Filling in the holes

The sandwich shop down the street has closed and the windows of a neighborhood shoe shop are lifeless, but that’s not what Bob Hemphill sees when he eyes Sprague Avenue.

Hemphill, a restauranteur, sees ample parking where others see barren asphalt. He sees motorists pulling into his business at 11808 E Sprague Ave. for fried catfish sandwiches, where others just see cars that no longer stop to shop.

“You know what it is?” Hemphill said. “It’s the expectations. They badmouth Sprague Avenue so badly, but it’s like the near east side, it’s a great opportunity for somebody. That’s what you have to do as a business. You have to look when opportunity knocks.”

Chkn-N-Mo, the offshoot of Hemphill’s popular downtown eatery Chicken-N-More will open by Tuesday. By doing so, it will add an ingredient analysts say is vital for Sprague Avenue’s recovery, a coming of so-called second-generation stores, the kind of established local business that fill in the holes after bigger businesses head for the next best retail strip.

There is a lot of filling in to do. There are more empty office buildings and retail spaces in Spokane Valley than any other suburban area in Spokane County. Retail vacancy rates in Spokane Valley are 14.4 percent, better than two years ago when 17 percent of Valley retail spaces were shuttered, but nowhere near the 4 percent rate that’s considered healthy. The rate of empty office spaces is worse.

But Scott Auble, of Auble Jolicoeur & Gentry, a firm that studies the local real estate market, said the potential is there for the retail and office space to pick up.

“If you look at the general economic conditions, they tell is things should improve,” Auble said.

Spokane Valley had three things working against it four years ago when vacancy rates for retail and office spaces were trending upward.

– There was a national recession.

– Spokane Valley Couplet had opened putting an end to eastbound traffic on Sprague Avenue between University and Thierman Roads. By most accounts, businesses on that stretch of Sprague were already struggling, but after the couplet half of them reported a 27 percent drop in revenue.

– The third problem for retail and office space was the burgeoning retail growth along North Sullivan Avenue, all the way to Spokane Valley Mall, a trend Auble referred to at the time, as “that giant sucking sound” of business being pulled off Sprague and onto Sullivan.

Analysts still believe the Spokane Valley couplet will prove to be a good thing for retail along the Valley’s core. Spokane Valley city launched a $400,000 study four months ago to revive Sprague. And the economy is picking up.

What isn’t going away though is that “giant sucking sound” to which Auble refers. And the problem doesn’t stop with new retail construction. New office space built outside of Spokane Valley’s traditional office core, has blackened some commercial real estate as well.

While retail vacancy rates in Spokane Valley were on a bit of a roller coaster, it’s office space that has a chronic case of the empties. Roughly a fifth of all office space in Spokane Valley is unfilled, Auble said. Dark windows and half-empty parking lots are common along the white-collar Argonne-Mullan corridor, where office buildings dominate the landscape for 14 blocks.

“Valley office space is at 20.9 percent and it’s been at that number for two years. That’s mostly due to a lot of new construction.” Auble said. “The amount of space for lease is going up.”

In the Argonne-Mullan corridor alone, nearly 69,000 square feet of new office space has been built in the last five years, indicate building permits filed with Spokane County and Spokane Valley.

At the same time corridor office construction has picked up, tenants have left the corridor for greener pastures. ITT Technical Institute, for several years one of the corridor’s larger tenants, left the two buildings it partially occupied in the office strip and relocated to a new 28,000-square-foot building at 13518 E Indiana Ave., near Spokane Valley Mall.

ITT’s new digs are just across the street from Mirabeau Point, which is quickly adding 200,000 square feet of office space to Spokane Valley’s inventory. Farther north, Pinecroft Business Park on East Mirabeau Parkway has boosted Valley business by more than 160,000 square feet in the last six years.

“The market will come into balance,” Auble said. “Rents are going to have to rise to meet the cost of construction,” which should make the affordability of older office space more attractive.

On paper, though, rent in Spokane Valley for both retail and office space rank the cheapest in the region. Jeff Johnson of Tomlinson Black Real Estate’s commercial property said office space in Spokane Valley leases as cheaply as $13.53 a square foot, compared to $18 on the South Hill and $16 on Spokane’s North Side for similar properties.

But there’s often a catch to those low Spokane Valley prices that make them less than a bargain, Johnson said. Cheaper leases often shoulder businesses with building costs that slightly more expensive leases cover.

When it comes to Spokane Valley’s premium locations for office and retail, prices are comparable to the higher prices in the region, $20 to $26 a square foot for space in a popular new mini complex where you might find a Starbucks, $20 for premium office space, which is in ballpark of downtown office and retail prices.

On Sprague Avenue between University and Argonne Roads, even the lowest prices experts quote for commercial space are eluding Dick Behm. He’s getting $7.50 to $10 on commercial property that might fetch $12 or more on the North Side; a reality Behm said hasn’t sunk in with the Spokane County tax assessor.

The latest tax assessment on Behm’s restaurant property, which houses Jenny’s Cafe, leapt up 60 percent this year. Oddly though, assessments on Behm’s office mall and parking lot located next to Jenny’s stayed flat or increased little.

Behm is contesting the assessments, even the ones that didn’t change. To bolster his argument, he’s delivered to County Assessor Ralph Baker a copy of a Spokane Valley Business Association study that half of the business on Behm’s stretch of Sprague have seen profits drop 27 percent since Sprague became a seven-lane, one-way street six years ago. He’s not sure what the future holds for Sprague Avenue, but he’s certain the days of national anchor retailers along Sprague, at least his stretch of the 11-mile street, are over.

“Most national concerns will not locate on a one-way street,” Behm said.