September 7, 2011 in Business

USPS saddled with huge Spokane lease on vacant space

By The Spokesman-Review
 
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The U.S. Postal Service is not only looking to find a smaller downtown Spokane post office – it’s also hoping to unload downtown office space that’s vacant and costing $490,000 per year.

Last month Spokane Postmaster Karen Fairlee said the Postal Service will move out of the historic Riverside station next year to save money..

The cash-strapped Postal Service is also trying to sublease 24,100 square feet of space the federal agency leases on the sixth floor of the Crescent Court Building, 707 W. Main Ave.

Until mid-2009, the space was used as a district office overseeing Eastern Washington and North Idaho, with about 85 workers there. The district office was closed to save money and regional operations were moved to the Seattle district office.

But the Postal Service’s $490,000 lease on the space extends through March 2014.

The lease is with the building’s owner, FPA Crescent Associates, of Larkspur, Calif., which bought the building from Red Lion Hotels Corp. in 2005.

In an effort to sublease the space, the Postal Service is offering a 33 percent discount. The agency pays $18.50 per square foot.

But recent marketing fliers say the sublease will cost $12 per square foot.

No tax dollars are used to pay either the Crescent Court lease or the $350,000 lease for the Riverside Avenue post office. The Postal Service is a self-funded operation, relying on sales of stamps and shipping services. Postal employees, however, draw benefits from the federal government’s health care and pension funds – yearly payouts that come to billions of dollars and which USPS managers say are crippling its finances.

There’s little chance the downtown post office will move into the vacant Crescent Court space, said Ernie Swanson, spokesman for the U.S. Postal Service district office in Seattle.

“It’s much larger a space than we need,” he said.

In addition, the new post office downtown will need to offer easy access for customers and businesses that will rent post office boxes. A sixth-floor office would not offer that option, Swanson said.

He said no tenants for the space are on the horizon: “Up to this point, there’s nothing active.”

Chris Bell, of NAI Black, is the commercial agent representing the Postal Service. In an email, Bell said the Postal Service is “very motivated” to find the right tenant to sublease the space.

The 24,100 square foot space is the largest single block of vacant commercial real estate in downtown Spokane, said Jon Jeffreys, Bell’s colleague with NAI Black.

That large space, in fact, may be a detriment to finding a tenant quickly, said Cory Barbieri, a broker with Spokane-based G&B Real Estate. He said the best option may be to break up the big space into smaller offices.

“There are just not a lot of users out there in this market looking for 24,000 square feet for an office,” Barbieri said.

Another challenge is the lack of adequate parking, Barbieri said. The NAI Black flier notes that the lease includes 25 parking spaces. But those are in the Parkade parking structure two blocks away, said Bell.

A recent federal audit found that 24 percent of the office space owned or leased by the Postal Service nationwide is vacant. The Postal Service owns or leases more than 33,000 facilities around the United States, and about two-thirds of its total interior space is owned by the agency.

The Postal Service has announced tentative plans to close roughly 3,600 offices across the country. Three would be in the Spokane area; one office near the University of Idaho in Moscow is also slated to close.


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