Spokane Office Building Sale: Overcoming Market Challenges
In the fall of 2021, I was one of the key brokers involved in the successful off-market sale of the 201 W Building (formerly the RLH Building and previously the IBM Building), a six-floor multi-tenant office and medical property with a parking garage, for $21,290,000. This transaction required strategic marketing, skilled negotiation, and innovative problem-solving to navigate the challenges of selling Spokane commercial real estate, particularly an office building, during the post-COVID era.
Challenge: Navigating Spokane’s Post-COVID Office Market
Selling a multi-tenant office building during a time when office space was less desirable presented unique hurdles. In Q4 2021, the office vacancy rate for 4-5 star buildings in Spokane reached 21.7%, according to CoStar, highlighting the softening demand for office properties as businesses adapted to new work environments. For Spokane commercial real estate investors, this created a cautious market, making it critical to position the 201 W Building as a secure and attractive investment property.
Spokane’s office market, however, continues to offer unique opportunities for investors seeking properties in key locations with proven stability. The city’s position as a growing economic hub in the Pacific Northwest has maintained its appeal for commercial real estate, despite national trends.
How We Positioned the 201 W Building as a Resilient Investment Opportunity
As one of the key brokers representing both the buyer and seller, I worked with the team to strategically market the property off-market. By targeting a curated list of qualified buyers, we identified an ideal buyer who recognized the unique value of this Spokane office building.
A critical aspect of our strategy was emphasizing the building’s evolution over time. Historically, tenants once occupied over 50% of the building, but ownership had strategically re-tenanted the space over the years as leases expired, diversifying the tenant mix and reducing reliance on large anchor tenants. This proactive leasing strategy created a more stable income stream, minimized potential future tenant improvement costs, and positioned the building as a low-risk, high-potential investment property in Spokane’s competitive office market.
In addition, the property’s high occupancy rate, prime location along the Spokane River and Centennial Trail, and its minimal deferred maintenance made it a standout opportunity for commercial real estate investors. The tenant mix, with staggered lease expirations, added long-term security for the buyer, enhancing the property’s appeal as one of Spokane’s best multi-tenant office buildings.
Seller Goals: Aligning the 201 W Building Sale with Portfolio Strategy
The seller, a fund, aimed to position the 201 W Building for sale to align with their portfolio strategy and meet their fund’s goals. This required a well-timed and carefully managed approach to ensure the property’s value was maximized despite broader challenges in the Spokane office real estate market.
To achieve these goals, diligent property management played a key role in ensuring the property maintained strong occupancy rates and continued positive leasing momentum throughout the sales process. Ownership also invested in key upgrades over time, including a fresh exterior paint job, enhanced exterior lighting, and the addition of a new façade and entryway connecting the parking garage to the main building. These improvements gave the property a modern and inviting appearance, ensuring it remained competitive in Spokane’s commercial real estate market.
By addressing deferred maintenance and focusing on aesthetic and functional upgrades, the property was positioned as a turn-key investment opportunity, helping the seller achieve their objectives in a challenging market for office building sales.
Buyer Incentives: A Prime Investment Opportunity in Spokane
The buyer was drawn to the 201 W Building’s exceptional location in downtown Spokane, positioned along the Spokane River and adjacent to the Centennial Trail. This prime setting, combined with the building’s high occupancy rate and value-add potential through a few remaining vacancies, made it an attractive multi-tenant office building for real estate investors.
In addition to its location, the building’s tenant mix offered long-term stability. With staggered lease expirations and diverse tenant types, the buyer could rely on a steady income stream while mitigating risks commonly associated with large anchor tenants. Ownership’s proactive approach to maintaining the property further enhanced its appeal. The fresh exterior paint, enhanced lighting, and the updated façade and entryway from the parking garage meant minimal deferred maintenance and a property that felt modern and turn-key.
Ultimately, the buyer recognized the 201 W Building as a resilient and high-potential asset in Spokane’s commercial real estate market that aligned with their long-term investment goals.
Balancing Interests: Structuring a Win-Win Transaction
As one of the key brokers representing both the buyer and seller, I played a central role in balancing the interests of both parties to ensure a successful transaction. The seller sought to achieve their portfolio objectives by exiting the property at a strong price, while the buyer was focused on acquiring an office building with long-term growth potential and minimal upfront risks.
By facilitating open communication and providing detailed market insights, I was able to structure a deal that aligned with both parties’ goals. The seller achieved a premium sale price while also leaving value-add opportunities for the buyer to capitalize on. This included leasing up the remaining vacancies and maintaining the building’s competitive position in Spokane’s downtown office market.
This collaborative and transparent approach allowed both parties to feel confident in the outcome, resulting in a smooth $21,290,000 transaction that exemplified a true win-win scenario.
Results and Post-Sale Success: A Thriving Commercial Real Estate Asset in Spokane
The sale of the 201 W Building not only marked a $21,290,000 milestone but also set the stage for continued success under new ownership. Since the transaction, the property has outperformed market expectations, achieving higher-than-market rents and nearing 100% occupancy.
The proactive investments made by ownership, combined with the strategic marketing and negotiation process, positioned the 201 W Building as a resilient and attractive multi-tenant office building in Spokane. These efforts have allowed the new owner to maximize returns while benefiting from a stable tenant mix and minimal deferred maintenance.
The success of this transaction underscores the importance of strategic positioning and collaboration in navigating challenges in Spokane’s commercial real estate market, reaffirming the city’s potential as a hub for investment opportunities.
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