Construction activity in the Spokane area is outpacing what was a bustling 2004, but contractors here worry that a pervasive cement shortage is slowing an otherwise brisk clip.


Meanwhile, home-sales activity is maintaining a torrid pace, as sales volumes rise steadily and prices continue to escalate. Industry observers say the level of home-sales activity likely wont continue to grow as fast as it has, but when the market does level off, it will be at a busier level than has been the norm here.


Building permit activity at the city of Spokane, city of Spokane Valley, and Spokane County suggest a sharply higher level of construction activity this year compared with 2004.


The two cities and county issued a combined $377 million in building permits through the first five months of 2005, up 40 percent compared with $270 million in the same period last year.


Virtually all of our contractors are very, very busy, says Kate McCaslin, former Spokane County commissioner who recently took over as president and CEO of the Associated Builders and Contractors Inland Pacific chapter. Were seeing more projects locally and regionally.


A number of big projects have gotten under way this year, including a $10.6 million Gonzaga University dormitory building along Division Street at the west end of the campus; a $9.7 million Itronix Corp. corporate headquarters and manufacturing facility in Spokane Valley; and a $7.9 million National Guard Readiness Center in East Spokane, among others.


The $70 million Spokane Convention Center expansion and renovation, which started last year, is continuing, and will carry over into 2006.


In addition, roughly $90 million in road construction is in the works here this year, with the Washington state Department of Transportation and Spokane city and county all taking on significant projects in the Spokane area.


Cement, a key ingredient in concrete, is in short supply, however, and is expected to be hard to find at least until fall. The shortage is delaying some projects, McCaslin says. Some contractors fear that they wont be able to finish jobs before winter hits and then will have to shut down construction sites until next spring, she says.


Building organizations are lobbying for relief from the shortage. The local Associated Builders & Contractors chapter planned to meet soon with U.S. Rep. Cathy McMorris to discuss the inconsistency in the cement shortage; builders want to find out why some parts of the country have ample supplies while some have acute shortages. Also, the national Associated General Contractors group earlier this month called on U.S. Commerce Secretary Carlos Gutierrez to suspend a duty currently in place on cement from Mexico, which would make Mexican cement more easily accessible for U.S. concrete suppliers.


While home builders are struggling as much as commercial contractors to find concrete, the home construction market is accounting for much of the surge in permit activity this year.


Through the first five months of this year, the county and its two largest cities issued building permits for 1,102 homes valued at $160.2 million, up dramatically from 714 homes worth $113.7 million in the year-earlier period.


Home sales continue to surge as well. Through the first five months of this year, 2,720 homes worth $417.1 million sold through the Spokane Multiple Listing Service, up from 2,560 homes worth $351.1 million in the year-earlier period. Last month, the median price of homes sold through the MLS was $140,000, up 12 percent compared with the year-earlier month.


Rob Higgins, executive vice president of the Spokane Association of Realtors, says home prices have continued to increase because of a combination of tight inventory and low mortgage rates.


The market likely wont be able to maintain its current accelerated pace through year-end, Higgins says. Still, he says, Even when it tapers off, were looking at a level where well be looking good for a number of years.


The commercial real estate market, meanwhile, includes a mix of upward and downward trends at midyear.


Dan Cantu, president of Cantu Commercial Properties LLC, says that overall, activity appears to be similar to last year, but, Its been spotty. It seems like you go for a long period with no activity, then you get a spurt of activity.


An office and retail vacancy survey recently completed by the Spokane-based Auble, Jolicoeur & Gentry appraisal firm shows that in the office market, vacancies have increased downtown and in Spokane Valley, but more space has been absorbed on the North Side, the South Hill, and on the periphery of downtown.


In the citys core, the survey shows a 21.8 percent office-vacancy rate, up from 16.5 percent a year earlier. That increase was anticipated due to new buildings coming on line and the emptying of the former Metropolitan Mortgage & Securities Co. high-rise, which is now the Wells Fargo Center.


The survey reports the following office-vacancy rates for other parts of the Spokane area: 9 percent on the downtown periphery, down from 9.2 percent a year earlier; 6.5 percent on the South Hill, down from 7.3 percent; 11 percent on North Side, down from 16 percent; and 20 percent in the Valley, up from 13.9 percent.


In the retail market, the survey suggests that vacant space has been absorbed in all parts of town.


Downtown, the retail vacancy rate is 13.4 percent. Thats down substantially from 30.5 percent a year earlier. That, however, is largely because some retail buildings have been converted to other uses, and thereby have been taken out of the retail survey.


Elsewhere, the retail-vacancy rate is as follows: 1.5 percent on the South Hill, down from 3.5 percent; 6.75 percent on the North Side, down from 7.6 percent; and 12.5 percent on in the Valley, down from 17 percent.