Commercial real estate stalls

COEUR d'ALENE - While a few large retail building projects are proceeding as scheduled, professionals in the commercial real estate industry do not expect 2010 to be a spectacular year for growth.

"New retail openings in the past year were slow," Coldwell Banker Commercial agent Mike King told about 300 who attended the third annual Kootenai County Market Forum presented by the Schneidmiller Realty commercial division Thursday at the Kroc Center.

Two new Walmarts, one in Post Falls and one in Hayden, and a Winco at Appleway Avenue and Ramsey Road are the only major projects currently under way, though the Love's Travel Center is set to begin construction this month and other smaller projects are in the pipeline, King said.

The Post Falls Walmart will include a Subway sandwich shop and a hair salon, and the Hayden Walmart a fast food restaurant to be announced later, King said. The Winco grocery store is expected to be around 95,000 square feet.

But many other commercial projects are stalled because the housing boom did not continue as developers expected.

Among those that have been approved and annexed into Post Falls is a 50-acre retail project at Highway 41 and Prairie Avenue. Roy Williams, vice president of development for the western region for development company Phillips Edison, flew in from the company's headquarters in Salt Lake City for the forum.

While Phillips Edison is still seeking anchor tenants for the development and some big box retailers are still considering the site, the slowdown in new housing in projects nearby on the Rathdrum Prairie means there is little activity there, Williams said.

The forum did provide some interesting facts, he said.

"It was worth the trip," he said.

Rob Kannapien, another CWB Commercial agent, addressed the real estate, finance, title company, developers and others in the industry.

"That is the most important part," he said. "2009 was a tough year for everybody."

The value of commercial property was down 40 percent, and sales volume down 90 percent, Kannapien said. Showing a graph with a colorful pitcher at the top, he acknowledged that many in the industry were overly optimistic during the boom years.

"During the bubble, most of us have partaken of the Kool-Aid," he said. Unsustainable prices and packaged products were "not necessarily as advertised."

Banks look long and hard at financing commercial real estate as investments, wanting 25 percent to 35 percent down from local investors with substantial deposits in the bank.

"The key is you need to have a significant relationship with your bank," he said.

But for those with cash, the time is right to find bargains, Kannapien said.

"This may be the best time in our lifetime to invest in commercial real estate," he said.

Among those in attendance was Charlie Nipp, a partner in Parkwood Business Properties, which holds a large portfolio of retail, office and light industrial properties.

Because the company's strategy is long-term, he is not bothered by the decline in equity, and believes Kootenai County has suffered less than other areas.

"Our quality of life bodes well for the long-term," he said, adding Parkwood might add to its assets in light of the market. "We're looking."

The decline in values of commercial property will mean a loss of tax revenues, something cities and other taxing entities will need to contend with, said Deanna Goodlander, Coeur d'Alene City Councilwoman. The city has just begun working on its next budget.

"It is not very encouraging, but it is to be expected," she said. "We are in for some interesting times."

Fred Schmidt, president and chief operating officer of Coldwell Banker Worldwide, was the guest speaker at this year's forum, and shared the national and international overview of commercial real estate.

Only $1 billion in listings sold, half of what entered the market in the past year, he said, and called 2009 a "year of severe correction in commercial and residential" that will not turn around until 2011.

Another potential problem is $1.4 trillion of debt that will come due for refinancing in the next 36 months, he said.

"We have a boatload of debt coming on line," Schmidt said. "Will we go through the same thing in commercial as residential?"

Gary Schneidmiller, broker/owner of the company, said he is upbeat about the region's future.

"We are beginning to see some light," he said. "There are many more investment opportunities."

Slides from the presentation can be seen online at www.cbcsr.com.