The recession and job losses have contributed to a steep rise in apartment vacancies here recently, ending an extended period of high occupancy rates, industry observers say.

Other related factors contributing to the near doubling of the vacancy rate include tenants leaving their apartments to move in with family or doubling up in apartments to save on expenses, says Vicki Mundlin, a principal at the Spokane-based real estate appraisal firm Auble, Jolicoeur & Gentry. Also, landlords likely are losing some tenants who are taking advantage of federal incentives to become home owners, Mundlin says

In 2009, the fall apartment vacancy rate in Spokane County climbed to 7.2 percent, up steeply from 3.9 percent in 2008, and the highest seasonal rate since 1999, according to a survey conducted by the Washington Center for Real Estate Research (WCRER), which is at Washington State University.

The overall apartment vacancy rate in Spokane County had hovered at under 4 percent for at least four years, dipping to 3 percent in 2007, the survey says. The vacancy rate in Kootenai County rose to 8.7 percent in the fall of 2009, up from 3.5 percent a year earlier.

Mundlin says the apartment market was strong through 2008, but started to show signs of softness by mid-2009.

"We saw a big increase in vacancy starting in the second half of 2009," she says. "It's related to the recession as much as anything."

Lori Koester, general manager of multifamily housing at Liberty Lake-based Greenstone Corp., also says vacancies started to rise in the fourth quarter of last year.

"We were seeing red flags in June or July," Koester says. "At the local level, we started feeling the impact of people losing their jobs in the last half of the year."

Those red flags included a slowing trend in rent collections and an increase in people declining to renew their leases.

"The No. 1 reason people were moving was economic," Koester says. "They no longer could afford the rent. They lost their job, or something happened within the family dynamic that they had to move in with somebody or help each other out."

The unemployment rate in Spokane County was 9.3 percent in December, up from 7.3 percent in the year-earlier month, according to a Washington state Employment Security Department survey. A more recent survey says that rate has continued to climb, reaching 10.6 percent in January, up from 8.8 percent in the year-earlier month.

The WCRER survey found that average monthly apartment rents in Kootenai County dipped slightly to $660 last year, from $673 in 2008, while average rents in Spokane County rose to $651 in 2009, from $632 in 2008.

Rent concessions, often in the form of a month's free rent in a one- or two-year lease, are common for new apartment projects, and they have become a growing factor in retaining renters.

"We usually see concessions when new projects are completed," Mundlin says. "Now, we're starting to see concessions on lease renewals, so people won't leave."

Factoring in concessions, average rents in Spokane County probably were lower in 2009 than in 2008, Mundlin says, adding, "Concessions don't show up on the surveys."

Compounding the current economic woes, "There's more product on the market," Koester says. "The world of renting apartments has changed."

Greenstone has developed more than 1,300 apartment units in seven apartment complexes in the Spokane-Coeur d'Alene area, including the recently completed 210-unit Bitterroot Lodge development, in Liberty Lake; the two-year-old 114-unit NorthStar Lodge development, on Spokane's North Side; and Rockwood Lodge, in Coeur d'Alene.

Koester says Greenstone has offered rent concessions at some of its properties.

"The North Side has been a little slow for us, and Coeur d'Alene has been troubling for us as well," she says.

Koester says the company has to stay ever mindful of the competition.

"We sometimes do market surveys every other week to respond to markets and changing rents," she says.

Mundlin says the federal first-time home buyer tax credit might be contributing to the vacancy rate in some of the higher-end apartments with rents at ranges of $700 to $1,000 a month.

"It could be taking the cream of the crop as far as renters go," Mundlin says. "They can put the $8,000 tax credit toward an entry-level home and have mortgage payments that are close to what they pay in rent."

With persistent high unemployment, Koester says it might take a few years for the overall occupancy rate to reach the 95 percent level, which it surpassed from 2005 to mid-2009.

Spokane developer Lanzce Douglass, however, says he thinks the market is stabilizing.

Douglass heads companies that developed and manage the 328-unit Trestle Creek apartment complex, at 5015 South Regal, on the South Hill, and the 384-unit Prairie Hills at Grayhawk complex, at 1718 E. Lincoln, on the North Side.

He says overall rents were down in 2009, compared with 2008, but that was due in part to rent concessions, which helped reduce the vacancy rate.

So far this year, though, Douglass says occupancy rates are improving at his developments, enabling him to curtail concessions.

Douglass also heads Eagle Pointe Apartments LLC, which is developing the 576-unit Eagle Pointe Apartments, in Cheney. Eagle Pointe began leasing units in its 192-unit first phase in January.

"It's a college area. We're getting a lot of reservations for August and September," he says. "We don't have too many students coming in midterm, but we're ahead of where we thought we would be."

Douglass says Eagle Pointe didn't offer rental concessions to tenants.

Likewise for Greenstone, Bitterroot Lodge is leasing its new units without rent incentives.

"We haven't had to do concessions, and haven't adjusted the price," Koester says. "We're letting the market absorb it at a natural pace."

Douglass says the economy hasn't halted his development plans. He says he plans to start work on the 384-unit second phase of Eagle Pointe this summer or fall.

He says he also wants to develop an apartment complex in Coeur d'Alene, although he declines to comment further on those plans.

Overall, the highest vacancy rates in the Spokane area in the last two years were in the Spokane Valley-Liberty Lake area, where vacancies rose to 8.5 percent in 2009, the WCRER survey says. Mundlin says that's where the highest number of new apartments came on line over the last two years.

Mundlin says 651 apartment units were under construction at the end of 2009, and half of those were in Spokane Valley and Liberty Lake.

At least two other big apartment complexes are in the planning and permitting stages in Spokane Valley. One is the already permitted 216-unit second phase of the Granite Pointe Apartments complex in the Mirabeau area. The other is the 256-unit Shelley Lake Apartments that Spokane developer Harlan Douglass is proposing to build at 215 S. Conklin, north of Shelley Lake.

In past years, the Spokane-Kootenai county market had been able to absorb 750 units a year without a long-term impact on vacancy rates Mundlin says.

The number of apartment properties that changed hands declined steeply in 2009, Mundlin says, citing a survey conducted by Spokane-based NAI Black, a commercial real estate brokerage. She says she doesn't expect to see many sales of apartment buildings in 2010, either, partly due to reduced property values.

The survey says that 13 apartment transactions involving a combined total of 258 units and total sales prices of $11 million were completed in 2009, down from 39 properties with 1,463 units that sold for a total of $70 million in 2008. The price per unit fell 10.4 percent to $42,755, compared with $47,700 a year earlier.

"Net operating income probably is less than in previous years," Mundlin says, adding that as it takes longer for an investment to pay for itself, its value declines.

"Sellers would probably take a loss if they had to sell today," she says.