Hospital projects and new schools drove the Tri-City commercial real estate market to new highs in 2015.
Brokers, builders and building officials say the year was one for the record books, thanks largely to spending in Kennewick and Richland.
“We’re looking at large hospital expansions in just about every location,” said Dan Briscoe, vice president for Kennewick-based Apollo Inc., a $200 million general and mechanical contractor with offices in Colorado, Montana, Oregon and soon California.
Its former business was relatively flat, but Apollo’s mechanical side had a busy year, with customers building new facilities and expanding existing ones.
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“Health care is driving the market in all of our locations. No doubt about it,” he said.
Several years of institutional spending is spilling into other commercial sectors. Retail, office and industrial investment surged in 2015 as well.
Residential construction has been constant over the last four to five years, but commercial has really picked up.
Rick Simon, Richland’s development services director
“This was our largest year by a mile,” said Gretchen Payne, office manager for G2 Construction, a Kennewick-based contractor that specializes in commercial buildings.
G2, a 35-person firm, is building the $2.8 million Eastern Oregon Trade and Event Center at the fairgrounds in Hermiston. Closer to home, its crews worked on an office building for C2 Management Financial as well as dental offices and assisted living centers in 2015.
“People are capitalizing on land and accessibility of the lots,” Payne said.
Across the Tri-Cities, planning departments are reeling from the pace of permit applications. They’ve added planners and inspectors to handle the increasing workload.
Two Kennewick School District projects topped the city’s commercial construction list in 2015: Desert Hills Middle School, a two-story, $26.9 million building, is under construction at 4891 W. 27th Ave., and Sage Crest Elementary, a $13.5 million project, is being built at 6411 W. 38th St.
Trios Health in Kennewick remained a marquee builder a full year after it wrapped construction of its Southridge hospital. Work on the Trios Medical Office Building, also known as Trios Care Center at Southridge, continued in 2015. The 168,000-square-foot project will cost an estimated $42 million.
A hospital expansion was Richland’s richest project in 2015. Kadlec Regional Medical Center received 10 permits totaling $62.7 million, including a four-floor addition ($35 million) and new parking structure ($19 million).
It’s hard to find a stable, reliable crew. Not everybody knows how to put up a metal building.
Gretchen Payne, office manager for G2 Construction
The Richland School District’s $16 million rebuild of Marcus Whitman Elementary, 1704 Gray St., rounded out the city’s top three projects. Marcus Whitman is one of eight schools under construction across the Tri-Cities.
“Residential construction has been constant over the last four to five years, but commercial has really picked up,” said Rick Simon, Richland’s development services director.
Kadlec’s expansion is especially welcome because it puts jobs and people in the heart of downtown, Simon said. That supports the city’s dream of a livelier core. Retail development continued at a brisk pace at Queensgate.
The surging activity might be the release of pent-up demand still lingering from the Great Recession, when virtually all construction ground to a halt, Simon said.
“Now that things are loosening up, that may be clearing out,” he said.
Pasco’s top project in 2015 was Project Sunrise, a 443,819-square-foot distribution warehouse that will cost $39 million.
Columbia Basin College began construction of its new Social Sciences and World Languages Center in August. The 65,000-square-foot, $14.35 million project is funded by the state and is on schedule to welcome faculty and students in about a year.
A $10 million Hampton Inn project at Road 68 rounds out Pasco’s top projects.
“This year is actually pretty busy,” said Jon Funfar, city spokesman.
Keeping up with the workload
For permitting agencies and contractors alike, keeping up with the workload can be a challenge.
G2 Construction, for instance, struggles to find and train qualified employees. The contractor has been successful in training its own workers and reaching out to schools such as Tri-Tech Skills Center, said Payne, the office manager.
“It’s hard to find a stable, reliable crew. Not everybody knows how to put up a metal building,” Payne said.
Greg McCormick, community planning director for Kennewick, sees no letup in 2016. In 2015, the city added a planner to handle the increase in permit requests. It occasionally contracts building services out when it’s hit with a rush.
“It is definitely a challenge to keep up with everything,” he said.
Richland tries to avoid adding new permanent staff, but Simon said the workload has fallen particularly hard on inspectors. The 2016 budget includes funding for a temporary position.
We will see if the level of activity is permanent, then we might add more permanent people.
Rick Simon, Richland’s development services director
“We will see if the level of activity is permanent, then we might add more permanent people,” he said.
For the first time since the Great Recession, the Federal Reserve raised the interest rate for target funds in December, elevating them from zero percent to 0.25 percent and then to 0.5 percent.
The fed’s goal is to promote job growth and moderate inflation, but the move makes it more costly to borrow money and will affect the calculus of new construction.
G2’s Payne doesn’t anticipate a slowdown because of interest rates.
Simon said there already are hints of big projects to come. A hotel developer plans to submit a proposal for a hotel adjacent to the new movie complex at Queensgate. The city has issued several land use permits that will likely yield new projects in the coming year.
Kennewick’s McCormick expects retail development in the southern part of the city to surge when the Hildebrand Boulevard extension is complete, providing a new transit corridor through the fast-growing Southridge area. Meanwhile, city staffers regularly meet with developers for pre-application sit-downs.
“There hasn’t been a slowdown in that during winter, so I expect spring to be active,” he said.