Retail growth is at a standstill along some corridors in the Spokane Valley, and the vacancy rate for retail property there is higher than in most other parts of the Spokane area.


Though Costco Wholesale Corp. has said its looking at moving its Third Avenue store to a site near the Home Depot store at 5101 E. Sprague, large buildings and retail bays near the Sprague-Sullivan intersection and elsewhere on Sprague have been empty for months and, in some cases, more than a year. Also, about a dozen vacant spaces currently litter Sprague Avenue between Sullivan and Pines roads.


Clark Pacific Real Estate Co. President Marshall Clark says many major retailers still are seeking space in the Valley, but nonetheless hes never seen so much vacant space there.


If, as he expects, more retail space is developed in the Valley before long, Its going to get worse before it gets better, Clark says.


David Black, CEO of Tomlinson Black Commercial Inc. here, also says that while he regards the Valley retail market as a good one, a lot of retailers have left.


There is a lot of space in the Valley thats vacant, Black says. Its in a state of flux.


Activity is beginning to stir in some long-vacant buildings in the Valley, but a number of highly visible spaces remain empty. For instance:


A 40,000-square-foot building near the northwest corner of Sprague and Sullivan hasnt had a permanent occupant since Future Shop Ltd., which built the structure, closed its store there almost a year ago. A discount bookstore occupied that space temporarily late last year, but since has moved out.


Two 16,000-square-foot spaces that flank a Hastings Entertainment Inc. store in Sullivan Square, at the southwest corner of Sprague and Sullivan, had been vacant for more than two years until recently, when Harbor Freight Tools moved into one of them temporarily. The tool retailer is occupying the space just east of the Hastings store until its fire-damaged store at Sprague and Pines Road is rebuilt. The vacant space near the Hastings store had been part of a Best Products Co. store, which closed in 1996.


An 18,000-square-foot speculative retail center called Sullivan Town Square, which was built behind a Sharis Restaurant located at 320 N. Sullivan, has been vacant since it was completed last fall.


Smaller spaces that have been empty for nearly a year or longer include a former Saks Restaurant, at 15606 E. Sprague, and a former Play It Again Sports outlet at 14208 E. Sprague.


Other spaces recently have attracted users after sitting vacant for months.


The 35,000-square-foot former Huckleberrys store at the southeast corner of Sprague and Sullivan had been empty since Rosauers Supermarkets Inc. closed it in the summer of 1998. This summer, a Walgreens Pharmacy will open in part of that space, but about a third of the building still hasnt been spoken for.


A 9,200-square-foot speculative retail building at 12801 E. Sprague that was completed last spring sat empty until earlier this month, when a cellular-phone company opened in its middle space. Prospective tenants preliminarily have committed to take three other spaces in the building, leaving one available, says Clark, who is marketing the property.


Its difficult to get a clear statistical picture of the Valleys retail-space market or see how its changed recently.


A retail vacancy rate survey completed this month by Auble, Jolicoeur & Gentry, of Spokane, showed a 10.6 percent vacancy rate for the Valley, which, with the exception of the central business district, was twice as high as the rate in any other part of the Spokane metropolitan area. The survey reviewed 19 Valley retail properties that have a total of 950,000 square feet of space.


The CBD had a 29 percent vacancy rate. Spokanes North Side had a 5.4 percent vacancy rate, the downtown periphery each posted a 4.8 percent vacancy rate, and the South Hill had a 1.4 percent vacancy rate.


Auble President Scot Auble says that the firm added properties to the recent survey, making it difficult to draw year-to-year comparisons. In 1999, the company reported a 16 percent vacancy rate in seven Valley properties with about 640,000 square feet of space. The prior year, Kiemle & Hagood Co., of Spokane, conducted the survey and reported a 37 percent vacancy rate in eight properties. That result was skewed by the inclusion of the University City Shopping Center, which was undergoing renovation. U-City wasnt included in either the 1999 or 2000 numbers.


In the Valley, Clark believes, developers have been adding space as fast as they did in the early 1990s, even though population growth has slowed, which could push the vacancy rate higher.


Nobody should be building speculative space in the Valley right now, he says. You just cant continue like things havent changed.


Mark Pinch, president of Tomlinson Black Commercial, says external factors have caused some retailers to leave the Valley. For instance, Future Shop pulled out as part of the Vancouver, B.C.-based electronics chains decision to close or sell all of its U.S. stores, and the Best Products store closed after its parent company filed for bankruptcy. Neither decision necessarily reflected the performance of the two stores here, Pinch asserts.


The glut of available Valley space is on the market when retail is believed to be slowing down in the Spokane-Coeur dAlene area.


Clark told attendees at a recent real estate market forum here that since 1990, the Spokane-Coeur dAlene retail market here has become overbuilt.


Demand for retail space is weakening, and I think that trend will continue for 18 to 24 months, he said.


Fewer national retailers are looking to open stores here, because after years of strong retail growth in the Spokane-Coeur dAlene area, many such companies now already have a presence. Clark says major retailers that arent here, but currently are looking for space include Old Navy; Linens n Things Inc.; Best Buy Co. Inc.; and Bed Bath & Beyond Inc.


Even though retail-development activity is expected to slow, several large projects are under way in the Spokane area. They include the second phase of the River Park Square redevelopment, expansion of NorthTown Mall, and construction of a Wal-Mart Stores Inc. outlet at Shadle Center.


While none of the major retail projects currently under way are located in the Valley, in recent years the Spokane Valley Mall and Market Pointe I shopping complex have opened on the north side of I-90, and the Spokane Valley Plaza has opened on the south side of the freeway. Plans call for an expansion of the Valley mall and additional shopping complexes around it, though time lines havent been set for construction.


Meanwhile, activity has migrated away from the eastern reaches of Sprague. Companies such as Future Shop and Huckleberrys opened stores at the Sullivan-Sprague intersection when it was one of the hottest retail areas in Spokane County, but the hot spotsand traffic flowshave moved north to I-90. Most retailers with a regional customer base now look closer to the freeway.


The available space along Sprague likely will be filled by companies that are aiming to draw customers mostly from the southern part of the Valley, Pinch says. Thats why companies such as Hastings or Fred Meyer Inc., which draw customers to each of their outlets from a 5- to 10-mile radius and typically have a number of stores in a metropolitan area, operate outlets on Sprague.


Retailers with similar geographical target markets also would look at space along Sprague as a viable option, while companies, like Barnes & Noble Booksellers or Gart Sports Inc., which have a regional customer base for each store, typically will open one or two stores in a market the size of Spokanes, Pinch says. In the Valley, theyll opt for locations near the freeway rather than more than a mile south of it, he says.


Jim Quigley, an associate broker at Kiemle & Hagood, foresees a more pronounced shift away from retail uses in some spaces along Sprague that traditionally have been retail. He and an associate, Carl Guenzel, put together a lease earlier this year in which Visiontec LLC, a Spokane contract manufacturer, leased a 51,000-square-foot, former Rosauers grocery store and converted it into an office-and-manufacturing facility.


Quigley says few large retail buildings lend themselves to that sort of conversion, but he foresees similar transformations occurring on a smaller scale with other buildings along Sprague.


The smaller spacesgenerally with between 2,000 and 10,000 square feet of floor spacelikely will be filled by service-oriented businesses such as computer repair shops, mailbox outlets, and tax-preparation companies, he says.


Evergreen effect


Valley traffic-flow patterns are certain to change again when the Evergreen Road-Interstate 90 interchange is finished in November.


We think that will take about 20 percent of the traffic off of the Sullivan and Pines interchanges, says Ross Kelley, assistant Spokane County engineer.


The impact of that change is unclear so far, but commercial real estate observers currently dont see the shift in traffic as a bad thing. Traffic will circulate better on Sullivan and Pines after the project is done, Pinch says, making it easier for consumers to get to the businesses there.


It appears unlikely that Evergreen will turn into a commercial corridor any time soon. The countys comprehensive plan currently doesnt call for commercial development there, and Evergreen already is densely developed with housing.


In my mind, Quigley says, I have a hard time seeing Evergreen looking like Sullivan at any time in the future.