Spokane Valley business vacancy rates rise as city struggles to develop a growth plan

SUNDAY, FEB. 21, 2010

‘For lease” signs dot both sides of East Sprague Avenue in Spokane Valley like dandelions springing from the sidewalks.

The former National Golf store has been empty for more than two years. The old China King Buffet across the street is vacant and for sale. KFC recently closed one of its two stores on the business strip. The former Old European Breakfast House, Jo-Ann fabrics, Complete Suite Furniture and Albertsons locations – all empty.

Property owners, leasing agents and real estate experts agree that the vacant storefronts and offices are a reflection of a historically bad economy – but many believe that isn’t the whole explanation.

Spokane Valley’s retail vacancy rate is higher than anywhere else in the county except for the West Plains, which has a small amount of retail space, according to data from Auble, Jolicoeur & Gentry, a real estate analysis and appraisal company in Spokane. Last fall, Spokane Valley’s rate was just under 11 percent, compared with just under 6 percent on the South Hill and 9 percent on the North Side. Another study by Spokane real estate company Kiemle & Hagood Co. found that the vacancy rate for office space in the Valley was nearly 22 percent last year, versus about 12-13 percent in the south, north and west areas of Spokane.

Some of the reasons cited for the disparity include lower population per acre than, say, the North Side and an explosion of newly constructed retail and office space in the Valley over the past decade. At least as important, though, is the uncertainty surrounding the direction of the city of Spokane Valley, a number of people interviewed say.

Future of revitalization plan in doubt

For some Sprague Avenue businesses, the uncertainty began before the city of Spokane Valley was incorporated in 2003.

Spokane County’s construction in 2000 of a couplet that turned Sprague one-way between University Road and Interstate 90 was largely opposed by businesses within the one-way zone and largely supported by commuters.

Then last year the Spokane Valley City Council formally adopted the Sprague-Appleway Revitalization Plan after three years of work and around a half-million dollars in consulting fees.

The plan originally sought to turn Sprague back into a two-way thoroughfare, although it was later modified. It also adopted controversial new zoning along the entire Sprague Avenue corridor, designed to make its “shabby visual character” more attractive and pedestrian-oriented. Critics claimed the plan “down-zoned” many properties, converting them from commercial to residential or mixed uses, and that although current uses were grandfathered in, hundreds of businesses became nonconforming, making it potentially harder to attract tenants or obtain bank financing and insurance.

Now, a new City Council majority elected in November has put the future of the revitalization plan in doubt. Dean Grafos, one of four new council members, has proposed scrapping the plan and rolling back zoning changes to the zoning in place in 2003, when the new city came into being.

Grafos says he’ll introduce those ideas in upcoming council meetings.

‘Don’t leave me in limbo’

All of this activity has some business people saying, enough.

“Give me certainty,” said Carlos Landa, part-owner of a strip mall at Sprague and Pines that has several empty storefronts. “Just make a vision and stand by it.” Without certainty, he added, retailers are “going to go look for less risk” elsewhere.

Although a supporter of the revitalization plan, Landa said he could live with another strategic direction as long as he knew what to expect.

“Don’t leave me in limbo like you have for the last 10 years,” he said of the City Council. “If I’ve lost the retail and I need to redevelop that center for another use, I can do it. But don’t leave us up in the air for another four years.”

Longtime commercial real estate broker Marshall Clark, who represents several vacant spaces on East Sprague, didn’t support the revitalization plan and welcomes the new council majority.

But he said much the same thing as Landa regarding Spokane Valley.

“Ever since they formed the city they’ve been unsettled … . All the cities are struggling, but they are struggling the worst because they don’t know what they want to be when they grow up,” Clark said.

Said Jim Magnuson, a Coeur d’Alene lawyer whose family owns University City shopping center, “Any time you’ve got uncertainty as to the direction of municipal or governmental regulations, people are not going to want to invest money in growth.”

Let the free market develop

Grafos said he understands the frustration; he’s a Valley business owner himself.

“You need to give property owners and citizens a sense that if they invest today, their investment is protected 20 years from now.” Unfortunately, he said, “there really is no way of doing that.”

He believes the best thing the city can do is roll back the changes that have been made and get out of the way of businesses.

“I feel that the free market should develop those properties,” Grafos said.

But Dick Behm, like Landa a member of the Spokane Valley Business Association, which supported the revitalization plan, said changing course now would create a lengthy disruption.

“Those things don’t happen overnight,” Behm said. “It has to go back to the planning department, you’ve got to have public meetings, comment periods – it would take a year to do it.”

‘Mom and pops’ favor East Sprague

No matter the political outcome, any improvement in the economy is expected to fill at least some of the vacancies along East Sprague.

A loosening of credit could make money available to start-up businesses as well as to building owners for use in sprucing up tired properties, said Scot Auble, of Auble, Jolicoeur & Gentry.

East Sprague, once the Valley’s business center, has become a magnet for smaller, local “mom and pop” businesses since the Spokane Valley Mall opened in 1997, said retail real estate broker Carl Guenzel, of Kiemle & Hagood.

“They still like to be on Sprague because it’s a little closer to the population,” he said. They also typically weren’t able to afford rents in the pricier spaces in or near the mall, but that’s changed because of the down economy, Guenzel said.

“Rental prices are coming down everywhere,” he said. “There is a domino effect.”

Rusty Barnes, whose family owns the building at Sprague and Farr that used to house National Golf, said he doesn’t know what it will take to fill his space. He thought WinCo opening a grocery store across Farr would be a draw, but “nothing, nothing at all.” As a real estate agent and investor, Barnes said he’s used to “brutal” market conditions, but he has found Spokane Valley especially grim.

“We just keep sinking further and further behind,” he said.

Jayne Singleton, director of the Spokane Valley Heritage Museum on East Sprague, said whatever it takes to revive Sprague, it can’t come soon enough.

Looking at the gaps in the once-thriving business district “kind of gives you a sick feeling in your stomach,” she said.

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