Spokane Rooter
As we progress through 2023, Spokane’s real estate landscape continues to confront formidable affordability challenges that resonate across both commercial and residential sectors. High property costs, combined with elevated interest rates, pose significant hurdles for current and prospective homeowners and investors alike. Notably, Dave Black, CEO of NAI Black, has underscored the constraints on commercial real estate activities—particularly in multifamily and retail sectors—where increased financing costs complicate developers’ returns on investment. Furthermore, recent adjustments by the Federal Reserve have stirred uncertainty in leasing activities within the industrial and office markets, showcasing a complex interplay between economic conditions and real estate dynamics. This article delves into the current state of Spokane’s real estate market, highlighting ongoing challenges and examining future trends, while also taking a closer look at housing affordability—a key concern for many residents.
Key Takeaways
- Spokane’s real estate market struggles with affordability due to high costs and elevated interest rates.
- Commercial activity, especially in multifamily and retail sectors, is hampered by increased financing costs and market uncertainty.
- While residential affordability shows slight improvement, median home values continue to outpace household income growth.
Current State of Spokane’s Real Estate Market
The current state of Spokane’s real estate market is characterized by a complex interplay of affordability challenges that impact both commercial and residential sectors. In Spokane and Kootenai counties, high costs coupled with elevated interest rates are anticipated to shape market dynamics throughout the coming year. According to Dave Black, CEO of NAI Black, the commercial real estate landscape is expected to remain constrained, particularly affecting multifamily and retail properties, as the heightened cost of financing continues to limit developers’ returns on investment. The leasing activity within the industrial and office markets presents a mixed bag, as recent Federal Reserve interest rate adjustments contribute to market uncertainty. Furthermore, Black observes a marked slowdown in multifamily development; however, he anticipates a stabilization in rental rates as more apartment units enter the market. On the industrial side, increasing vacancy rates can be attributed to a surplus of large buildings that were completed during a more prosperous economic climate. Meanwhile, the office market has maintained steady leasing activity, primarily driven by businesses restructuring their operations, even as vacancy rates rise in areas like downtown Spokane. Additionally, concerns surrounding safety in Spokane are causing some investors to explore opportunities in North Idaho, as the costs associated with maintaining real estate in Spokane have soared. On the residential front, Patrick Jones from Eastern Washington University notes a slight uptick in housing affordability, with the Spokane Trends Housing Affordability Index climbing to 71 from a previous
68.4. This improvement, while welcomed, does not mask the underlying affordability crisis caused by a sharp rise in median home values from 2019 to 2023, which outpaced median household incomes, creating a significant gap that is likely to influence market activity in the year ahead.
Future Trends and Projections for Affordability
Looking ahead, the real estate landscape in Spokane and Kootenai counties is projected to navigate an uphill battle concerning affordability across both commercial and residential markets. As economic pressures persist, particularly from elevated interest rates, Dave Black, CEO of NAI Black, emphasizes that potential investors and developers will continue to face significant challenges. The commercial sector, specifically multifamily and retail properties, may endure prolonged constraints, which could dampen new developments and investment opportunities. In contrast, as the supply of apartment units expands, rental prices are expected to reach a state of equilibrium. Meanwhile, the industrial market grapples with rising vacancy rates, as demand wanes for the super-sized buildings constructed during a prior economic boom. The office market, while showing adaptation as businesses recalibrate their footprints, also faces pressures with increasing vacancy rates downtown. Furthermore, the troubling safety concerns in Spokane are leading some investors to turn their sights to North Idaho, exploring alternatives that offer more favorable conditions. Ultimately, the residential sphere shows some glimmers of improvement with a slight recovery noted in the Spokane Trends Housing Affordability Index, but the overarching theme remains one of caution as the disparity between rising home prices and stagnant incomes continues to loom large over prospective buyers.
