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03 Oct Off
LEASE RATE TRENDS
As the graph suggests, average monthly lease rates are generally increasing, with the 2019 year-to-date rate of $0.54/sq. ft., NNN, the highest of the four-plus year period. For reference, available competing market industrial asking rates are averaging about $0.56/sq. ft., NNN. As will be discussed in the vacancy and absorption trends section, lease activity has been steady, with no reason to assume any change in the near term.
Current Vacancy Levels
Vacancy rates vary widely from building to building, with CJM’s recent survey indicating an overall vacancy rate of about 4.51% (down about 70 basis points from CJM’s Q1 2019 survey). Discussions with local brokers suggest recent Spokane industrial vacancy rates are generally similar to CJM’s survey results.
Absorption Trends
2019 projected leasing activity is expected to be the highest since 2015, which also coincides with rising average monthly lease rates indicating strengthening demand for newer office-warehouse product.
CAPITALIZATION RATES
PWC’s Pacific Region warehouse OAR survey, which is generally more applicable than Realty Rates national survey, suggests warehouse OARs declined modestly year-over-year, but both surveys only provide an overview for the warehouse/industrial market.
The ten Spokane properties listed in the table below were tenant-occupied and sold during the past four years. Overall capitalization rates (OARs) among the comparable sales range from 6.35% to 8.91% with a central tendency of 7.99%.
COMPARABLE CAP RATE SALES
| No. | Designation/Location | Year Built/Ren. | Sale Date | RSF | Sale Price | OAR |
| 1 | ABRA Auto Building, 1827 East Trent Avenue, Spokane | 1982 | Active | 7,593 | $1,335,000 | 6.99% |
| 2 | East Mansfield Building, 11816 East Mansfield Avenue, Spokane Valley | 1988 | Active | 21,000 | $1,450,000 | 6.35% |
| 3 | Van Marter Drive Property, 2701 North Van Marter Drive, Spokane Valley | 1983 | July 8, 2019 | 45,657 | $3,050,000 | 8.51% |
| 4 | Ella Facility, 225 North Ella Road, Spokane | 1955/1984 | April 24, 2019 | 62,000 | $2,270,000 | 8.37% |
| 5 | Haven Street Park, 3421 North Haven Street, Spokane | 1981/1987 | March 30, 2018 | 29,340 | $1,390,000 | 8.91% |
| 6 | Canon Park Building, 7826 North Market Street, Spokane | 1993/2005 | June 29, 2017 | 21,300 | $1,150,000 | 8.14% |
| 7 | International Gateway Corporate Center, 10102 East Knox Avenue, Spokane | 2001 | February 2, 2017 | 57,250 | $8,985,000 | 8.32% |
| 8 | Koren Building, 204 South Koren Street, Spokane Valley | 1997 | December 15, 2016 | 19,716 | $1,010,000 | 8.47% |
| 9 | Madelia Building, 724 North Madelia Street, Spokane | 1962 | September 23, 2016 | 26,300 | $875,000 | 7.83% |
| 10 | North Madelia Building, 416 North Madelia Street, Spokane | 1995 | June 26, 2015 | 6,200 | $450,000 | 8.46% |
SALES TREND OVERVIEW
As the graph illustrates, sale prices per square foot were relatively flat from 2012 to 2016 (ranging from about $48 to $53/sq. ft.), but have increased substantially over the past two years in conjunction with increasing sales volume.
Marketing & Exposure Periods
Spokane and Spokane Valley office-warehouse building sales reported marketing periods ranging from about one month to two years, with the typical marketing time about three to six months.
OVERALL MARKET CONCLUSION
In summary, vacancy and rental rates have remained relatively stable over the past year, with asking industrial monthly lease rates in a general range from $0.35 to $1.00/sq. ft., NNN, while our survey of the competing market estimated industrial vacancy at about 4.50%.
Based on the evidence, industrial rental rates and
vacancy should remain steady in the near term while leasing demand for small
industrial units is improving with year-to-date executed leases on pace to be
the highest in three years. Industrial building sales volume and prices per sq.
ft., year-to-date, are higher year-over-year. Taken together, the Spokane
industrial market is improving with sufficient demand.
COMPARABLE COMMERCIAL BUILDING SALES
| No. 1 | No. 2 | No. 3 | No. 4 | No. 5 | |
| Name | Howard Building | ABRA Auto Building | East Montgomery Industrial Bldg. | Dishman Road Flex Building | Tapas Business Park-Unit 6 |
| Address | 1306 North Howard | 1827 East Trent Ave. | 10502 East Montgomery | 315 South Dishman Road | 16115 East Trent Avenue |
| City | Spokane | Spokane | Spokane | Spokane Valley | Spokane Valley |
| Market | North Spokane City | East Spokane City | Spokane Valley | Spokane Valley | Spokane Valley |
| Sale Date | Active | Active | March 4, 2019 | August 1, 2018 | April 23, 2018 |
| Year Built/Ren. | 1950/1999 | 1982 | 1985 | 1984 | 2017 |
| Building GBA | 5,744 | 7,593 | 8,800 | 5,925 | 6,064 |
| Fee Simple/Leased Fee | Leased Fee | Leased Fee | Leased Fee | Fee Simple | Fee Simple |
| % Office | 10.0%[1] | N/A | 25.8% | N/A | 20.0% |
| Clear Height | 12 feet | 16 feet | 12 feet | 20 feet | 20 feet |
| Parking Adequacy | Appears Adequate | Appears Adequate | Appears Adequate | Appears Adequate | Appears Adequate |
| # of Truck Doors | 1 GL | 2 GL | 3 GL | 2 GL | 3 GL |
| Exposure[2] | ~5,000 ADT | ~20,000 ADT | ~11,000 ADT | ~1,000 ADT | ~15,000 ADT |
| Sale Price | $1,300,000 | $1,335,000 | $1,100,000 | $480,000 | $810,000 |
| Price/SF | $226 | $176 | $125 | $81 | $134 |
| Comments | Well-maintained, single-story commercial building one block north of Spokane Arena | Corporate-leased auto repair facility in east Spokane commercial corridor. | Central Spokane Valley multi-tenant office-warehouse with additional land | Metal building located in a transitional area of southwest Spokane Valley | Newer free-standing, metal building with frontage on commercial arterial, fenced yard |
[1] Estimated based on offering memorandum, exact percentage is not available
[2] Per ESRI/STDB
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| CJM Advisors is a full-service commercial real estate appraisal and advisory firm. CJM appraisers come from a variety of backgrounds in real estate, finance, planning, and education. CJM has as owners, partners or employees three individuals who hold the MAI designation of the Appraisal Institute (appraisalinstitute.org). Designated members have met rigorous requirements relating to education, testing, experience and demonstration of knowledge, understanding and ability. The MAI membership designation is pertinent to our work here at CJM. Appraisers who hold this designation are experienced in valuation and evaluation of commercial, industrial, residential, and other types of properties. These appraisers are qualified to advise their clients on a broad range of real estate decisions. |
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