Future looks promising after boom year for Spokane area construction

If you’re under the impression that you’re seeing a remarkable amount of construction around Spokane – from cranes on the skyline to the peals of hammers in neighborhoods – you’re not wrong.

Last year, the city of Spokane set a record for the dollar value of the building permits issued at $538 million. Even if you take Walt Worthy’s downtown hotel out of the equation – permitted at a value of $135 million – 2013 was a genuine boom year for people deciding to invest in construction in Spokane, surpassing the value of building permits issued in Boise and Tacoma.

Countywide, permits for more than $1 billion worth of construction were issued last year by Spokane, Spokane Valley and Spokane County, the highest total in years.

“It’s really astonishing,” said Jan Quintrall, the city’s head of business and development services.

All of which is very good news moving forward. Yesterday’s permits turn into today’s construction projects, with all the economic ripples that emanate from that. And today’s construction turns into property taxes in the coffers tomorrow for local governments.

Grant Forsyth, chief economist for Avista Corp., said that building permits are one of the economic indicators he tracks to try and gauge the economy’s future prospects. In particular, he follows the number of residential units permitted in both Spokane and Kootenai counties. By that measure, current construction permitting is about level with last year at this time, he said.

Still, starting about halfway through last year, he said, construction permitting shot up. The city’s numbers may be stronger than the region overall, but construction is showing more strength than it has since the boom went bust in 2008.

“Clearly there’s been a real pickup … compared to 2011, 2010,” Forsyth said. “Compared to that period, things have picked up considerably. But if you go back in time, we’re still way behind the permitting of the boom period.”

The elephant in this particular room is Worthy’s new hotel. It’s the biggest local project by a mile. Worthy’s hotel is spurring a lot of other downtown activity, Quintrall said, pointing out development activity from the Bennett Block and the areas surrounding the hotel to the “restaurant row” on Sprague across from the Davenport. Kendall Yards and Gonzaga also have been sites of more or less constant construction activity.

Permit statistics for the city of Spokane include a lot of interesting details:

• The number of new-construction permits issued was 516, a 41 percent increase over 2012 and the most in recent years. The number of single-family homes permitted was 251, a 35 percent increase over the prior year and also the most in recent years – though still well below 2006 and 2007.

• Even without Worthy’s hotel, the value of last year’s permits was about $400 million. Only 2006 saw higher values than that. So far this year, the permitted values are lower than last year, but the number of permits is up.

• After a period in which public-sector building was a large part of all construction, the private sector is swinging hammers with a vengeance: 82 percent of the city’s 2013 construction value was private dollars. So far this year, it’s 84 percent.

• The value of renovations and additions was $200 million in 2013, which is roughly equal to the peak year of 2006.

• After Worthy’s hotel, the largest project permitted in 2013 was the new parking and retail building at Gonzaga (valued at $45.4 million); the convention center expansion ($37 million); the Finch Elementary addition and renovation ($13.8 million); and the new GU tennis and golf center ($12.6 million.)

It’s hard to credit any single factor for all the swinging hammers. But Quintrall’s office has greatly speeded up the permitting process at City Hall, and she said that change – along with lots of other customer-friendly innovations in the Condon administration – has played a role.

“I think part of it is the sense that it’s a new day, and we’re doing things differently,” she said.

Forsyth agreed that a faster, easier permitting process can have an effect. He also noted that a larger factor likely is interest rates – which have been ultra-low, and which are expected to rise again at some point next year. A lot of the current building activity may be prompted by a rush to build before interest rates rise again, he said, and it’s not clear how much of a damper rising interest rates might bring.

For today, though, things are hopping. And that bodes well for tomorrow.