The Spokane commercial real estate market saw a shift in momentum during Q2 2025. While national economic conditions showed signs of inflation and steady interest rates, Spokane experienced a softening across several CRE sectors. Even amid challenges, opportunities exist for those who understand shifting dynamics and can adapt to market signals.
Spokane’s office market remains the most challenged, particularly downtown, where tenant concerns and perceptions of planning misalignment continue to drive elevated vacancy. Suburban areas like Spokane Valley and South Hill are performing better, with steady demand from medical and professional tenants. The lack of new construction is helping maintain balance in stronger submarkets.
Multifamily sales have slowed as elevated interest rates reshape underwriting and widen the gap between buyer caution and seller expectations. With flat rents and rising concessions, investors are favoring value-add and stabilized assets with clearer upside.
Spokane’s industrial sector remains well-positioned thanks to its regional connectivity, but signs of cooling emerged this quarter. Countywide vacancy is nearing recent highs, and absorption has slowed. Leasing is sluggish for large spaces, while smaller, well-located assets continue to draw steady demand. West Plains remains a relative bright spot, with active construction and stronger lease-up momentum than other submarkets.
Spokane County’s retail sector also showed resilience in Q2. Countywide retail vacancy remained below 5%, with asking rents rising roughly 2.4% year-over-year. New construction was limited, with notable developments like the 107,900 SF Home Depot on South Hill underscoring steady demand and select confidence from national retailers. Additionally, over 1,300 new business licenses were issued in the first half of 2025—many tied to neighborhood retail and service-based businesses—highlighting strong local entrepreneurial activity and sustained demand for small-scale retail space.
What to Watch in Q3 2025
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- Leasing activity in large-bay industrial spaces is expected to remain slow, while smaller, well-located properties may help stabilize overall vacancy in the coming months.
- Multifamily expected to remain flat, with low construction starts. Seller financing may gain traction as a tool to bridge buyer-seller pricing gaps and unlock stalled transactions.
- Retail should continue to outperform, especially in neighborhood and service-based formats tied to new business formation.
- Federal tax incentives may spark Opportunity Zone development activity.
Outlook for Q4 and Early 2026
Expect continued headwinds in capital markets, but momentum should build around well-located retail centers, medical office, and targeted property renovations. Opportunity Zones could see renewed attention with their permanence now signed into law.
The Spokane CRE market is adjusting, not stalling. The second half of 2025 is about targeting resilient assets and positioning ahead of the next growth cycle.
As trusted local advisors, we help clients make sense of shifting conditions and move strategically—positioning their portfolios for long-term success in a changing market.
Reach out to one of our advisors today!
Data sourced from CoStar, Crexi, broker-reported activity, and publicly available information.