Posted on July 18, 2013
Journal of Business
By Mike McLean
Occupancy, revenues ascend, although still beneath 2005 levels
SPOKANE, WA- The Spokane Business & Industrial Park has seen its occupancy rate and revenues slowly improve over the last few years, although both measures have some ground to make up to reach prerecession levels, says Dean Stuart, director of marketing for Crown West Realty LLC, of Spokane Valley, which owns the 615-acre facility.
SBIP, headquartered at 3808 N. Sullivan, has a total of 5 million square feet of leaseable space in about 50 buildings. The Park currently has about 125 tenants.
"Given the economic climate we've had for the last six years, the occupancy rate is quite good at 91 percent," Stuart says.
Recent new tenants include Haywood, Calif.-based Coast Aluminum & Architectural Inc., which is leasing 24,000 square feet of floor space; Swedish company Sandvik Mining & Construction, leasing 20,000 square feet; and KGM Assemblers Inc., of Kent, Wash., leasing 12,000 square feet.
The peak occupancy at SBIP during Stuart's 13-year tenure with Crown West approached 96 percent in 2004 and 2005, he says.
After the recession hit, "It bottomed out in the neighborhood of 80 to 85 percent," he says. "In 2007 and 2008, a lot of companies went out of business, downsized, or left the market."
Now SBIP's annual revenues are trending upwards, though not at a steep rate, Stuart says.
Base lease rates fell by as much as 20 percent during the recession and have recovered only about halfway, he says, adding, "The pressure is still on keeping rents down."
That pressure can include tenant demands for a number of incentives and improvements.
"There are so many variables, every deal is different," he says. "The biggest concessions are in base rent and the length of lease terms."
Before the recession, five- and 10-year leases were the norm, Stuart says, adding that now, tenants are requesting one- or two-year leases.
"We don't like doing anything with less than three-year terms," he says. "If you have a property full of one- or two-year leases, it can be unstable, because there could be a lot of turnover all at once."
Stuart says SBIP rents are competitive, and Crown West regularly invests in the property to keep it updated.
Current monthly lease rates start at 18 cents per square foot for distribution and manufacturing space, he says. Annual rents for office and retail space range from $4.50 to $12 per square foot.
One good indicator that some current tenants are gaining confidence in the economy is they're expanding their current space, Stuart says.
Spokane-based companies Spokane Industries Inc., Hydrafab Northwest Inc., and Jubilant HollisterStier Contract & Manufacturing Services each recently expanded their respective leased space at SBIP by 20,000 square feet.
Spokane Industries now leases 260,000 square feet, Hydrafab leases 45,000 square feet, and Jubilant HollisterStier's expanded space at SBIP totals 40,000 square feet.
SBIP's largest tenant in terms of leased space is Inland Empire Distribution Systems, which occupies 300,000 square feet of floor space, Stuart says. On the other end of the scale, the park has tenants that lease spaces as small as 1,000 square feet, he says.
"We have a variety of different types of space," he says.
Stuart says one of the advantages the SBIP can offer is to increase space to accommodate tenants' growth.
"A lot of clients need more space in the middle of their lease," he says.
Other amenities at the park include on-site rail services and truck scales, Stuart says.
The tenant makeup in terms of industry sectors is 50 percent manufacturing, 40 percent distribution, and 10 percent retail and office.
"Manufacturing has gone down," he says. "In 2000, 65 percent of the occupancy was manufacturing."
Conversely, distribution and warehousing use has increased from 30 percent in 2000, and office and retail has increased from 5 percent.
SBIP has added more than 1 million square feet of space at the park since it bought the former U.S. Navy supply depot in 1997. Its most recently constructed building is a 110,000-square-foot distribution center, which was completed last year for American Tire Distributors Inc. in conjunction with a 12-year lease agreement with the Huntersville, N.C.-based company.
Stuart says Crown West has no plans on the horizon to construct more buildings at SBIP.
"At this point, we're out of available land," he says.
Stuart says Crown West is pursuing a number of prospects to lease additional space at SBIP. "I wouldn't count any now as highly likely, though," he says.
He asserts that demand is growing in the business community among companies that will need larger spaces, but many businesses are holding back due to uncertainty in the national political and financial outlooks.
"There's a lot of trepidation that's keeping people from taking action that they might take in a more certain environment," he says. "Sooner or later they are going to have to act, but right now a lot of people will just wait and see."
Crown West has a staff of about 40 people, fifteen of whom focus primarily on SBIP. "A lot of accounting is handled out of Spokane for properties all over the country," he says.
Crown West, a subsidiary of New York-based real estate investment company Petrus Partners Ltd., owns and manages about 3 million square feet of building space outside of SBIP.
"We have staff in Phoenix and Denver, and the East Coast is handled out of New York, he says.