The first leg of the north-south freeway to open for traffic likely will stir new commercial development, such as around the interchanges where it connects with busy arterials, but market demand for that land isnt materializing yet, commercial real estate specialists here say.


That portion of the overall estimated $3.3 billion project still is far enough away from completion that land investors and potential developers say theyre biding their time until construction progresses further.


We would have to be on the last leg and with funding in the bank, so to speak, before (investors) are going to take it seriously, Marshall Clark, of Clark Pacific Real Estate Co., of Spokane, says.


Half of us are all still wondering if its reality, says Larry Soehren, vice president of Kiemle & Hagood Co., of Spokane.


The north-south freeway, formally called the North Spokane Corridor, ultimately will stretch 10.2 miles between Interstate 90, near the Thor-Freya exit, and U.S. 395, near Wandermere Golf Course. The overall project is expected to take 20 years to build. The freeway will be designed to carry eight lanes of traffic between I-90 and Francis Avenue, six lanes between Francis and U.S. 2, and four lanes between U.S. 2 and U.S. 395.


Construction work has focused initially on the section of the freeway that will be north of Francis Avenue, for which about $291 million has been spent, allocated, or earmarked so far. It has included extensive earthwork and construction of a series of bridges along the freeway route, several of which wont be completed until next year.


The latest contract, for $19.5 million, was awarded this spring and is for laying a rock base and paving a four-mile stretch of the freeway between Freya Street and Farwell Road. The Washington state Department of Transportation hopes to open one lane of traffic in each direction on that stretch in 2009, but work on the entire section of the freeway north of Francis isnt expected to be completed until 2011.


Interchanges along the stretch that appear likely to attract commercial development would be at Francis and where the freeway crosses U.S. 2.


Clark, however, says he thinks it will take much longer than the time it takes to build the freeway for it to realize any commercial benefit for investors.


He compares the possible lag with that seen along the Ruby-Division street couplet, near downtown, where the Ruby section of the couplet is just now starting to fill out with more commercial development, years after completion of the couplet.


Currently, there isnt enough traffic that would be fed to the northern part of the North-South Corridor project from feeder streets like Francis to make an investment attractive, Clark says.


There are too many things that can change or go wrong for people to invest money. There isnt much traffic on it, people arent sure it will ever be donethey might not have cars anymore by the time it gets done, he says jokingly.


Clark thinks that farther north, where the project intersects with U.S. 2, is where the most benefit stands to be realized.


At Francis it will take longer, because its not known for retail, he says.


Soehren says a lot of the potential around Wellesley and Francis is for improved trucking for more industrial and warehouse-type businesses.


Spokane builder Dick Vandervert says the piecemeal nature of the construction means it will take longer for any commercial benefit to be realized.


Until they connect it onto 395, its just an arterial, Vandervert says.


South of Francis, Burlington Northern Santa Fe Railway Co. currently is seeking environmental approval to begin cleaning up 11.5 acres of former rail yard next to the planned freeway between Wellesley and Francis, which it says could be in high demand for future development. It says its preparing the property so part of it can be sold.


Theres some sense youll see development in the Hillyard area, Soehren says. Hillyard is hopeful about turning what is now a bunch of train track and railyards into something viable.


Real estate investors Gavin Swenson and Mark Baier, who own MGLands here, say the opening of the highway still is too far out into the future for commercial development to boom, even at the north end where construction projects are under way.


From a development standpoint, 15 years is a long time to sit on a piece of property in the hopes that it one day could become a profitable location, Swenson says. He says MGLands makes its purchases based on what a propertys potential value is right now, and until the freeway is connected from one end to the other, he doesnt consider it a draw.


MGLands would never hold onto a piece of property speculatively for years, he says, adding that as far as hes concerned, the freeway is still a pipe dream without full funding.


Spokane developer Raymond Hanson owns about 250 acres near the freeway route north of Spokane, including land that formerly belonged to the Kaiser Aluminum & Chemical Corp.s Mead Works smelter on Hawthorne Road. He says he is content to hold onto property while development activity approaches it over an extended period of time.


Hanson says it will be a long time yet before any new commercial development is viable along the North Spokane Corridor, but freeway access is one of the factors his company considers for project development.


He says that he expects the property around the freeways northern interchanges to become more valuable, but that its a long-term prospect. He says he hasnt made any plans for his own property there based on opportunities likely to be created by the freeway project.


Separate from speculative commercial activity along the northern section of the freeway, right-of-way acquisitions for the project have caused some disruption to businesses and are expected to cause more.


About 90 businesses with more than 1,200 full-time employees are expected to be affected directly by the construction over the 20-year work span, according to a DOT environmental impact statement. Most of those will have to move from their current locations when the construction reaches them.


Most of the businesses that ultimately will be displaced are small, but a few have 50 or more employees. A route studied earlier was altered to avoid displacing large employers such as Food Services of America Inc., which employs about 250 people at its facility just east of Market at 3520 E. Francis.


The department is well aware of the possible difficulties for local businesses, DOT regional spokesman Al Gilson says. Gilson says, though, that there is no particular advantage for companies to move now rather than later.


The stage of the game we are in, we are purchasing property just ahead of construction in the northern part of project, he says.


In a displacement, if they want, we help them find a new location, and we pay to relocate them to that place, Gilson says. He says DOT pays fair market value for the property and provides relocation assistance, although some businesses decline DOTs help.


For most companies, the best move right now is no move, he says.


If they move ahead of time, they would do so at their expense, Gilson says.


When the state agency has the resources, it buys land early from willing sellers along other, not yet funded, stretches of the planned freeway, but for the most part the project is being funded incrementally in smaller, more manageable projects, Gilson says.


One such company, Ziegler Lumber Co., of Spokane, was able to sell its property early, in 2004. The company already has transitioned much of its corporate and wholesale business from a location at 4220 N. Market Street, where it still operates one of its Ziggys retail stores on a portion of its former land, which it leases back from the state. It could be years before the freeway work reaches its former property there, says Reid Ziegler, one of the companys principals.


With 87 employees there, Ziegler Lumber is one of the largest employers identified along the Market Street portion of the planned freeway project. The company worked with DOT and with state legislators to get funds from a stalled West Side project reallocated for an early buyout of its 14 acres of property there.


They have worked with some peoplethats not well-known. They try to deal with hardship cases, Ziegler says.


The company started moving most of its warehouse operations away from the five buildings it owned there to some of its other locations in Spokane and Post Falls when the sale closed, he says.


Ziegler Lumber moved its door-building shop and wholesale division to Post Falls, and its corporate offices to its store at 620 E. Holland.


Ziegler says no matter when such a forced move occurs, it presents at least some hardship for a business. He says it can be difficult to quantify all of the costs associated with such a move.


Im not sure if its ever enough (money), but if you have to move, you have to move, whether they cover the cost or not, Zeigler says. You build another building to replace one you had. You have to move inventory. How much gets damaged? How much gets lost?


Its more than just inventory that gets jostled around in such a move, Zeigler says.


Some of our employees have shifted locations, he says. Obviously, if its two to three miles away its no big deal, but some of our people have ended up in Post Falls, where we moved our wholesale branch. Some of them moved, and some got jobs other places.


Still, he says, being able to move on its own time allowed the company to make a much smoother transition.


Its not just the cost, its the time element thats important to businesses. The uncertainty of when you move is a big hardship, Ziegler says.


Despite the hardships and disruption that Ziegler Lumber endured because of the move, he says he believes the freeway will have a positive impact, partly because of the improved movement of business supplies and equipment.


Other property owners not required to move yet are staying put. Spokane architect Glen Cloninger, part owner of the Tapio Center office complex at 104 S. Freya, at the south end of the freeway route, says that though DOT ultimately will buy the center as part of the right of way for an access collector-distribution system along I-90, he has been instructed to go about his business for now as if the freeway wont be constructed. He says hes done just that.


To me its just steady as we go for the next 15 years, which includes maintaining the buildings and making interior-space improvements as necessary to continue to attract and retain tenants, Cloninger says.


We need to keep this complex moving forward and keep it maintained and keep it viable in order to have our tenants want to be here. You dont get tenants in your buildings if you dont maintain them, he says.


Contact Jeanne Gustafson at (509) 344-1264 or via e-mail at jeanneg@spokanejournal.com.