Space: Businesses on the move, some rents dropping
A 12 • Wednesday, February 19, 2014
Port Townsend & Jefferson County Leader
▼Continued from page 1
LARGE UNITS TOUGHER
of moving from Taylor Street to 820 Water St. Owners Peter and Anna Quinn bought Imprint Books from David and Judy Hartman, who are retiring, and are combining the business into the space. “There’s so much shifting and so many things in the works,” Mullen said. Mullen remembers what she calls Port Townsend’s recent heyday. It was in 2006, and the economy was robust, and “there was 100 percent occupancy and things happened in the middle of the night almost.” Mullen also remembers harder days. When she first moved here, there were unrenovated, long-empty buildings. Today, Mullen says, “The positive thing is that when one goes out, another one comes in.”
POSITIVE, REALISTIC
John L. Scott real estate agent Richard Hild’s name is on a giant sign at 701 Water St., on the corner of Water and Quincy, where Ancestral Spirits Gallery had been in business since 1993. It was, according to National Geographic Traveler, “an exquisite art gallery,” until it closed several years ago, seemingly overnight. The owners have not been willing to talk publicly about why. The sign clearly says the 3,300 square feet of prime corner property is for sale, but Hild says he gets calls all the time from people who want to lease space in the Waterman & Katz Building, which has eight residential and four commercial units. Several years ago, the property was offered for $675,000. Today, Hild said, it’s available for $295,000. “They are delightful spaces and they are high end. It’s essentially a new building,” he said. Now that the price is down by more than half of what it had been, Hild expects it to sell this year. For now, what Hild sees are a lot of good deals, but he said, “Banks are sitting on a massive amount of money and they aren’t making loans.” What that means for people wanting space is that they might be able to buy rather than lease – if they can get financing. “Good deals are still out there, but banks are still trying to get higher prices,” Hild said. “The majority of my transactions are cash.” Hild, who has been in local real estate since 1989, said there still seems to be an “awful lot of empty space.” “Things get rented and then people don’t make it. It has a lot to do with the economy,” Hild said. As for whether Water Street is half empty or half full, “I’ve given up tracking what’s for rent downtown. It ranges from $1 gross rent to what we had in the Katz Building, which was $2 a foot and triple net.” “I’m positive, but I have to look at the reality of all the empty spaces downtown. I believe it’s going to come back,” he noted.
NOT SO POSITIVE
Property manager Ron Khile is decidedly not upbeat. The manager of the Sanderling Building, at 1136 Water St., more commonly known as being the medical clinic building that housed private-practice physicians for years, Khile has been having trouble renting available space. “We’ve been below 50 percent occupancy for probably five years now,” he said, quickly adding that the rent has dropped from $2.25 per square foot to as low as $1.30 per square foot. He has three spaces available, one with 350 square feet, another with 750 square feet and a larger one with 800 square feet. “It’s pathetic,” Khile said when asked how he thinks things are. “Haven’t you seen all the places closing down the street?” Khile contends that City of Port Townsend officials are uncooperative, and he pointed to a flag sign that a nearby restaurant had put up and which the city told the business to remove or face a fine. It’s a point that property owner Jim McCarron, who owns the building in which Ichikawa Restaurant is
A sign touts space available in the Lighthouse Center on East Sims Way. A 4,200-square-foot space has been available in the center since the Washington State Liquor store closed. Photo by Allison Arthur
“It’s a great opportunity to rent space. We’re seeing prices less than half of what we’ve seen in a better market, before 2008.” Jim Graf property manager Windermere
Businesses have been on the move for years as property owners refurbish old buildings, such as the Terry Building on Washington Street. Two businesses in the Terry Building moved elsewhere because the owner wanted to remodel it. A third business, the Upstage Theatre, has been booking events at other local venues. Photo by Allison Arthur
“All those changes show that while we are not immune to economical challenges and we do have empty spaces, there are signs the economy is getting stronger.” Mari Mullen executive director Port Townsend Main Street Program
were also warned. “The City collects business and occupation taxes from every business, viable or not,” McCarron said. “When a business fails, people lose their jobs, taxes are not paid, and buildings are not rented.” McCarron admits that he can get on a soap box about the issues surrounding rent. “There are multiple other reasons why buildings are vacant, but the City is clearly the only entity capable of changing its perceived and wellearned status as ‘anti-business,’” McCarron wrote.
POSITIVE AND FULL
In the heart of downtown, Marilyn K. Kurka manages the 52 residential Admiralty Apartments as well as 14 commercial spaces under the apartments and in the housed, also makes. That building three Kuhn and Kellogg Buildings as was a Shell service station that he bought in the early 1980s and remod- manager of Kellogg Holdings. All of eled into office space. Rent back then the apartments and 12 of the 14 comwas $1 per square foot a month, and mercial units are full. Kurka is upbeat. “we easily filled it,” McCarron said “This is the highest I’ve experivia email last week. enced in the five years that I’ve been “Signage was good, utilities were doing property management downreasonable, and the city did not town. The basements are always bother us,” McCarron said. McCarron said a former manager the toughest,” she said of the two remaining spaces available. of the restaurant “took the liberty” Last Thursday, space at 911 to criticize the City and its “antiWater St., which Artisans on Taylor business action,” and since then, vacated last fall, was officially rented some at Cty Hall have been vindicto Irene and John Sandberg, who tive, McCarron believes. The most recent owner erected a are planning to open Piccadilly Bob’s Unique Boutique, a home décor shop colorful feather flag with the word offering rustic, Victorian and steam “Sushi” on it, and the City ordered the flag removed per sign code viola- punk décor. They’re planning on opening in May, Kurka said. tion, McCarron said. At least two The downtown space was only other businesses with similar signs
empty for four months in the winter. “We’ve been looking for the right tenant,” Kurka said. “We want a tenant who will be stable and succeed in the spot. It also has the highest rents.” The rents for Water Street storefronts vary by block, with downtown fetching $1.50 or more plus triple net – that means the tenant pays insurance, property taxes, management fees and any maintenance issues for the building. If someone signs a lease and breaks it, they still could be held liable for the monthly rent until the space is leased again. Kurka recently signed leases for several new businesses, including Lively Olive Tasting Bar and the Spice and Tea Exchange of Port Townsend. All made it through their first winter – when tourist traffic slows, Kurka said. Still, Kurka is aware that one longtime business owner reported the worst January sales in 20 years. What Kurka sees with all the movement this year doesn’t worry her – not just because the winter shuffle is typical, but because many of the businesses that did move (About Time, Broken Spoke and Frame Works, for example) moved because the Hastings Building owners are planning a major renovation. “What it did is give a false impression that there is a lot of space downtown, and I would say it’s the opposite,” she said. Early last summer, the owner of the Terry Building on Washington Street forced two successful businesses, the Candle Shop and Bazaar Girls, to find other locations. And they did, and both are still operating. Meanwhile, the Admiralty Apartments building, at the corner of Taylor and Water downtown, remains viable as affordable housing because the commercial spaces are rented. “If the commercial units were vacant, it would affect the owners’ ability to keep the contract for affordable housing,” Kurka acknowledged of the housing over those storefronts. The contract to keep those units of Section 8 housing ends in 2015, and Kurka expects the owners to sign another five-year contract. But she, and others, are keenly aware of the fancy hotel that is expected to go into the Hastings Building next door. And it’s unclear what, if any, impact that could have on the Admiralty housing units. Tenants are already asking to be moved away from the side of the building where work on Hastings could start later this year.
Julia Price of Island Property, based on Whidbey Island, manages Flagship Landing and Port Townsend Plaza. The Purple Heron gift shop, which was located in the plaza, recently closed, and the post office substation that had been in Purple Heron moved to SEA Marine on Point Hudson. “I didn’t advertise that space, but people are calling me. The little spaces are easier to fill,” Price said. A 4,000-square-foot space on the other side of Quimper Mercantile, where Ace Hardware had been located, is “either not big enough or it’s too big,” she said. That space has been available since 2007. Price came into local real estate at the bottom end of things in 2008, when “the ferries went out and they closed the [Hood Canal] bridge.” She can’t remember how long there was a big hole in the building after Swain’s Outdoor and More closed early in 2011. Quimper Mercantile opened in 2012. Price has seen rents come down, and she tells people, “I’ll always say the owner is open to offers,” she said of Bill Massey, owner of the properties. Since 2008, she says, the vacancy rates on her properties have held steady at about 25 percent. Like Kurka, Price sees Port Townsend as half full, rather than half empty. “If you have a good business plan and a good idea, now is the time to do it,” Price said of believing Port Townsend is doing well, better, in fact, than some of Whidbey’s downtown communities. “To me, it feels like I get a lot more activity [in Port Townsend],” she said. “Two years ago, I had a space at the end of the plaza, and nobody wanted it. Nobody was looking. I think they are now. I think it’s on the upswing, but I am sitting over here on Whidbey.”
SIX MONTHS FREE
Jim Graf of Windermere also is an optimist, even though one property he manages, a four-unit complex on Water Street right across from the state ferry terminal, has only one tenant – Subway. “It’s a great opportunity to rent space. We’re seeing prices less than half of what we’ve seen in a better market, before 2008,” said Graf. Before 2008, it wasn’t unusual to get $2 a square foot; now, spaces are leasing for $1 a square foot. Although the complex has only the Subway restaurant now, Graf explained that previous tenants had been successful, but left for different reasons, including divorce. “We’re getting all kinds of calls,” Graf said of the retail vacancies. Still, that sign next to Subway offering “free rent for six months” hasn’t moved people into the building yet. Like Price, Graf believes space is at a rock-bottom low and for those with a good business plan, cinching a good space now would be a smart move.
YESTERDAY, AND TODAY
Decades ago, there were years when commercial buildings reputedly were traded in poker games. “I’ve heard that,” joked real estate agent Hild. “You know, ‘I’ll raise you one Eisenbeis’ and the deed is on the table.” These days, one property manager – who did not want to be identified – said if only he or she could rent to potential marijuana business entrepreneurs, there would be no vacancies at all in downtown Port Townsend. Mullen found a map of the good old days – from back in 1991, actually. It shows shops that still exist today, such as Maricee Fashions, Victorian Clipper Barber, El Sarape Mexican restaurant, the Bishop Victorian Hotel, Khu Larb Thai restaurant and Phoenix Rising, all businesses that have not moved. It also shows the Sea Galley Restaurant, Sprouse Variety Store, and Cafe Piccolo, all businesses that have long been closed. So is Port Townsend half empty or half full today? It seems to be a matter of perspective – and the space you’re in.
Pop-ups: Businesses take advantage of high season
▼Continued from page 1 “Pop-ups allow entrepreneurs to dip their downtown is discouraging and I am excited toe into the market, test out their concept to be able to help keep Water Street looking and gather feedback on their inventory,” she prolific and productive.” said. “It also keeps downtown looking fresh and active.” TESTING THE MARKET Last fall, Closet Space owner Rosie Itti The “pop-up” concept isn’t unfamiliar to set up shop at 1034 Water St., and after two the downtown area, said Teresa Verraes, successful months, she opened a brick-andJefferson County Chamber of Commerce mortar location at 909 Water St. on Feb. 1. executive director. Several other clothing and accessory
retailers have hosted trunk shows in vacant spaces, said Port Townsend Main Street President Mari Mullen, as well as local nonprofits using the former Artisans on Taylor location as a pop-up gift-wrapping station. The Chamber and Main Street provide insight and resources to business owners interested in knowing more about the availability of spaces in the area and what types of “niches” are in need of filling. Although
pop-ups provide a unique opportunity for businesses to test business and marketing plans, longstanding businesses are not always supportive of the concept, Verraes said. “Pop-ups capitalize on the stronger months, taking advantage of the high season without the risks of operating a business all year round. It can create a sense of competition without level footing,” she said.