Inland Northwest Market Update: July 2021

Uncertainty persists this month.  There are policy, macroeconomic, and demographic trends that are forcing property owners to re-evaluate their holdings on a timeline that is not of their choosing.

Continue reading for insight into these trends along with local news that impacts you as an owner and investor in the Inland Northwest.

Note:  This newsletter features an unusually high number of external links. There are trends and insights that I could not fully unpack in one email. A conversation is often the best way to interpret this information, so give me a call to discuss – 509.221.9354

Overall Market

  • Policy:  Elimination of the 1031 exchange, increased capital gains taxes, and the removal of the step-up in basis are all on the table for changes this year. The impact will be far and wide if any of the legislation is passed.
  • Macroeconomic:  The June 2021 inflation rate of 5.4% has created concerns of continued inflation, which has investors seeking yield in assets that provide an inflation hedge.  This typically involves real estate with short-term leases (multifamily, single-family rentals, self-storage, hospitality) compared to assets built around long-term leases (office, retail, industrial).
  • Demographic:  U.S. population growth has been slowly declining since a peak in 1992 at 1.39%.  Estimates show that the population grew only 0.35% in the first half of 2020.  In 25 states, more people died than were born, up from 5 states in 2019.  Flat to negative population growth has wide-reaching implications for all sectors of the economy.  For multifamily owners who have benefited from population growth outpacing housing, a sustained period of flat population growth could tip the scales back to a more competitive housing market at a national level.  The difficulty in tracking this impact locally is that migration clouds the data.  If you’re in a market that is not attracting people from other cities/states, then national population trends could pose a threat to your property operations.
  • Other: There is a displaced labor market, uncertainty in material costs, and institutional capital flowing into new sectors like single-family rentals and single-family build-to-rent, which all impact multifamily owners and their tenants.
  • For property owners, this uncertainty is likely forcing you to re-evaluate your current operations, ownership goals, and retirement plans on a timeline that isn’t of your choosing.
  • My goal is to help you address these uncertainties in a way that gives you the confidence and clarity you need to be well-positioned in this uncertain market.  Call or reply to this email to begin an exploration conversation.

Local News

  • Billings, MT and Coeur d’Alene, ID topped the Wall Street Journal/ Emerging Housing Markets Index for July 2021, continuing the trend of migration and growth to the Inland Northwest. While Spokane and Tri-Cities did not make the list this quarter, they experienced continued growth following their ranking in the previous quarterly report.
  • Three employers are launching new facilities in Pasco, WA, bringing significant job growth to the Tri-Cities: 1) Darigold is under contract to buy land for a $500M protein and butter plant; 2) Reser’s broke ground on a 250,000SF plant that will produce potato salad and other side dishes; 3) Local Bounti is building a greenhouse complex in Pasco targeting an April 2022 opening date.
  • The Tri-Cities has historically grown by expanding existing employer footprints, small business launches, and retirees. This wave of new employers entering the Tri-Cities will provide yet another boost to the local economy.


  • Rent growth continues, especially in affordable mid-size markets, AKA any market in the Inland Northwest.  Boise, ID (+39%) and Spokane, WA (+32%) topped the Apartment List National Rent Report and the Tri-Cities saw +16% year-over-year rent growth.
  • One regional property manager told me they are preparing over 2,000 rent increase notices and will send them as soon as the state allows. The letters are printed and ready to be sent to existing tenants, which will push rent growth even higher through the summer.
  • The single-family rental market is undergoing significant changes in capital allocation and rent growth. Tenants are flocking to single-family rentals because of the extra space they offer, especially those who are working from home.


  • The work-from-home impact is being felt in multifamily tenant preferences, as 35% of renters are looking for larger units.  Whether this is a trend that will last for years to come is unknown, but many developers are keeping a close watch to determine if they should adjust unit mix and floorplans for pending projects.
  • Remember how national population trends can vary at a local level? Well in 2020, the Tri-Cities continued to outpace state population growth, and Franklin County (Pasco) ranked #1 for growth among all Washington State counties. This was driven by retirees and is one of the reasons developers continue to push forward with 945 units under construction today and another 900+ units in the planning phase.

With so much information to share this month, I had a difficult time packing it in one newsletter. As I mentioned at the start, a conversation is often the best way to understand the direct impact of this information, so give me a call – 509.221.9354

I look forward to discussing how these trends impact your investments in the coming years.

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