Two national trends are causing demand for warehouse space here to decline, industry observers say.


National retailers more frequently are using huge distribution centers to ship their goods nationally or to broad regions, rather than using multiple smaller warehouses in various locales. Meanwhile, more manufacturers are adopting the lean-manufacturing practices that call for just-in-time delivery of parts and supplies, which means they need less warehouse space.


The bottom line for owners of warehouse space here is that other than the big planned warehouse thats being built in Post Falls for regional food distributor Sysco Corp., the Spokane area hasnt landed many huge distribution centers in recent years. And with demand for medium-size distribution centers declining, landlords are filling their spaces with relatively small tenants.


The end result is you have more, smaller users, says Dean Stuart, director of marketing for Crown West Realty LLC, which operates the big Spokane Business & Industrial Park here. They operate in less space and are not paying for storage space.


The 545-acre Spokane Business & Industrial Park, which includes 67 buildings with a total of 4.2 million square feet of floor space, currently is about 12 percent vacant, Stuart says, which is about the same vacancy rate as last year and is comparable to that of the overall Spokane market.


Stuart says, however, that while the parks vacancy rate is relatively consistent, the average amount of space taken by each tenant has dropped considerably in recent years. Tenants currently take an average of about 26,000 square feet of floor space. In 1997, a year after Crown West bought the park, tenants leased an average of about 36,000 square feet of space.


Five or more years ago, he says, it seemed like many new tenants wanted 40,000 square feet to 60,000 square feet of floor space.


We still see that, but much less frequently, Stuart says.


That doesnt mean the Spokane area wont land another Sysco, he says, adding, Theres no reason Spokane wouldnt be as good of a place as any other for those buildings.


Stable survey numbers


Though big users of space apparently arent knocking at the doors of warehouse owners here, a recent survey of real estate vacancies and rents suggests there hasnt been a drop in overall demand for such space.


The survey, conducted by the Spokane real estate appraisal firm Auble, Jolicoeur & Gentry in conjunction with the regions largest commercial real estate brokerages, put the vacancy rate for Spokane-area industrial space, which includes warehouse space, at 11.5 percent in February, down from 12.8 percent six months earlier and 13.1 percent a year ago.


The survey includes 954 buildings with a total of about 22.5 million square feet of floor space. Its unclear how much of that is warehouse space, as opposed to manufacturing space and industrial-related office space, primarily because industrial structures often have all of those types of space.


The survey does break out the average monthly rental rate for warehouse space here, and those numbers show that rents have fallen in the past year, to 28 cents a square foot from 34 cents.


Tracy Lucas, a real estate agent with the Spokane real estate concern Kiemle & Hagood Co., says he has marketed a couple of large warehouse spaces in recent years that the previous tenant had vacated to consolidate operations elsewhere.


Such spaces are filling up, albeit at rental rates far below what they were two or three years ago, Lucas says.


In one instance, McKesson Corp., a San Francisco-based wholesale pharmaceutical and beauty-supply distributor, moved out of an 85,000-square-foot warehouse building at 2611 N. Woodruff, in Spokane Valley, last July and began serving the Spokane market via truck deliveries from elsewhere, Lucas says. Walkers Furniture Inc., of Spokane, recently leased McKessons former facility and consolidated its warehouse operations there.


In another instance, Allegiance Corp., of McCaw, Ill., vacated its 52,000-square-foot medical-supply distribution building in Liberty Lake, at 23502 E. Knox, about two years ago. Late last year, Bunzl Distribution Inc., a St. Louis-based paper and packaging products distributor that operates here as Papercraft, leased that building, then subleased about 9,600 square feet of floor space in it to Purcell Systems Inc., the Liberty Lake electronics cabinet manufacturer.


Coldwater Creek Inc., the big Sandpoint-based retailer, also has streamlined its distribution process in recent years. In early 2002, it disclosed plans to close a distribution center in Sandpoint and to move all inventory and shipping operations to a 600,000-square-foot facility in Parkersburg, W.V.


Coldwater Creek spokesman David Gunter says the cost of shipping out of Sandpoint and of bringing merchandise in and out of that North Idaho resort town was becoming higher than doing so from an Eastern U.S. locale.


The Parkersburg facility is right in the crosshairs of two trucking routes, Gunter says. Also, about 60 percent of Coldwater Creeks customers live close enough to Parkersburg to receive a package shipped from there in one days time.