Spokane has established itself as a rising competitor in the Washington business market, as cheaper rents and more availability for space continue to draw in investors and developers from across the region. With upcoming projects in the construction pipeline for downtown Spokane and new transactions and leases like the Bank of America Financial Center and the Wonder Building, Spokane continues to establish its role as a significant player in the commercial real estate field.
A city of just about 217,000 people, Spokane has experienced record growth in the past decade, not just in terms of population but also when looking to commercial real estate development. Several major projects are currently underway, including the expansion of the North Bank as it connects to downtown, enlarging transit to create the Central City Line and the Riverfront park reinvestment project; both which will be delivered by 2021.
In direct competition with cities like Boise, Tacoma and Salt Lake City, Spokane is becoming a more attractive alternative to major markets like Seattle because unlike larger cities, Spokane is not as space-constrained. Charlie Wolff, business development manager for the city of Spokane, said he foresees a larger amount of people moving to Spokane as a viable alternative to Seattle, but he said it’s not necessarily because it’s a “cheaper” option.
“We like to say higher quality of life,” Wolff said.
While vacancy rates are higher in Spokane by comparison, hovering at about 15 percent downtown overall but varying by class, with Class A being the strongest performer at 10 percent vacancy, Wolff said this is likely due to the wide net the community encompasses. He also said Spokane is likely a third of the cost of the Seattle market. Office rates differ by class, with Class A at $20 per square foot full service, Class B at $15 per square foot full service and Class C at $12 per square foot full service.
Construction costs and the process of developing and bringing a project to fruition also differ by comparison.
“Construction costs are slightly less than Seattle,” Wolff said. “We are bound by similar state laws around contracting and similar working lobbies. Permitting, however, is a much more straightforward process. If one were to bring a set of completed construction documents into City Hall, we take pride in promising a permit in 30 days. We assign a project coordinator to help oversee the project.”
Investment opportunities in downtown Spokane are expanding with projects like the Riverfront park reinvestment, which will use a $64 million bond to revitalize Riverfront Park with five major design elements. The North Bank expansion is still very much in the planning stages but aims to draft the North Bank Plan and Standards in April 2019. Development concepts are in the early stages and include a connection from downtown to the event and entertainment district and the Spokane Arena, and the addition of more restaurants, dining opportunities and recreation on the Spokane River. The City hopes that these initiatives will improve connectivity to downtown and make areas more accessible for pedestrians and cyclists, and this is just a start.
The Skate Ribbon and SkyRide Facility, completed in 2017, has activated one of the city’s largest assets due to their location and accessibility to downtown, according to Wolff.
“Investment is encouraged and historically follows transit infrastructure,” he said.
The creation of the Central City Line, which will be the city’s first bus rapid transit, and parking availability, which is at nearly 56 percent peak utilization downtown, help to make investing in downtown Spokane an attractive opportunity. Wolff also mentioned city incentives around public infrastructure costs and utility hook-ups which help reduce the burden of developer costs, plus many areas of the city qualify for federal tax deferrals, an additional incentive for investment.
Perhaps two of the most prominent changes that have revitalized downtown Spokane have been the recent renovation of the Wonder Building located at 835 North Post Street and the nearly $48 million sale of the Bank of America Financial Center located at 601 W Riverside Avenue from Unico Properties LLC to the commercial real estate Canada-based company Redstone Group.
The Wonder Building, which was once the historic Wonder Bread factory, underwent a $15 million renovation by Denver-based Peter Mounsey, which modernized amenities in the building that make it attractive to potential tenants and investors. One of its newest tenants, Seattle-based Rover.com, known for its national network of 5-star pet sitters and dog walkers, announced its lease of nearly 30,000 square feet in December 2018, with a move-in date of May 1, 2019.
“Spokane suffers from a lack of readily available, highly improved, large block spaces,” said Mike Sharapata, executive vice president of investment management company JLL’s Spokane office and one of the brokers for the Wonder Building. “If you are a tenant needing 50,000 square feet or more, your options are extremely limited. The owners of the Wonder Building made strategic investments in parking, building systems and amenities that simply didn’t exist in Downtown Spokane.”
Technology companies can have a significant impact on employee productivity through the real estate assets they offer, according to Wolff. Wonder’s strategic investments and JLL’s West Coast reach have encouraged businesses from outside Spokane to relocate from their larger markets in order to have access to the assets Spokane real estate has to offer, resulting in a nearly 90 percent lease-up in eight months to four separate tenants in the Wonder Building, including Rover.com, Katerra and two national engineering firms.
“The adage ‘if you build it (right) they will come’ has never been more accurate,” Wolff said.
Sharapata added that new tenants of the Wonder Building, especially Rover, indirectly attract new investors and tenants to the area by acting as a beacon to other technology firms, shining a light on competitive amenities Spokane has to offer. Some of these amenities include solutions to traffic, lifestyle, cost of living and employee retention and access, issues that bigger markets experience.
“I relocated from the Bay Area two years ago to be closer to family and have a very intimate understanding of how larger technology markets such as Silicon Valley, Oakland and San Francisco operate,” Sharapata said. “Historic, high ceiling and exposed brick space is highly sought after. It’s where people want to be. It tells a story. When these types of buildings are renovated correctly, tech companies simply can’t resist.”
Sharapata also mentioned several companies who he believes will not only remain in Spokane, but also expand their commercial footprint as more investment opportunities are realized, including Rover, Egnyte, Katerra, F5 and Stay Alfred.
For the next five years, Wolff mentioned several growth opportunities that are on the horizon for Spokane. The largest school district bond in the history of the state of Washington at $495 million will help construct three new middle schools and rebuild an additional three middle schools, while a separate $77 million bond will help fund 12+ projects to overhaul libraries. Spokane will continue to develop and grow without the extreme space constraints experienced by larger markets and will provide rich investment opportunities for companies looking to capitalize on the quality of life that is more difficult to find in more congested business hubs.
“This is my story,” Sharapata said. “Spokane welcomed me and my family with open arms. Quality of life has improved dramatically. State income tax eliminated. Overall affordability far outweighs my life in the Bay Area and the educational choices are truly amazing.”