The Pacific Northwest’s regional economy remains strong even after being impacted by the national and global economic trends. Unemployment is up to 5.3 percent in the region. Housing sales have also slowed, however, sales prices have increased slightly. Most retailers’ sales have increased although across-the-board sales have been flat, since auto and furniture sales are down, due to rising fuel prices and fewer home sales, respectively.
Questionable shopping center projects are now being placed on hold or have become staged developments, while well located, designed and tenanted centers are going forward. Well-placed neighborhood centers continue to be planned and developed, though some neighborhood centers have been impacted by Wal-Mart Supercenters and Winco Foods, causing nearby grocers to close or reposition. This has resulted in large vacancies in a few neighborhood centers.
Regional and community centers have also seen a few more vacancies, which has caused some retailers previously suffering from poor sales to close stores, while others are taking a more cautious approach to expansion. National retail apparel chains have slowed, bypassing most community center opportunities.
Regional malls continue adding lifestyle components. At Southcenter in Tukwila, Washington, a second lifestyle component could be added to the north side of the mall after one was just added to its south side. Neiman Marcus has inked a deal to open its first Pacific Northwest location in The Bravern across Lake Washington in Bellevue. Restaurant and luxury retail leasing is making progress at Schnitzer West’s The Shops at The Bravern. Kemper Development Company is remodeling Bellevue Square, and is planning on increasing the already successful Bellevue Collection with a luxury addition.
Successful retailers continuing to expand in the Seattle area are Ace Hardware, Barnes & Noble, Bed Bath & Beyond, Best Buy, Costco, Fred Meyer, Kohl’s, L.A. Fitness, Staples, Target, The Sports Authority, Wal-Mart, Whole Foods Marketplace and Winco Foods. Active developers in the region are Schnitzer, Kemper, Powell Development Company, TRF Pacific, Simon Property Group, Tarragon Development, Urban Retail Properties, Wesbild, Westfield Development and White-Leasure.
The area’s hot submarket is Covington, southeast of Seattle, with a new Kohl’s, The Home Depot, Costco and a proposed Target. Bellingham, Washington, retailers are doing well with shoppers from Vancouver coming south for value purchases. The difficult submarkets, such as Federal Way, Washington, are where the retail has been divided into two distinct areas.
Investment sales have slowed —higher cap rates are being dictated by the national economic conditions, while sellers still think that their properties are worth more given the lack of local retail space. Asking rents have not yet declined in the Seattle area with small shop space going anywhere from $20 per square foot in economically depressed areas to $35 per square foot for first generation space to $50 per square foot in secondary locations of downtown Seattle. Larger retailers are in the $12 to $30 per square foot range, depending on location and whether it’s first- or second-generation space.
Rolland Jones is a senior vice president and head of the Retail Specialty Group with GVA Kidder Mathews.