SCHNEIDMILLER REALTY

Kootenai County
Commercial Market
Review & Forecast
2008
Activity, Trends & Indicators
1

Survey
Methodology
Table of Coldwell Banker Commercial Schneidmiller Realty is pleased to present a

Contents
s u rv e y
m e t h o d o lo gy 1
O f f i c e 2
r e ta i l 3
Land / new
c o n s t r u c ti o n 4
m u lti - fa m i ly 5
industrial 6
S o u r c e s 7
Kootenai County Commercial Real Estate Market Report. Our purpose is to
present valuable information for investors and building owners who are affected
by our evolving market. We have collected statistics from many different sources
and compiled the data in a concise manner.
This report focuses on the most populous places within Kootenai County, namely
Coeur d’Alene (34,785), Post Falls (17,028), Hayden (9,361), Rathdrum (4,891), and
Dalton Gardens (2,260). Our analysis attempts to give a definitive study of past
trends and future indicators that both have and will characterize our market.
New data from a Kootenai County survey by Auble, Jolicoeur & Gentry and
Coldwell Banker Commercial Schneidmiller Realty gives insight into our market
that was not possible before. The 2007 survey sampling encompassed over
8.5 million square feet of commercial buildings which equates to 32% of the
commercial buildings identified in our market. Going forward, we will continue
with a semi-annual survey that will give us the ability to track historical trends in
vacancy rates, rental rates and absorption rates.
The data in this report largely reflects the continuation of a strong market for
commercial real estate activity in Kootenai County. Low interest rates and
economic growth have contributed to a relatively stable commercial market.
At Coldwell Banker Commercial Schneidmiller Realty, we appreciate the
opportunity to work with our valued clients and build relationships based on
superior service. Each member of our team strives to meet your needs and help
you fulfill your goals. We thank you for your business.

Phone: (208) 765-4300

Toll Free: (800) 829-2555

435 W. Hanley Ave.

Coeur d’Alene, ID 83815
Fax: (208) 765-9150
www.nwinvest.com

SCHNEIDMILLER REALTY
 2

Office
Review
The office sector of our market claimed the lowest
vacancy rate across all sectors surveyed. Overall
vacancy is at 2.37% with over 1.5 million square feet
surveyed. Office tenants have trended towards fewer
turnovers and a greater amount of lease renewals.
Lessees have found it clearly more cost effective to
renew or expand in their current location than move to a new space. Rising
tenant improvement costs have contributed to the increased level of renewals. In
addition, rising land prices and construction costs are driving up asking rents on KOOTENAI COUNTY
new projects. NONFARM PAYROLL J O B S

Existing buildings have continued to increase rents to 60,000

compensate for higher operating costs. However, rents at
50,000
existing buildings are still significantly more economical

Total non-farm payroll jobs

than new office space entering the market. 40,000

One major new project to note is the recently completed 30,000

46,300 square foot Riverview Tower on Northwest
Boulevard. Parkwood Business Properties is offering 20,000
space in this project at an annual rate of $18/sq. ft. net.
10,000
As of the end of February 2008, they have successfully
leased 90% of available lease space in this property. 0
2000 2001 2002 2003 2004 2005 2006 2007
Forecast
Year end 2007 unemployment for Kootenai County o f f i c e s u rv e y
remained remarkably low at 3.5%, significantly better breakdown
than the 4.8% national year-end unemployment rate. Job
growth and unemployment trends are a key indicator 1,000,000 sf
of future office space needs. These positive factors = % vacant 2.37%

typically foreshadow upward movement in office leasing 800,000 sf

1, 523,368 Total SF Available
activity as job growth and business expansion continues.
600,000 sf
2.06%
Expect to see increased build-to-suit activity in the 400,000 sf
office market as rising land and building prices make
speculative construction cost-prohibitive, and developers 200,000 sf 1.71%
risk ongoing holding expenses. The “credit-crunch”
5.79%
0%
will remain a pervasive problem that could limit 0
Hayden Rathdrum Dalton Coeur d’Alene
sales of office condos and new office development.
Post Falls
Office Office Office Office Office

Completion of the federal courthouse should keep market

conditions stable throughout the year. Completion of the
federal courthouse in North Coeur d’Alene will drive
development of office space for tenants in associated
professions. A combination of modest growth and
minimal planned office construction should keep market
conditions stable throughout the year.

SCHNEIDMILLER REALTY
3

ta x a b le sa le s
Retail Review
2007 marked the completion of numerous retail centers across
Kootenai County. Major project completions included the opening
= % change of Cabela’s near Stateline, Kohl’s just south of Prairie Avenue on
$1 bil Highway 95, and Sportsman’s Warehouse adjacent to Costco.

Retail vacancy was measured at 8.1%, with over 3.8 million square feet
+7.9
+6
$900 mil
surveyed. The highest vacancy rate was measured in Rathdrum with
+7.7 +4.1 +2.9
$1,034,826,443
$1,064,289,258
$1,128,137,116

-1.3
$1,217,414,503
12.95% vacant. The rapid development of strip centers throughout the
$935,720,163
$923,395,375

$994,007,517

$600 mil county has outpaced retail absorption. Small users have numerous
options forcing landlords of Class B properties to attract tenants with
$300 mil move-in specials and aggressive tenant improvement allowances.

Taxable sales attributed to Kootenai County in 2007 rose to over $1.2

billion, an increase of 7.91% over the previous year. National retailers
0
2001 2002 2003 2004 2005 2006 2007
continue to expand to meet the needs of the growing population and
economic base.
R e ta i l B r e a k d o w n
Forecast
Phase II of the highly successful Sportsman’s Warehouse strip
2,000,000 sf = % vacant
3.46% centers is scheduled for completion in summer of 2008. Tenants
3,866,946 Total SF Available in Phase I have quickly realized the benefits of Costco and
1,500,000 sf
12.74%
Sportsman’s Warehouse serving as shadow anchors.

1,000,000 sf The Pointe at Post Falls has attracted major national retailers.
The project has slated over 800,000 square feet of retail to big-
8.56% box, hotel, theater, restaurants, fast food and inline space. As
500,000 sf 12.95% of the end of February 2008, there are no signed contracts, but
0% negotiations are underway with Wal-Mart, Lowe’s and Sam’s
0
Post Falls Hayden Rathdrum Dalton Coeur d’Alene Club. A large hospitality component is also expected in the near
Retail Retail Retail Retail Retail future.

Barnes & Noble is set to open July 2008 in the Village at

Riverstone. Other planned tenants include Red Robin and Ironwood Athletic Club.
In first quarter 2009, nine undisclosed national retailers are scheduled to open.

Ongoing softness in the housing market will continue to affect retail absorption.
Inevitably, if consumer spending continues to slump and unemployment increases,
the national retail market will further soften. Kootenai County’s retail market still
remains comparatively healthy, particularly in the high-end retail sector. However,
a softening would likely send vacancy rates higher and exert pressure on landlords
to reduce asking rental rates.

Owners and developers of retail real estate are well aware of the challenges facing
retailers. Nonetheless, local conditions still remain relatively robust compared to
the national situation. Kootenai County’s close proximity to Canada could also
aid the retail market as tourism spending should be bolstered by the weak United
States dollar.
SCHNEIDMILLER REALTY
 Land &
4

Review
New construction
in the area has
New Construction
slowed alongside the national housing market. Lots platted in Kootenai County
decreased from 2,462 in 2006 to 1,362 in 2007. The largest decreases were seen
B u i l d i n g P e r m it
in Rathdrum and unincorporated areas throughout Kootenai County. While the S u m m a ry 2 0 07
number of lots platted decreased, major developers positioned
for future growth. A number of significant land acquisitions P e r m i t s Va l u e U n i t
were made along the Highway 41 Corridor, North Hayden area,
and Cabela’s development area. Kootenai Co. Total
Residential 1848 $305,338,467 1,396
Commercial 336 $212,724,424 N/A
Over the past decade, single-family home construction Multi-Family 39 $38,346,902 377
throughout the region has been stimulated by population influx Total............................... 2223 $556,409,793 1,773
to Kootenai County from neighboring states. One of the best
Post Falls
indicators for tracking buyer relocation trends is the origin Residential 295 $53,357,274 364
of surrendered driver’s licenses. The Idaho Transportation Commercial 70 $50,594,240 N/A
Department has tracked the origin of surrendered licenses since Multi-Family 17 $11,848,602 150
Total................................. 382 $115,800,116 784
1997. The number of surrendered licenses from California
ballooned from 834 in 2001 to 1,383 in 2006. The top two Coeur d’Alene
sources of immigration for Kootenai County are California Residential 477 $84,674,385 523
and Washington respectively. This data shows an increased Commercial 140 $128,479,543 N/A
Multi-Family 16 $22,426,849 211
attraction to Idaho from across the Western region. Total................................. 633 $235,580,777 734

Forecast Rathdrum
Census Bureau statistics project that by 2030, Idaho population Residential 111 $15,119,287 84
Commercial 11 $3,513,772 N/A
will increase to over 2 million residents. This reflects a 52% Multi-Family 0 $0 0
increase over 2000 population, and a 45% faster growth rate than Total................................. 122 $18,633,059 84
the national average. Idaho is predicted to need an additional
390,000 new housing units to absorb the population influx. An
Hayden
Residential 184 $32,222,090 130
increase in housing units goes in step with an increase in jobs, Commercial 51 $16,835,416 N/A
retail stores and office space. Unquestionably, Kootenai County is Multi-Family 6 $4,071,451 16
a highly desirable destination that will continue to be viewed as a Total................................. 259 $53,128,957 146
market with great investment opportunities. Kootenai Co. Uninc.
Residential 781 $119,965,431 295
Lo t
lo tss p
Pll at
at te
te d
d i n Ko o te n a i c o. Commercial 64 $13,301,453 N/A
Multi-Family 0 $0 0
Total................................. 845 $133,266,884 295
Coeur d’Alene
2000 Hayden
Post Falls
2001 Rathdrum
Spirit Lake
2002
Dalton Gardens
2003 County
Year

2004
2005
2006
2007
Total Lots 0 500 1000 1500 2000 2500 3000 3500 SCHNEIDMILLER REALTY
5

Multi-Family
H i s t o r i ca l
Apa r t m e n t Vaca n c i e s

Overall Vacancy Rate

$0.60
Actual Rent Per Rentable Square Foot

$0.50

$0.40

$0.30 Review
$0.20 Sales volume of multi-family product in Kootenai County was off 57% as
$0.10 compared to 2006 ($35 million in 2007 vs. $15 million in 2006). Values declined
approximately 11% from 2006 levels as the average sale price fell from $345,000
4% 2.9% 3.8% 5.6%

0
to $306,000 in the multi-family arena.  Unsold stock remains higher than previous
3/15 6/15 9/15 12/15
2000
years, especially in the condo market.
$0.80
$0.70
$0.60
$0.50
The good news is Kootenai County apartments achieved an average rent of $0.77
per net square foot in 2007.  Overall, apartment vacancy decreased to 4.3% from
$0.40
$0.30
$0.20 5.7 % the previous year.  Remarkably, studio apartments (a small segment in our
$0.10 4.8% 5.6% 5.2% 3.2% market) recorded no vacancies in the final 2007 apartment survey conducted. 
Some newer units with exceptional amenities or superior locations are achieving
0
3/15 6/15 9/15 12/15

rent of over $1.00 per net square foot.

2001
$0.80
$0.70

Affordability remains a key concern for Kootenai County.  A household is

$0.60
$0.50
$0.40 considered cost-burdened if annual rental rates exceed 30% of a household’s
$0.30 yearly gross income.  Presently, one in seven US households is severely housing
$0.20
cost-burdened.  Kootenai County’s affordability has declined over the past decade
and is now less affordable than neighboring Spokane County.  The growing low-
$0.10 4.5% 4.3% 2.5% 3.8%
0

income rental population is driving an increase in demand for affordable housing.

3/15 6/15 9/15 12/15
$0.80 2002
$0.70

Forecast
$0.60

Values will continue to be soft, presenting opportunities for liquid buyers. 

$0.50
$0.40
$0.30 Vacancy rates will decline to levels not seen in years as prospective homeowners
$0.20
9% sit on the sidelines waiting for the housing market to hit bottom. Additionally,
the recent melt-down in the “sub-prime” mortgage arena has caused tightening
$0.10 6.9% 6.4% 6.5%

0.0
of underwriting standards for new home loans, thereby closing the door on many
3/15 6/15 9/15 12/15
2004
first time home buyers who are currently renting. The result is lower vacancy rates
$0.80
$0.70
$0.60 and increased rents for apartment housing.
$0.50
$0.40
$0.30
$0.20
$0.10 5.2% 3.8% 3.2% 4.6% Ko o te n a i C o u n t y Apa r t m e n t
0.0
3/15 6/15 9/15 12/15
M a r k e t s u rv e y S e p te m b e r 2 0 07
2005
$0.80
Studio 1 Bdrm 2 Bdrm 2 Bdrm 3 Bedroom Other All
$0.70 1 Bath 2 Bath 2 Bath
$0.60
$0.50
$0.40
$0.30
Market Vacancy 0.0% 4.5% 3.2% 2.8% 16.5% 0.0% 4.3%
$0.20
$0.10 3.1%
7.2% 5.7% 6.9% Avg. Rent $408 $573 $651 $747 $895 $926 $664
Rent / NRSF $0.850 $0.841 $0.761 $0.708 $0.795 $0.643 $0.772
0.0
3/15 6/15 9/15 12/15
2006
$0.80 Units Surveyed 52 403 526 325 103 24 1433
14
$0.70
$0.60
Complexes 2 12 13 9 4 2
$0.50
$0.40
$0.30
$0.20
$0.10 4.2% 4.3% 6.9%
1.6%
0.0
3/15 6/15 9/15 N/A
2007 SCHNEIDMILLER REALTY
 Industrial
6

I n d u s t r i a l Vaca n c i e s
Ko o te n a i C o.
Review
Job growth in Kootenai County manufacturing employment has driven
high demand for this product type. Of the 2,215,420 square feet
surveyed in Kootenai County, only 87,869 square feet is vacant (3.97%).
The majority of the vacant space was found in smaller buildings with
fewer than 3,000 square feet. These vacancies are due to substantial
construction of small spaces over the last several years. Even with
low vacancy, leasing rates have resisted upward movement and remain
fairly static. Tepid rate trends have failed to keep pace with increased
construction costs, which in-turn, have kept developers from building
large speculative industrial space.

Over the past year, low interest rates and favorable owner-occupied
financing have converted several leased industrial spaces to owner-user
space. This shift could make room for additional lease space in the
near future.
M a n u fac t u r i n g
Industrial land rates in Hayden have edged higher than Post Falls. In Riverbend e m p loy m e n t
Commerce Park, offering rates are $4.00 to $4.50/sq. ft. Light industrial lots in ko o te n a i C o.
EXPO at Post Falls range between $5.00 and $8.00/sq. ft for
half to one-acre lots. Industrial land prices are slightly higher = Mfg. Jobs
in parts of Kootenai County than Spokane County, with some 5000
asking prices above $10.00/sq. ft.
# Employed

4500
Forecast
Only a few new projects are proposed at this time. The
Riverbend Commerce Park is currently finishing up two 4000
buildings with a combined total of approximately 87,000
square feet. The Park has a 43,000 square foot building 3500
slated for construction in the near future, but no formal 2000 2001 2002 2003 2004 2005 2006 2007
decision has yet been made. Riverbend Commerce Park is
moving forward on Phase 4 plans, with 24 lots ranging from
1.0 to 1.5 acres, of which several lots are currently pending sales.

Businesses looking for large spaces will need to consider build-to-suit options due
to the lack of supply. The aforementioned static rental rates should begin trending
upward to keep up with construction costs. The manufacturing employment
underpinnings of the industrial market remain positive.

Furthermore, low vacancy rates and strong demand will create a healthy
industrial market in 2008.

SCHNEIDMILLER REALTY
Sources
Fall 2007 Spokane/Kootenai County Market Survey – Auble, Jolicoeur &
Gentry/Coldwell Banker Commercial Schneidmiller Realty • 1990, 2000
Census & Housing Data - U.S. Census Bureau • Population and Housing
Projections - U.S. Census Bureau • Unemployment Data - U.S. Bureau
of Labor Statistics • Idaho Employment/Unemployment Data – Idaho
Department of Labor • County and Zip Business Patterns - U.S. Census
Bureau • Building Permits Survey - U.S. Census Bureau • Coeur d’Alene
Multiple Listing Service Data • Cities of: Coeur d’Alene, Post Falls,
Hayden and Rathdrum.

© 2008 Coldwell Banker Commercial Schneidmiller Realty. All rights

reserved. The information contained in this report has been obtained
from sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. Readers are
encouraged to verify the data and consult their professional advisors prior
to acting on any of the material contained in this report.

Acknowledgment
Coldwell Banker Commercial would like to thank everyone for their
participation, especially our dedicated clients. We appreciate you! We
thank Gary Schneidmiller for the vision to pursue this venture. Thank
you Mike King for your hours of design, execution, and review in helping
make this market report a reality. We thank Auble, Jolicoeur & Gentry
for their tireless efforts in securing data for our report, as well as the
future statistical reporting that we will all benefit from. We give a very
special thank you to for their diligent dedication and excellence
in delivering this creative presentation.