. The local, U.S., and globaleconomic conditions have not made it easy for anyone involved in the real estate

industry. Hopefully, our real estate report will supply information that is useful inthe business decisions you may face each and every day.

Thank you to the many businesses and property owners who have been willingto share critical information with our team. Your cooperation and assistance isappreciated and helps to make this report timely, accurate and useful. We wouldalso like to extend a special thanks to our corporate sponsors; they continue torecognize the value this information brings to the general real estate and invest-ment community in North Idaho. Those companies include Community FirstBank, Auble, Jolicoeur & Gentry, Ramsden & Lyons, Riverbend CommercePark, Greenstone, R.R. Bradley & Associates, North Idaho Title, Range andthe Spokane Journal of Business. Thanks also to the support staff at ColdwellBanker Commercial. This is a huge project and we appreciate the countless hoursinvested on behalf of our customers and clients.

As we all work through the challenging times before us, we will continue to focuson client speci c solutions. Our goal is to ensure that the real estate needs of each and every one of our customers assignments is optimally addressed. This2010 market report and forecast may encourage you to re-evaluate your real estateinvestment strategy. Our entire team of full time commercial professionals iscommitted to delivering the best in real estate services and solutions for you. Weare prepared to help you uncover the opportunities that exist today, as well as toprepare you for the future. Let us know if we may help!

Best regards,

Gary Schneidmiller , Broker/Owner Coldwell Banker Commercial Schneidmiller Realty

1


3/12


This report provides an analysis of activity along with trends and indicators for

commercial real estate in Kootenai County.

We are beginning to see the pace slow in the decline of market fundamentals.While there are encouraging signs of recovery, there are still many pervasive is-sues that will affect commercial real estate in the coming years. Both job growthand a healthier credit market will be required for a sustainable recovery in com-mercial real estate.

Investors with cash should be ready to capitalize on buying opportunities createdby distressed selling. Owners that have been holding their property with the hopefor improved terms on their loans will be forced to sell as cash ows continue to

drop due to falling rents thus affecting the property values. This buying envi-ronment will ultimately build wealth for savvy investors. Tenants are also in anexcellent position to nd new space or renegotiate their existing leases and lock-inlong term low rates. Dif cult times can consequently build the greatest wealth forinvestors who are poised to act quickly. As we noted last year, challenges bringwith them opportunities. If you are a tenant looking for lease space or an investorwith cash, you will continue to have a signi cant advantage in the coming year.

Executive Summary The latest survey expanded thenumber of properties surveyedin 2007 and 2008. Our survey

was once again made possible

through a partnership by Auble,Jolicoeur & Gentry and Coldwell

Banker Commercial Schneidmiller

Realty. Following last years

methodology, the survey focuses

on the most populous places in

Kootenai County, namely Coeur

dAlene (45,110), Post Falls

(26,500), Hayden (13,763) and

Rathdrum (7,075). Our latest data

set identifes 1,898 commercialproperties and over 15.4 million

square feet of space across all

commercial property sectors.

Survey Methodology


4/12

r E v I E w

In 2009, tenants had signi cant negotiatingleverage to obtain rent concessions, tenantimprovements and deferred rent. In somewhat of a role reversal, tenants were requiring nancialstatements from landlords. Tenants were prudentto obtain non-disturbance agreements from lendersto guarantee their leasehold interest in a propertyin case of foreclosure.

A new of ce project of note is a 31,800 squarefoot building developed by Parkwood BusinessProperties. The building is fully occupied byMountain West Bank and serves as an operationscenter. Idaho State Police also completed a 40,000square foot building in north Coeur dAlene.

River View Corporate Center in Spokane Valleyhas recently started offering new tenants free rentfor the balance of 2010 along with a full tenantimprovement build out. This type of competitionfor new users will force some landlords that are notwell capitalized to wait on the sidelines until theleasing market fundamentals improve.

f o r E c a S t

Of ce market fundaments typically lag the job

market by approximately six months. National jobgrowth is expected in mid-2010 which should helpsupport a oor in rent and vacancies by year end.For now, vacancy is still on the rise and will morethan likely set an all time high by the end of theyear.

Landlords have been offering extraordinary tenantconcessions including any combination of freerent periods, moving allowances, discounted rent,favorable termination options, little or no rentescalations and turn-key tenant improvements.This trend will continue in 2010 and will requirelandlords to provide capital to compete for newusers.

Officekoo tEnaI coun tynonfa rm payro l l JobS0

10,000 T o t a

l n o n - f a

r m p

a y r o

l l j o b s

20,000

30,000

40,000

50,000

60,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

2,891,892 Total SF Surveyed

Coeur dAlene7.23%

Post Falls9.72%

Rathdrum8.36%

Hayden8.33%

2,050,286

531,032

70,796

239,778

T o t a

l s q

. f t

.

10%5%% Vacant

off IcE vacancy

SurvEy b rEakdown


3


5/12

r E v I E w

Nationally retailers have closed underperforming storesin an effort to return to pro tability. Our local markethas not experienced a large amount of national retailersclosing. The majority of the vacancies in our marketcan be attr ibuted to local merchants that could not meetadequate cash ows to cover xed overhead expenses.New retail openings in the past year were slow; however,in 2009 we saw the start of several major new projectsin North Idaho. Work began on two Super Walmarts and aWinco. All three projects are slated to open in 2010.

The Hayden Walmart is located at the southwest corner of Highway 95 and Honeysuckle Avenue. The planned 213,000square foot store is located on 19 acres and will include a fast-food tenant that has yet to be announced.

The new Post Falls Walmart is located about a quarter mileeast of Cabelas on the north side of the Pointe at Post Fallsdevelopment. Building plans call for a mid-sized storeof approximately 154,000 square feet and plans include aSubway restaurant and a Smart Styles hair salon. Post Fallsexisting Walmart on the east side of town is about 200,000square feet. According to Walmart of cials, the existing storewill not be changed to a Sams Club as had been rumored.

Winco purchased 9 acres on the Northeast corner of Appleway Avenue andRamsey Road. Preliminary plans call for an approximate 95,000 square foot

store.

Loves Travel Stops & Country Stores Inc. has acquired10 acres of land off the Pleasantview exit in the Expo atPost Falls development. Loves plans to begin constructionin early Spring 2010. The project will include a 24-hourtravel center with a fueling area, fast food restaurant, andconvenience store.

f o r E c a S t

The best stability in retail investments will be in groceryanchored centers. Outlying strip centers built on theurban fringe in expectations of future growth will take anextended time to ll. Tight credit and high levels of debtwill hinder a surge in consumer spending so do not expecta quick recovery in retail.

Retail


0

$300 mil

$600 mil

$900 mil

$1 bil

$ 9 3 5

, 7 2 0

, 1 6 3

$ 9 2 3

, 3 9 5

, 3 7 5

$ 9 9 4

, 0 0 7

, 5 1 7

$ 1

, 0 3 4

, 8 2 6

, 4

4 3

$ 1

, 0 6 4

, 2 8 9

, 2

5 8

$ 1

, 1 2 8

, 1 3 7

, 1

1 6

$ 1

, 2 1 7

, 4 1 4

, 5

0 3

$ 1

, 1 8 2

, 7 7 8

, 9

2 5

= % change

-1.3 +7.7+4.1

+2.9+6

+7.9 -2.8

$ 1

, 0 6 3

, 7 5 0

, 4

5 7

-10

2001 2002 2003 2004 2005 2006 2007 2008 2009

t axab lE Sa lES

7,726,531 Total SF Surveyed

Coeur dAlene8.8%

Post Falls12.35%

Rathdrum12.24%

Hayden7.12%

4,280,448

2,154,097

356,229

935,757

T o t a

l s q

. f t

.

10%5%% Vacant

rEtaI l vacancy

SurvEy b rEakdown


6/12

r E v I E w

There has been a massive population in ux in Kootenai County over the lastdecade. The growth rate has slowed considerably in the past years, and as aresult, speculative land acquisitions were mostly absent in the market.

Residential lots platted in Kootenai County dropped from 1,152 in 2008to 501 in 2009, a 56.5 percent decrease. This is a 79.7 percent decreasefrom the 2006 peak of 2,462 lots platted. Coeur dAlene, Harrison andHayden reported the largest drop in lots platted among incorporatedcities in Kootenai County.

Building permits in Kootenai County also dropped from 1,567 in 2009to 979 in 2010. The total value of the building permits decreasedfrom $300,776,743 in 2008 to $219,945,083 in 2009, a decrease of 26.9percent year over year.

f o r E c a S t

Land will be a tough sell as investors with cash are looking for yieldfrom investments rather than banking on speculative appreciation.Those who have the staying power to hold for future growth will be ableto purchase land at prices we may never see again.

Expect another slow year in development. New commercialdevelopments will not pencil for investors that have incredible buyingopportunities on existing properties priced well below replacement

cost. Users that require a specialized build-to-suit property should takeadvantage of the low construction and land costs.

Land &New Construction

pErmI tS va luE unI tSk o o t E n a I c o u n t y t o ta l

Residential 729 $132,190,205 729Commercial 240 $78,722,234 -Multi-Family 10 $9,032,644 98T ta 979 $219,945,083 827

p o S t f a l l S

Residential 243 $36,423,142 243Commercial 45 $22,057,890 -Multi-Family 4 $3,868,916 50T ta 292 $62,349,948 293c o E u r d a l E n E Residential 248 $34,980,471 248Commercial 103 $25,353,592 -Multi-Family 4 $3,620,000 32T ta 355 $63,954,063 280r a t h d r u m Residential 43 $8,091,842 43Commercial 0 $0 -Multi-Family 0 $0 0T ta 43 $8,091,842 43h a y d E n

Residential 40 $8,996,443 40Commercial 33 $23,785,761 -Multi-Family 1 $499,900 4T ta 74 $33,282,104 44k o o t E n a I c o u n I n c o r p o r a t E d

Residential 155 $43,698,307 155Commercial 59 $7,524,991 -Multi-Family 1 $1,043,828 12T ta 215 $52,267,126 167

buI ld Ing pErmI t

S u m m a r y 2 0 0 9

5

l o tS p la t tEd In koo tEnaI co


0

500

1000

1500

2000

2500

3000

3500 Coeur dAlene

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

HaydenPost FallsRathdrumSpirit LakeDalton GardensHarrisonBayviewCounty


7/12

r E v I E w

Unemployment rose to 10.6 percent in the Coeur dAlene metropolitan statistical

area by year end 2009; as a result, household creation slowed and apartmentvacancy was up in all unit types. The overall vacancy rate rose from 3.5 percentin September 2008 to 6.7 percent in September 2009. The shadow condoand housing stock has continued to dilute the traditional tenant pool and hasnegatively impacted rents. Moreover, extended turn-over periods together withtenant concessions have also converged to squeeze the bottom line of apartmentoperators. The rent pressure is especially noticeable in the newer apartment stockas this segment generally commands higher rental rates. Conversely, the olderand more affordable stock has been impacted to a lesser degree. The highestoverall vacancy rate of 10.2 percent was reported in units built after 1995. ClassB & C apartments built between 1975 and 1984 performed better with an overall

vacancy rate of 2 percent.

Multi-family sales volume reported in the Coeur dAlene MLS remained fairlystatic with a 5.2 percent decrease year over year. In the absence of one notablylarge sale in Coeur dAlene in 2009, MLS sales would have declined signi cantly.Nearly 50 percent of the reported sales activity in the 2-4 unit category wasrelated to foreclosures, REO or otherwise distressed property.

f o r E c a S t

The emphasis should now be on tenant retention, ef cient operation and creatingvalue for your tenant base. As we move toward an economic recovery, multi-family investors should pay close attention to the employment market. Jobgrowth will quickly create an increase in demand and shore up rent declines inthe apartment market. Echo boomers that have been forced to live with parents ordouble up with roommates will quickly begin to rent when they nd the incometo afford a monthly payment.

l o tS p la t tEd

2000

$0.50

$0.60

$0.70

$0.80

3/15 6/15 9/15 12/15

4% 2.9% 3.8%5.6%

$0.50

$0.60

$0.70

$0.80

20013/15 6/15 9/15 12/15

4.8% 5.6% 5.2% 3.2%

$0.50

$0.60

$0.70

$0.80

20023/15 6/15 9/15 12/15

4.5% 4.3% 2.5% 3.8%

2004

$0.50

$0.60

$0.70

$0.80

$0.50

$0.60

$0.70

$0.80

3/15 6/15 9/15 12/15

20053/15 6/15 9/15 12/15

6.9% 9% 6.4% 6.5%

5.2% 3.8% 3.2% 4.6%

$0.50

$0.60

$0.70

$0.80

20063/15 6/15 9/15 12/15

3.1%7.2% 5.7% 6.9%

$0.50

$0.60

$0.70

$0.80

20073/15 6/15 9/15 12/15

4.2% 1.6% 4.3%5.1%

$0.50

$0.60

$0.70

$0.80

20083/15 6/15 9/15 N/A

4.3% 3.3% 3.5% 6.9%

$0.50

$0.60

$0.70

$0.80

20093/15 6/15 9/15 N/A

4.6% 5.6% 8.7% 5.1%

hIS to r Ica l

apa r tmEnt vacancIES

Overall Vacancy Rate

A c t u a

l R e n t

P e r R e n t a

b l e S q u a r e

F o o t

Multi-Family

Market Vacancy 1.9% 5.1% 9.8% 9.6% 16.3% 0.0% 6.7%

Avg. Rent $408 $573 $631 $753 $879 $ $673

Rent / NRSF $0.85 $0.829 $0.733 $0.71 $0.762 $ $0.768

Units Surveyed 52 374 481 344 104 1360

Complexes 2 11 12 9 5 13

STudio 1 Bdrm 2 Bdrm 2 Bdrm 3 Bedroom oTher All1 BATh 2 BATh 2 BATh


koo tEnaI coun ty apa r tmEnt

markEt SurvEy

S E p t E m b E r

2 0 0 9


8/12

-7-6-5-4-3-2-1012345678

% C

h a n g e

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

r E v I E w

Post Falls continues to report the lowest industrial vacancy inKootenai County. Industrial vacancy in Coeur dAlene rose from4.87 percent in 2008 to 10.28 percent in 2009. Hayden reporteda 9.63 percent vacancy rate; however, Hayden vacancy appears tobe dropping due to recent leasing activity. Advanced Input Systems completed a 54,000 square footexpansion developed by Parkwood Business Proper ties. InAugust 2009, Western States CAT opened a new 55,765 SFindustrial/retail building on Highway 95 in north Hayden.

Last year we reported that ALK Abello Source Materials Inc.opened an 85,000 square foot ex-tech facility at Lochsa andClearwater Loop in the Riverbend Commerce Park. ALK Abellorecently expanded their existing facility less than a year afterreceiving the certi cate of occupancy on their original building.Two new of ce/warehouse buildings were completed across the

freeway at EXPO Commerce Park. EXPO reported several

land sales to new users that will begin building in 2010.

f o r E c a S t

The industrial market will begin to recover when consumerspending returns, new construction increases and retailersrestock and build their inventories. It is important to notethat the industrial market is the least reliant on the job marketfor space demands. Expect industrial to be a top performingrecovery sector due to the short construction times,rebuilding of inventory and increased manufacturing activity.

Industrial &Flex-Tech

00 01 02 03 04 05 06 07 08 09

= Mfg. Jobs

4000

5000

4500

3500

# E m p

l o y e

d

Year

Coeur dAlene10.28%

Post Falls3.24%

Rathdrum7.11%

Hayden9.63%

1,334,859

1,991,162

377,190

1,125,982

T o t a

l s q

. f t

.

10% 15%5%0%

% Vacant

manufac tu r Ing

EmploymEnt

koo tEnaI coun ty

InduSt r Ia l vacancIES

koo tEnaI coun ty


7

gdp pErcEntagE changE baSEd on cha InEd 2000 do l l a rS


9/12

rEvIEw

National and regional banks experienced a barrage of writedowns, loanmodi cations and defaults. Many banks delayed working through distressedassets until they built up their balance sheets. In the Fall of 2009, regulatorsallowed banks to hold onto performing loans that were technically in defaultdue to declining values. At the dismay of many investors seeking properties topurchase from banks, this decision dramatically changed the number of qualityproperties returned to banks in the foreclosure process. In the short term,extensions will be the preferred resolution for lenders with maturing loans on

performing assets.

forEcaSt

Investment property sales volume was down over 70 percent from 2008 on anational level. Expect to see an increase in 2010 over the arti cially low 2009investment sales volume. The alarming pace of decline in commercial real estatevalues seems to have stabilized and investors are now planning opportunistic buys.

While our market experiences downward pressure on property values, it providestremendous opportunity for buyers who have available capital to act. As propertyvalues move below replacement cost, we can expect a reappearance of investorsin the market. Increased availability of credit, stability in the job market and aresurgence of transactions to establish a more accurate baseline for property valueswill be required for a full recovery in the investment market.


IncomeProducing Investments

0

1

2

3

4

5

6

7

8

1 9 -F

e b -1

0

1 6 - D

e c - 0 8

2 9 - O

c t - 0 8

8 - O

c t - 0 8

3 0 -A

pr - 0 8

1 8 -M

a r - 0 8

1 6 -M

a r - 0 8

3 0 - J

a n- 0 8

2 2 - J

a n- 0 8

1 1 - D

e c - 0 7

3 1 - O

c t - 0 7

1 8 - S

e p- 0 7

1 7 -A

u g- 0 7

7 -A

u g- 0 7

2 8 - J

un- 0 7

9 -M

a y - 0

7

2 1 -M

a r - 0 7

3 1 - J

a n- 0 7

1 2 - D

e c - 0 6

2 5 - O

c t - 0 6

2 0 - S

e p- 0

6

8 -A

u g- 0 6

2 9 - J

un- 0 6

1 0 -M

a y - 0

6

2 8 -M

a r - 0 6

3 1 - J

a n- 0 6

1 3 - D

e c - 0 5

1 -N

ov- 0

5

2 0 - S

e p- 0

5

9 -A

u g- 0 5

3 0 - J

un- 0 5

3 -M

a y - 0 5

2 2 -M

a r - 0 5

2 -F e

b - 0 5

1 4 - D

e c - 0 4

1 0 -N

ov- 0 4

2 1 - S

e p- 0 4

1 0 -A

u g- 0 4

3 0 - J

un- 0 4

4 -M

a y - 0

4

1 6 -M

a r - 0 4

2 8 - J

a n- 0 4

9 - D

e c - 0 3

2 8 - O

c t - 0 3

1 6 - S

e p- 0

3

1 2 -A

u g- 0

3

2 5 - J

un- 0 3

6 -M

a y - 0 3

1 8 -M

a r - 0 3

2 9 - J

a n- 0 3

9 - J a n- 0

3

1 0 - D

e c - 0 2

2

4

6

8

10

1 6 - D e c - 0 8

3 0 - O c t - 0 8

8 - O c t - 0 8

3 0 -A

pr - 0 8

1 8 -M a r - 0 8

3 0 - J a n- 0 8

2 2 - J a n- 0 8

1 1 - D e c - 0 7

3 1 - O c t - 0 7

1 8 - S e p- 0 7

2 9 - J un- 0 6

1 0 -M a y - 0 6

2 8 -M a r - 0 6

3 1 - J a n- 0 6

1 3 - D e c - 0 5

1 -N ov- 0 5

2 0 - S e p- 0 5

9 -A u g- 0 5

3 0 - J un- 0 5

3 -M a y - 0 5

2 2 -M a r - 0 5

2 -F e b - 0 5

1 4 - D e c - 0 4

1 0 -N ov- 0 4

2 2 - S e p- 0 4

1 1 -A u g- 0 4

1 - J ul - 0 4

2 7 - J un- 0 3

7 -N ov- 0 2

1 2 - D e c - 0 1

7 -N ov- 0 1

3 - O c t - 0 1

1 8 - S e p- 0 1

2 2 -A u g- 0 1

2 8 - J un- 0 1

1 6 -M a y - 0 1

1 9 -A

pr - 0 1

2 1 -M a r - 0 1

1 -F e b - 0 1

4 - J a n- 0 1

1 7 -M a y - 0 0

2 2 -M a r - 0 0

3 -F e b - 0 0

R a t e

R a t e

Annual Average

1999 166.6

2000 172.2

2001 177.1

2002 179.9

2003 184

2004 188.9

2005 195.3

2006 201.6

2007 207.342

2008 215.303

2009 214.573

c o n S u m E r p r I c E I n d E x

fEd fundS ra tE dIScoun t r a tE

wal l S t rEEt Journa l p r ImE ra tE


10/12


9

AboutKootenaiCounty

2000-2009 Pop. Annual Rate

Percentage of Employed Civilians

2.9%2009-2014 Pop. Annual Rate 2.4%

1990 2000 2009 201460000

80000

100000

120000

140000

160000

180000159869

141814

108685

69795

20092014

0-4

5-9

10-14

15-19

20-24

25-34

35-44

45-54

55-64

65-74

75-84

85+

0 2 4 6 8 1 0

1 2

1 4

1 6

$75K-99K (12.1%)$100K-$149K (6.4%)

$150-199K+ (1.7%)$200K+ (1.6%)

$50K-74K (26%)


11/12


S p o n S o r S

I n - k I n d

Sponsors Sources a n d


S o u r c E S

Auble, Jolicoeur & Gentry, U.S.

Census Bureau, J.P. Stravens/Plan

ning Associates, Inc., U.S. Bureau of

Labor Statistics, Idaho Department

of Labor, U.S. Bureau of Economic

Analysis, ESRI, Federal Reserve,

Construction Monitor Inc., Coeur

dAlene Multiple Listings Service,Coldwell Banker Commercial, Wash

ington State University Center for

Real Estate Research, Idaho State

Tax Commission, North Idaho Title,

Real Capital Analytics Inc., Wall

Street Journal Prime Rate

2010 Coldwell Banker Commer

cial Schneidmiller Realty. All rights

reserved. The information contained

in this report has been obtained from

sources deemed reliable. While

every reasonable effort has been

made to ensure its accuracy, we

cannot guarantee it. Readers are

encouraged to verify the data and

consult their professional advisors

prior to acting on any of the material

contained in this report.


12/12

C a g h ntCCIM

G nn Sat Pa Sc tt

Pa B cCCIMda Kn s

dani Bielec-KramerCCIM

d g raPat eb n m k K ngCCIM T na e wa s n

m k G ggCNS Wayn B t n

J n K p n

r b Kannap nCCIM T nt P sc t

Locally Known ,Globally Connected

2000 Northwest Blvd., Ste 200 Coeur dAlene 208-765-4300 800-829-2555

Search available properties for sale & lease at www.cbcsr.com

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2010 Commercial Market Report

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