Downtown Spokanes largest office buildings climbed in value by a combined 16 percent over the past six years, the Spokane County Assessors Office says.


The combined assessed value of 14 of downtown Spokanes more prominent multitenant office buildings increased to $120.5 million in this years assessments, up from the previous total assessed value of $103.6 million.


The county re-evaluated those buildings this year after a handful of office structures in the citys core sold for more than their assessed value over the past 18 months, says Tom Konis, commercial appraiser for the county.


The biggest percentage increase in assessed value, however, involved a property that didnt change hands. The value of the 16-story U.S. Bank Building, at 422 W. Riverside, jumped by a third to $10.7 million from $8.1 million.


The Peyton Building, at 10 N. Post, wasnt far behind. Its value increased 32 percent, to $3.5 million from $2.7 million. That seven-story, 74,500-square-foot structure changed hands last June when Peyton Building LLC, a company made up of Bellingham, Wash., investors, bought it for about $5.8 million.


Craig Soehren, a commercial real estate agent at Kiemle & Hagood Co., of Spokane, says rising valuations arent necessarily a good thing for business owners. An increase in valuation will result in higher taxes on a propertya negative effect from the property owners perspective, but higher tax valuations dont necessarily translate to a rise in the amount of money a building owner could command for a property.


It may not be a true picture of the true value of the building, Soehren says.


Terry Konrad, commercial appraisal supervisor for the county assessors office, says transaction amounts and appraised value dont always match up because the purchase price can include other termssuch as business assets or assumed debtsthat dont affect a propertys value.


Such is the case with Spokanes tallest structure, the Bank of America Financial Center, at 601 W. Riverside. First States Investors 5000A LLC, of Jenkintown, Pa., bought that 20-story building in June 2003 for $40.8 million as part of a portfolio involving properties nationwide.


Konis says the county reappraised the property, but came up with a value dramatically lower than the purchase price submitted to the county for that property. The new assessed value for that building is $28 million, up 19 percent from the previous assessed value of $23.5 million.


Other properties that sold in the last 18 months include the Spokane Regional Business Center building, at 801 W. Riverside, and the Jefferson 400 Building, at 400 S. Jefferson.


The assessed value of the five-story SRBC building, home of the Spokane Regional Chamber of Commerce and other such organizations, grew only 3 percent, to $3.4 million from $3.3 million. The Jefferson 400 Buildings valuation jumped 20 percent, however, to almost $3.1 million from about $2.6 million.


Spokane developer Walt Worthy bought the Metropolitan Financial Center, at 601 W. First, last month, but thats after the most recent round of reappraisals.


The 17-story Metropolitan building has an assessed value of $13.4 million, up 4 percent from $12.8 million.


Other prominent downtown buildings that the county reappraised include:


The 15-story Washington Trust Financial Center, at 717 W. Sprague, which had its valuation increased by 9 percent to $15.3 million


The 14-story Washington Mutual Financial Center, at 601 W. Main, which went up 21 percent to $13.4 million.


The 16-story Paulsen Center, at 421 W. Riverside, which jumped 22 percent to $10.4 million.


The eight-story Wells Fargo Bank building, at 524 W. Riverside, which rose 22 percent to about $3.3 million.


The six-story Old City Hall Building, at 221 N. Wall, which went up 17 percent to $7 million.


The seven-story Hutton Building, at 9 N. Washington, which jumped 17 percent to $3.1 million.


Soehren says a higher assessed value leads to higher property taxes, which lowers a propertys net operating income. Downtown office rents rose in the late 1990s, then leveled off and now have fallen off in some instances. In the current market, building owners typically cant raise rents to offset higher taxes, because theres a lot of vacant space.


At the same time, however, investors are willing to take a smaller percentage return on real estate investments than they once would have accepted. Other types of investments, such as stocks and money-market accounts, are producing smaller returns than they once did, which makes real estate more attractive, Soehren says.


Typically, all properties countywide are physically appraised by county appraisers every six years on a rotating basis, meaning that one-sixth of the properties are reassessed in any given year.


County appraisers can reassess properties before their turn in that cycle, however, if theres been a significant amount of activity indicating a substantial change in values in a particular area, Konis says.


Downtown office properties arent scheduled to be physically reappraised until next year, but the county reappraised the properties a year early due to market changes.


The properties still will be physically appraised next year, and their values could be adjusted again.


Next year, they may not change at all, Konis says. If the vacancies keep up, they could drop next year.


The most recent office-vacancy study conducted by Auble, Jolicoeur & Gentry, a Spokane appraisal firm, shows a 16.5 percent overall office vacancy rate downtown as of last spring. Thats up from 12.3 percent in spring 2003.