Clark County’s commercial development scene continued to feel the effects of recession through 2009, and there aren’t many signs of it turning around in 2010.
However, bright spots on the local construction horizon include government-funded projects such as expansions at Washington State University Vancouver and Clark College, a new development to accommodate the U.S. Army, and major railroad, highway and street improvements.
County’s top construction projects
Transportation projects speed along
Projects on hold
“That’s our stimulus money at work. There are a lot more road projects right now and fewer buildings,” said Randy Graves, executive director of the 200-member Southwest Washington Contractors Association.
Other experts say the days of speculative office, retail and industrial development are gone, at least for the next couple of years.
The problem? Bank lenders won’t finance the projects unless they see firm tenant commitments to lease new space. In the meantime, developers won’t risk their own capital to start projects as they try to anticipate whether demand will materialize, said Steve Burdick, director of development for Killian Pacific in Vancouver.
“Even when the market starts to recover, lenders probably won’t begin originating any new loans,” at least not right away, Burdick said.
That will inhibit all but the most robust business expansions through 2010, said Adam Roselli, a vice president with Eric Fuller and Associates Inc., a commercial real estate firm in Vancouver. Roselli said many firms are hunkering down to wait out the recession.
“A lot of companies are only taking out leases for one to three years,” said Roselli, who specializes in the Clark County office market.
Roselli said more than 19 percent of space in Clark County’s office buildings was vacant in November, which is high for the region.
“A healthy office rate is deemed to be in the 12 (percent) to 15 percent range,” he said.
On hold
That’s why Elie Kassab has put on hold his proposed six-story downtown Vancouver office tower, but he said he expects to move forward with its companion six-story, 100-unit apartment building. It will replace the former Vancouver police station office at 300 E. 13th St., said Kassab, owner of Prestige Development in Vancouver.
“There’s quite a demand for apartments,” Kasaab said.
He said he expects to break ground on the building in late 2010, to be rented as work force housing to renters who earn up to 80 percent of the area’s median income.
Office tenants
Roselli said that the only office projects being built are for specific tenants and will be completed in the next year or two. Among them, California-based Fisher Investments said it expects to break ground midyear on a two-building office campus in Camas.
The company eventually will move its Vancouver staff of 254 employees to the Camas campus, which could become a world headquarters for Fisher Investments and its staff of 1,000 employees, mostly based in San Mateo, Calif. For now, the company is headquartered in Woodside, Calif.
“This year, we’ve hired 40 people (in Vancouver), mostly account executives doing telephone sales work,” said Ken Fisher, founder and chief executive officer of the investment firm, which manages more than $30 billion in accounts.
Fisher said the firm is looking to hire another 10 to 15 account executives in the first quarter of 2010 and another 10 client service associates by the end of February.
Fisher Investments will also continue to transfer a trickle of employees from California to Vancouver, an encouraging sign of economic recovery, according to some real estate experts. Local business expansions fuel demand for housing, which in turn, fuels retail development, said Deborah Ewing, a retail specialist and vice president with Eric Fuller and Associates Inc.
Retail development
Until then, new store developments have slowed to a handful of well-financed big-box “discount” store projects in 2010, including a WinCo Foods store in Brush Prairie, a Costco Wholesale warehouse in Vancouver and a Walmart Supercenter in Woodland.
“Those are exceptions because their sales typically improve in a down economy,” Ewing said.
As with office projects, Ewing said new retail construction won’t be financed without strong tenant commitments.
“Lenders have to have the confidence that it will be repaid,” said Ewing, who said most lenders require a more in-depth analysis of project proposals these days.
Burdick predicted that banks would continue to trim their real estate loan portfolios, casting a shadow of uncertainty over multimillion dollar mixed-use projects, such as Killian Pacific’s $170 million Library Square. In 2008, his company announced plans to mothball the project, formerly called Riverwest.
A year later, the company has no definite plans to revisit the development of retail, condominium, hotel and office space. It was planned to complement a public library building now under construction at Evergreen Boulevard and C Street in downtown Vancouver.
The project can’t move forward until commercial vacancy rates decline, and housing markets improve, Burdick said.
“There’s still vacant office space and a lot of vacant condos. And hotels are not viable at this point,” Burdick said.
He predicted the next wave of commercial construction would be launched by the arrival of a new and entirely unexpected business.
“Maybe it will be a defense company, with all this stuff happening in Afghanistan,” Burdick said. “I’m not aware of any company that fits that kind of description, but it’s always a remote possibility.”
