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If you build it, will they come?

Businesses have plenty of room to grow into, but not enough cash

Posted: Tuesday, November 26, 2002

Editor's note: The following is the first in a series of articles about business on the central Kenai Peninsula.

Nearly 30 commercial spaces stand empty in Kenai and Soldotna. Some old, some new. From the former Pay and Save store in the Peninsula Center Mall in Soldotna to the former first Napa Auto Parts store in Kenai, there are enough abandoned commercial structures to beg the question: In the wake of an often mercurial economy, is this to be expected?

Kenai Mayor John Williams sounded off on the first question, saying he had approached several owners of Kenai's abandoned buildings about doing something to occupy the spaces. He said some of the property owners' just didn't seem interested in making decisions on their buildings.

"It's really tough," Williams said. "You need to really look at the persona of the owners. Some of these guys are collectors. Some people can't be motivated to do anything with these buildings. Meanwhile, we have new buildings being built."

So why build more new buildings, rather than occupying ones that already exist?

 

The Kenai Professional Building sits vacant on Willow Street.

There are no definitive answers, but the communities where these buildings are located have taken notice.

Currently, there are 10 abandoned buildings in Kenai, and 11 new commercial spaces that sit empty. In Soldotna, there are two new spaces awaiting occupancy and four more older spaces that are going unused.

Kenai City Council member Pat Porter said she is concerned about the message so many vacant buildings in the city's main corridor sends out.

"It doesn't look good economically for our town," she said. "It's a real distraction for the town."

Porter said the council hasn't really addressed the matter, but some citizens have raised concerns about the issue at town hall meetings for a city comprehensive plan that will be drafted next year. As a result, this has been added to a long list of topics the city planning commission and contractors will review for the comprehensive plan.

In the meantime, business owners are still seeking homes for their companies. While some businesses choose to make their way in newer facilities, others find it in their best interest to make the most of what already is available.

"For a short-term (five to 10 years), it's a practical investment," said 10-year Soldotna insurance agent Nancy Mitchell, who just moved into a brand new building she built in Soldotna. "Especially if you're going to reside in the building."

She said the decrease in stock market value versus the investment return of real estate made investing in the real estate market a higher rate of return.

"It worked out better financially," Mitchell said.

She said her building would retain greater value on the real estate market.

"New buildings have less maintenance costs," she said.

Kate Carmody just opened her business, Body, Mind and Spirit, next to Don Jose's in what was the previous Kenai Post Office building on Willow Street. The space had been empty for four years, before the import retail and massage therapy business moved in earlier this month. Carmody said she and her business associates considered a newer space, but the price and the space were right for what they needed.

"This had a lot more square footage, the rent was better, and to me, it had a lot more character," she said. "And we were able to get into it a lot quicker."

There was room enough for retail space, two private rooms for massage therapists, and a larger space Carmody said she intends to use for classes in the future.

"I didn't have to go in and do much remodeling," she said.

Allen Norville is a building developer who recently has contributed to both sides of the issue, building a new structure in Kenai's main retail center and renovating a large warehouse in Soldotna. Owner of the Carrs shopping center, Norville opened a new 13-unit building last month in Kenai, adjacent to Carrs. He said the new building is geared toward smaller businesses.

"We had a request for stores that will accommodate small spaces," Norville said in an earlier Clarion story. "There's a lot of traffic at the center. The smaller tenants tend to do a lot better when they're located near a large business."

In Soldotna, he purchased the building at the corner of Warehouse Drive and Wilson Lane, and modified it to accommodate the future central peninsula headquarters for ACS.

Chuck Stauffer, ACS area manager, said the company's operations in its two separate Soldotna facilities would move into the larger building -- and under one roof -- by January.

"We're getting a lot of positive feedback from Soldotna, because it was an eyesore," he said. "It was basically the most cost-effective way to go."

John Mellish, of RPM Rebuild Inc., said cost may be a factor in keeping many of the empty spaces unused. His company purchased and is renovating spaces in the southeast fourth of the building on Frontage Road near the Uptown Motel in Kenai where two new businesses have moved in. He said he's seen a lot of newer buildings charge tenants between $1.50 and $1.75 per square foot.

"It's awful tough for a lot of small businesses to make it at that rate," he said. "We try to offer spaces at 90 cents per square foot so we can make a return on our investment and keep a low turnover."

Still, some property owners may find it difficult to even fill the spaces they own, old or new. Mitchell's new office had its grand opening Saturday, but her building still has yet to lease the two other offices she made available last week.

"I've had a lot of inquiries, but no commitments," she said.

Earlier this year, Norville told the Clarion he was negotiating several leases at his new Kenai building, but only two tenants are open.

Another owner, however, expects to take his building off the vacancy list.

Ron Swanson, owner of Ron's Rent-It Center in Kenai and Ron's Honda Center in Soldotna, owns the Kenai Professional Building on the corner of Willow and Cohoe. His building has been empty for nearly 10 years.

The 35-year peninsula business owner said a year after he purchased the building, and right when its previous tenants had moved, there was a significant downturn in the economy, which made it difficult to maintain his other businesses and occupy that one.

"The intentions were to use it for my own business," Swanson said. "Then the crash came."

He said he plans to move his rental business into the building next spring, and said replacing wiring and plumbing that he removed earlier and preparing the building to meet city and state code won't be expensive or difficult.

Swanson said the location -- just a block from the Kenai Spur Highway -- is favorable, but only what he perceives as a recent resurgence in commercial growth in the area spurred him to make the move.

"There's been absolutely no interest in doing anything as far as commercial (growth) in Kenai up until this year," he said. "There just hasn't been a market. Without a market, nobody's been asking to do anything."

Swanson said the Kenai Mall would attract more business if it was more aggressively used, potentially driving more business into the area west of Bridge Access Road.

Robert Martin is a commercial leasing agent with Carr-Gottstein Properties, the owner of the Kenai Mall. Of the 87,551-square feet available in the complex, he said only 30,850 currently is being leased, in spite of the 70-cents-per-square-foot price tag on space.

When it was fully leased, the property hosted Carrs stores -- one a grocery store and the other a general retail outlet -- and a Fred Meyer. Martin attributed much of the mall's current occupation rate to the brunt of the retail traffic moving to the east.

"The Kenai Mall has been decimated by your box stores," he said. "Over the last few years, there has been a shift in buying patterns. The heart of the retail industry is moving toward Soldotna."

Martin said changing retail trends across the nation have given cause for strip malls to redirect their priorities. He said because the retailers tend to want to be where there is higher traffic volume, malls like the Kenai Mall have had to attract service-oriented businesses to survive.

"You're finding that institutions are taking the back sides of malls. And in some cases, the front," Martin said. "When we got a bid from the (state) Department of Labor, it was a perfect fit."

Carr-Gottstein doesn't want the mall to become another empty shell, Martin said. He said his company is trying to revitalize the Kenai Mall and the surrounding area, in spite of the seeming difficulty in attracting retailers.

"We're undaunted," he said. "We're still talking to tenants."

But Kenai's mayor said the older buildings were relics of an era long gone. He said change may come only when there is a substantial injection to the economy. One like the oil boom of the 1960s.

"Many of the buildings we are talking about were built on a hurry-up, short capital basis," he said. "It's going to take something dramatic to rekindle the economic growth of the smaller communities. The whole future of this (economy) depends on another discovery of new resources."

Editor's note: The following is the first in a series of articles about business on the central Kenai Peninsula.

By MARCUS K. GARNER

Peninsula Clarion

Nearly 30 commercial spaces stand empty in Kenai and Soldotna. Some old, some new. From the former Pay and Save store in the Peninsula Center Mall in Soldotna to the former first Napa Auto Parts store in Kenai, there are enough abandoned commercial structures to beg the question: In the wake of an often mercurial economy, is this to be expected?

Kenai Mayor John Williams sounded off on the first question, saying he had approached several owners of Kenai's abandoned buildings about doing something to occupy the spaces. He said some of the property owners' just didn't seem interested in making decisions on their buildings.

"It's really tough," Williams said. "You need to really look at the persona of the owners. Some of these guys are collectors. Some people can't be motivated to do anything with these buildings. Meanwhile, we have new buildings being built."

So why build more new buildings, rather than occupying ones that already exist?

There are no definitive answers, but the communities where these buildings are located have taken notice.

Currently, there are 10 abandoned buildings in Kenai, and 11 new commercial spaces that sit empty. In Soldotna, there are two new spaces awaiting occupancy and four more older spaces that are going unused.

Kenai City Council member Pat Porter said she is concerned about the message so many vacant buildings in the city's main corridor sends out.

"It doesn't look good economically for our town," she said. "It's a real distraction for the town."

Porter said the council hasn't really addressed the matter, but some citizens have raised concerns about the issue at town hall meetings for a city comprehensive plan that will be drafted next year. As a result, this has been added to a long list of topics the city planning commission and contractors will review for the comprehensive plan.

In the meantime, business owners are still seeking homes for their companies. While some businesses choose to make their way in newer facilities, others find it in their best interest to make the most of what already is available.

"For a short-term (five to 10 years), it's a practical investment," said 10-year Soldotna insurance agent Nancy Mitchell, who just moved into a brand new building she built in Soldotna. "Especially if you're going to reside in the building."

She said the decrease in stock market value versus the investment return of real estate made investing in the real estate market a higher rate of return.

"It worked out better financially," Mitchell said.

She said her building would retain greater value on the real estate market.

"New buildings have less maintenance costs," she said.

Kate Carmody just opened her business, Body, Mind and Spirit, next to Don Jose's in what was the previous Kenai Post Office building on Willow Street. The space had been empty for four years, before the import retail and massage therapy business moved in earlier this month. Carmody said she and her business associates considered a newer space, but the price and the space were right for what they needed.

"This had a lot more square footage, the rent was better, and to me, it had a lot more character," she said. "And we were able to get into it a lot quicker."

There was room enough for retail space, two private rooms for massage therapists, and a larger space Carmody said she intends to use for classes in the future.

"I didn't have to go in and do much remodeling," she said.

Allen Norville is a building developer who recently has contributed to both sides of the issue, building a new structure in Kenai's main retail center and renovating a large warehouse in Soldotna. Owner of the Carrs shopping center, Norville opened a new 13-unit building last month in Kenai, adjacent to Carrs. He said the new building is geared toward smaller businesses.

"We had a request for stores that will accommodate small spaces," Norville said in an earlier Clarion story. "There's a lot of traffic at the center. The smaller tenants tend to do a lot better when they're located near a large business."

In Soldotna, he purchased the building at the corner of Warehouse Drive and Wilson Lane, and modified it to accommodate the future central peninsula headquarters for ACS.

Chuck Stauffer, ACS area manager, said the company's operations in its two separate Soldotna facilities would move into the larger building -- and under one roof -- by January.

"We're getting a lot of positive feedback from Soldotna, because it was an eyesore," he said. "It was basically the most cost-effective way to go."

John Mellish, of RPM Rebuild Inc., said cost may be a factor in keeping many of the empty spaces unused. His company purchased and is renovating spaces in the southeast fourth of the building on Frontage Road near the Uptown Motel in Kenai where two new businesses have moved in. He said he's seen a lot of newer buildings charge tenants between $1.50 and $1.75 per square foot.

"It's awful tough for a lot of small businesses to make it at that rate," he said. "We try to offer spaces at 90 cents per square foot so we can make a return on our investment and keep a low turnover."

Still, some property owners may find it difficult to even fill the spaces they own, old or new. Mitchell's new office had its grand opening Saturday, but her building still has yet to lease the two other offices she made available last week.

"I've had a lot of inquiries, but no commitments," she said.

Earlier this year, Norville told the Clarion he was negotiating several leases at his new Kenai building, but only two tenants are open.

Another owner, however, expects to take his building off the vacancy list.

Ron Swanson, owner of Ron's Rent-It Center in Kenai and Ron's Honda Center in Soldotna, owns the Kenai Professional Building on the corner of Willow and Cohoe. His building has been empty for nearly 10 years.

The 35-year peninsula business owner said a year after he purchased the building, and right when its previous tenants had moved, there was a significant downturn in the economy, which made it difficult to maintain his other businesses and occupy that one.

"The intentions were to use it for my own business," Swanson said. "Then the crash came."

He said he plans to move his rental business into the building next spring, and said replacing wiring and plumbing that he removed earlier and preparing the building to meet city and state code won't be expensive or difficult.

Swanson said the location -- just a block from the Kenai Spur Highway -- is favorable, but only what he perceives as a recent resurgence in commercial growth in the area spurred him to make the move.

"There's been absolutely no interest in doing anything as far as commercial (growth) in Kenai up until this year," he said. "There just hasn't been a market. Without a market, nobody's been asking to do anything."

Swanson said the Kenai Mall would attract more business if it was more aggressively used, potentially driving more business into the area west of Bridge Access Road.

Robert Martin is a commercial leasing agent with Carr-Gottstein Properties, the owner of the Kenai Mall. Of the 87,551-square feet available in the complex, he said only 30,850 currently is being leased, in spite of the 70-cents-per-square-foot price tag on space.

When it was fully leased, the property hosted Carrs stores -- one a grocery store and the other a general retail outlet -- and a Fred Meyer. Martin attributed much of the mall's current occupation rate to the brunt of the retail traffic moving to the east.

"The Kenai Mall has been decimated by your box stores," he said. "Over the last few years, there has been a shift in buying patterns. The heart of the retail industry is moving toward Soldotna."

Martin said changing retail trends across the nation have given cause for strip malls to redirect their priorities. He said because the retailers tend to want to be where there is higher traffic volume, malls like the Kenai Mall have had to attract service-oriented businesses to survive.

"You're finding that institutions are taking the back sides of malls. And in some cases, the front," Martin said. "When we got a bid from the (state) Department of Labor, it was a perfect fit."

Carr-Gottstein doesn't want the mall to become another empty shell, Martin said. He said his company is trying to revitalize the Kenai Mall and the surrounding area, in spite of the seeming difficulty in attracting retailers.

"We're undaunted," he said. "We're still talking to tenants."

But Kenai's mayor said the older buildings were relics of an era long gone. He said change may come only when there is a substantial injection to the economy. One like the oil boom of the 1960s.

"Many of the buildings we are talking about were built on a hurry-up, short capital basis," he said. "It's going to take something dramatic to rekindle the economic growth of the smaller communities. The whole future of this (economy) depends on another discovery of new resources."



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