Poised for growth

Attractive lease rates a growth tonic for some retailers

BY CHRISTY LOCHRIE for the VBJ

Chuck Leidy and his wife, Gina, like a bargain. The Vancouver couple, owners of the recently opened Reo's Coffee and Hot Dog Emporium on Main Street in Uptown Village, spent the last eight years scooping up bargain-basement-priced restaurant equipment from estate sales, auctions and from online classified advertisements.

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The espresso machines, snapped up at an auction for $750 each, retail for about $5,000, according to Chuck Leidy, adding that the couple paid about $200 to have them rebuilt.

"What we have, in essence, is two brand new machines," Leidy said, while sipping a cup of the brew near a faux fireplace in a space that he remembers from his youth as a hardware store.

So it's no wonder that the Leidys, who spent more than a decade dreaming of opening their own coffee shop, looked for a leasing bargain, too.

"When you look at commercial rates in other parts of town, they run two-and-a-half to three times what they are here," said Leidy, who as a 3-year-old, remembers lugging ice cream home from a Main Street drug store in his Radio Flyer wagon, a trek that took him past the building that now houses their coffee shop.
_Buck Heidrick_for the VBJ_
Despite continuing weakness in the retail sector, Kazoodles, a toy store owned by Mary and
Bob Sisson, opened up a second location in east Vancouver last week. Above, aisles packed
with toys at their Esther Short Park store.

"Neighborhoods are like people," Leidy said. "They get old, die and then are reborn."

But when it comes to retail spaces at the tail-end of a recession, many are sitting empty, according to Deborah Ewing, a commercial real estate broker with Eric Fuller & Associates in Vancouver.

Ewing, who has 22 years of commercial real estate experience, said the retail vacancy rate in Vancouver hovers at 17 percent; in healthy economic times, the vacancy rate is between 5 and 7 percent, she said.

Preliminary first quarter Portland metro area retail vacancy rates are at 7.9 percent, according to Pam Lindloff of NAI Norris, Beggs and Simpson, a commercial real estate firm with offices in Vancouver.

"It's a great time to take advantage of the lower rental rates and concessions that people are giving to attract the right tenants," Ewing said.

That's what Rand Schiltz did. A custom jeweler with 29 years of experience, Schlitz opened his own business, Rand Jewelers, on Evergreen Street in downtown Vancouver. His high-profile storefront, near the still under-construction main branch of the Fort Vancouver Community Library, sat empty for nearly two years, he said.

"Right now, shopping around for [retail] space, it's a great time," Schiltz said, pausing between helping customers with ring sizings, repairs and special orders.

Schiltz said he negotiated a five year lease, with small rent increases included. His landlord, Vancouver Historic Renovation, owned by Douglas Walker, agreed to shoulder about $30,000 of the cost of the build-outs, transforming the retail shell into a store with woodworking, a warm color palate and an overhead loft. "It was the best bang for the dollar," he said.

Mike Lamb, a commercial and residential real estate agent with Windermere Real Estate in Vancouver, said landlords looking to get their balance sheets back in the black with rented properties are willing to negotiate.

Shorter leases, more tenant improvement allowances and even rent reductions ranging from 20 to 30 percent are among the incentives that retailers, many of whom are new to the market or are seeking expansion opportunities, are tapping into, Lamb said.

While some smaller retailers take advantage of the attractive lease rates for expansion opportunities, other larger retailers are taking notice as well.

Michael Read, a spokesman for WinCo Foods, which
recently opened a 94,000- square-foot store on N.E. 119th Street in Vancouver, said the depressed commercial real estate market became a trigger for expansion for the six-state chain.

"There are more opportunities to look at," Read said, adding that store conversions of existing empty big-box spaces and ground-up builds are part of the company's store portfolio.

Even so, the economic storm has dampened expansion plans for WinCo. The big-box retailer, which features a bag-your-own-groceries business model, plans to open seven new stores this year.  In a stronger economy, WinCo, which typically spends nine months constructing a new store, would have slated nine new locations for opening, Read said.

Lindloff said she's working with a number of retailers who are taking advantage of the lowered lease rates to expand.

"If it's a tenant that wants to be in a higher profile shopping center that they weren't able to afford before, they're often able to make that change now," Lindloff said. "There are opportunities out there."

Even so, moving shop - or opening a new one - can be a pricey endeavor. Lindloff points out the costs associated with a change in location, which include not only the physical move itself, but advertisements needed to retain customers, stationary changes and other housekeeping tidbits.

"It's not inexpensive to relocate," Lindloff said.

But for some retailers, it's the opportunity of a lifetime.

Leidy, who is gearing his coffeehouse and hot dog emporium towards a mature customer base, thinks now is the perfect time to start, expand or reach for one's retail dream.

"If you've got the right kind of business, there's no bad time to start," Leidy said. "What holds most people back is fear of failure."

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