Spokane business leader says downtown’s vacancy rate is up to 28%: ‘That’s a little scary’

Before he became president and CEO of one of Spokane’s premier commercial real estate firms, Gordon Hester repossessed mobile homes in North Idaho from deadbeat owners.

“It was an interesting education,” said Hester, of the commercial real estate firm Kiemle Hagood. “I knew I wanted to work in real estate. I really wanted to work somewhere where I could feel I was doing more to gain more people’s trust and where I could be more professional.”

Hester told his story Wednesday night as one the speakers for the Business Leadership Series that is put on by Eastern Washington University’s Institute for Public Policy & Economic Analysis.

An EWU alum, Hester explained how he got into the commercial real estate business and gave students and attendees a brief synopsis of the current market conditions, telling them that the commercial vacancy rate in downtown Spokane is 28%.

“I get asked this question a lot: ‘How is the real estate market?’ My stock answer is: It depends,” he said. “There are certain aspects of the market that can be like the Mona Lisa, and there are certain aspects of the market that look like a finger painting on the floor.”

He explained that commercial buildings and office space are graded Class A to Class C. The newer, nicer buildings are rated higher, and the older, less desirable buildings get Class C ratings.

“I don’t know that I’ve ever seen that much of Spokane as vacant,” he said.

“That’s a little scary.”

That’s up from 19.7% in 2023 and 18.8% in 2022.

Overall, Spokane had an office vacancy rate of 15%. That was slightly higher than 2023 and up from 11.6% in 2022.

North Idaho’s Kootenai County, however, had an office vacancy rate of only 4.8%.

In Spokane, Hester noted vacancies in the former Crescent Court building, Chase Bank, Umpqua Bank and Bank of America buildings that total about 425,000 unused square feet.

“That’s about $8.5 million in rent not entering the economy. A very serious impact,” he said. “That’s also about 2,000 employees who no longer are downtown shopping or dining or using services.”

He then contrasted a slide of a shirtless Zach Galifianakis and a picture of “The Rock” Dwayne Johnson jogging.

“The downtown area is a great place to do business,” he said.

Most customers, however, currently see downtown as Galifianakis, he said, while real estate brokers see it as Johnson.

“My job is to move (perception) more toward Dwayne Johnson,” he said.

Reports of crime and the visible homeless populations make those conversations more difficult.

He said city and county leaders must work to find homes for those who need it and services for those who are addicted to drugs or who have a mental illness.

“From an economic standpoint, we have to get a little creative,” he said.

So far, Spokane has avoided the rush of foreclosures that has hit Seattle and Portland.

“But that will come to Spokane at some point,” Hester said.

At the end of his talk, Hester answered questions from the crowd, and many dealt with how to get into the business.

“I don’t know anyone who went into property management with the intention of going into property management,” he said.

The work involves keen communication skills, the ability to understand contract law and the ability to use math skills to calculate everything from interest rates to return on investment quickly.

He noted the growth on the West Plains, in Post Falls and in economic activity in Kendall Yards.

“There are so many good things going on in Spokane,” he said.

“But if there is a perception that downtown isn’t safe, people won’t cross the river.”

He said his entry into property management came kind of by mistake.

“I started my career working for a mortgage company. As part of my first job, I repossessed mobile homes in North Idaho and drove them down to Moses Lake and put them on a small one-acre lot and sold them as a package,” he said.

Then in 1990, he started at Kiemle Hagood, which was founded in 1973 by Ed Kiemle and Jerry Hagood.

“Ed was the property management expert and Jerry was the broker,” Hester said. “And what those two gentlemen brought together was an understanding that both of them were talented in individual parts of the business, but together they could bring high levels of service to their clients. It was really a great philosophy to grow up in over the years.”