Daren Kelly, who with his wife, Lisa, owns and manages a modest collection of small apartment buildings through a company called Noble Mansions, says he's having no trouble keeping the units occupied so far amid the lingering recession.

In fact, he says in reference to Noble Mansions' first four-unit acquisition, "I haven't lost a day of rent for a couple of years. When a unit is about to come open, I get a lot of inquiries."

His situation appears typical here, as the combination of fewer home sales and more stringent lending standards has been helping to keep apartment vacancy rates low, local industry observers say. That situation, though, may be changing slightly.

The vacancy rate in Spokane County as of the 2008 third quarter—the latest period for which data is available—was 4.6 percent, up from 3.8 percent a year earlier, says Glenn Crellin, director of the Washington Center for Real Estate Research, at Washington State University.

Despite that rise, the market still is considered tight, Crellin says.

"Most managers tolerate a vacancy rate in the 5 percent range," he says. "If it's above 5 percent, they have financial pressures."

Crellin says he expects the fourth-quarter vacancy rate also was higher than in the year-earlier period, due in part to some formerly owner-occupied single-family homes going on the market as rental homes. He adds however, that apartment vacancy rates might move downward again if people continue to find it difficult to buy homes or keep up with their mortgage payments.

The vacancy rate in the county had been on an overall downward trend since 1997, when it topped out at 9 percent, he says. Even though home sales were soaring just a few years ago, the strong underlying economy here at that time attracted more people to the Spokane area, and the growth in the renting population exceeded new apartment construction.

Vacancies in Kootenai County held level at 3.7 percent in 2008, compared with 3.8 percent in 2007. In recent years, apartment rent and vacancy trends in the Idaho county closely matched Spokane County, although vacancy rates spiked in Kootenai County at 7.2 percent in 2003 and 5.7 percent in 2005, when sizable projects came on line, he says.

Meantime, rents have risen moderately in both counties since 2002 after having been level for several years before that, he says.

Tisha Thelen, vice president of multifamily development at Liberty Lake-based Greenstone Corp., says the current market rate for a two-bedroom apartment here ranges from $575 to $875 a month.

"We have seen a 24 percent increase in rent over the past five years," made possible by a greater demand for apartments, Thelen says.

Greenstone Corp. has developed more than 1,200 apartment units in the Spokane-Coeur d'Alene area, including the 114-unit Northstar Lodge development, at 6520 N. Cedar, and the 114-unit Bitterroot Lodge first phase in Liberty Lake, both of which it completed last year. A second 114-unit phase of the Bitterroot Lodge development is under construction.

At least two other sizable apartment projects are under development here.

One is the $11.4 million, 144-unit Granite Pointe Apartments, at 12707 E. Mansfield, in Spokane Valley. HAL Valley Apartments LLC, of Spokane, is developing that project. The other is the $7.6 million, 100-unit Bentley Apartments Phase II, at 1715 S. Hayford, on the West Plains. Rudeen Development LLC, of Liberty Lake, is developing that project.

Spokane County and the cities of Spokane and Spokane Valley issued permits valued at a combined $55.4 million for apartment buildings last year, up from $40.8 million in 2007.

In Spokane alone, 14 permits were issued last year for the construction of 191 apartment units, up from 10 permits for a total of 150 units in 2007. Last year's figures, though, were well off the pace of 2006, when the city issued permits for apartment projects with a total of 563 units. Crellin says one likely reason for the drop in apartment construction in 2008 compared with 2006 is that such construction shifted outside of the city.

Thelen says she anticipates that more people who have owned homes will be forced to become renters because of the current economic climate and weak job market.

On the other hand, some tenants are moving out of apartments and buying houses "because they can get a good deal and interest rates are low," she says, adding, "We'll see a little bit of everything happening."

Thelen says she thinks part of the reason for the slight rise in the county's vacancy rate is that people are renting smaller spaces, taking in roommates, or moving in with friends or family due to the continuing recession.

"They can't afford the rent or they are getting nervous," she says. "Our Kootenai County property, Rockwood Lodge, has been hit with people losing jobs."

For the near term, apartment managers should focus on resident retention, Thelen says.

"It will be vital that we understand our customers and why they rent," she says.

For instance, tenants who are between 45 and 63 years old and make up 24 percent of all apartment tenants stay longer in their rental units than other age groups, value maintenance-free living, and enjoy social interaction, Thelen says. Younger renters, especially those under 30 years old and who make up 30 percent of all apartment tenants, look for convenience and would pay more for the ability to walk to shopping, work, and entertainment, she says.

WSU's Crellin says he doesn't expect much apartment construction activity this year.

"Financing opportunities are so limited, you can't put anything new in the ground," he says.

Assuming the Spokane-area population won't decline, a slowdown in additional apartment inventory could help keep the apartment vacancy rate low, Crellen says.

While Thelen says she agrees financing for such projects will be a greater challenge in the future than it has been in recent years, money will be available for strong projects. Developers, though, will be expected to put up a significant portion of their own funds, she says.

"Real equity will be a requirement," Thelen says.

Kelly says he's always on the lookout to acquire other properties for Noble Mansions if the price and character are right.

"I tell everyone, including people I rent to, that they should buy their own (apartment) building," he says.

Kelly is a former Seattle-area real estate agent and a relative newcomer to the landlord business. His first acquisition here, in 2002, was a four-unit former mansion called the Normandie House, at 2007 W. Third.

"It was the smartest thing I ever did," he says, noting that he's had no difficulty keeping units rented there.