Friday, May 9, 2008
Third Avenue's vexing paradox
High-profile vacancies reveal big challenges
Portland Business Journal - by Wendy Culverwell Business Journal staff writer
There's no shortage of activity on downtown Portland's Southwest Third Avenue around noon, when office workers go searching for lunch.
Chef Jeffery Reiter banked his business on it when he opened Blueplate restaurant in the historic Dekum Building about 18 months ago. The soda fountain and lunch counter format was an instant hit, with lines queuing up every day.
Southwest Third has long been a paradox for retailers. Just two blocks from the Willamette River and bordering on a city parking garage and Pioneer Place, it's popular with pedestrians and drivers and it has some of downtown's best-known shopping destinations, including the Nordstrom Rack, Romano's Macaroni Grill, the Portland Outdoor Store and others.
But tucked among them are plenty of empty storefronts. Vacancies have increased in the year-plus since light rail construction to the west brought buses to the corridor and with them, more street activity.
The vacancy rate for downtown retail space is about 6 percent, but along Southwest Third, empty storefronts line the street from Stark, where a women's retailer recently shut down in the Oregon Pioneer building, south five blocks to Taylor.
The reasons for all the vacancies are difficult to pin down.
Some blame construction of the new Max line two blocks west, which forced bus traffic onto Third and Fourth. Some say buses bring troublemakers.
Others say the historic buildings pose a challenge because they aren't as suited to modern retailers as newer structures to the west.
John Beardsley, a real estate investor with a taste for historic buildings, acquired three in the area in the past year. He sees great potential in the neighborhood.
Complaining about light rail construction is silly, he said. It's an investment in Portland's future.
"There may be some legitimacy (to complaints) but if you provide a good service and your product and your repartee with your customers is good, there's no reason for that to discontinue because of some street improvement. I absolutely don't subscribe to that," Beardsley said.
Beardsley said opening up old buildings such as the Oregon Pioneer (1910), Loyalty (1929) and Hamilton (1893) is the key to success. Stripping away awnings and restoring transom windows gets light into buildings and light sells space, he said, citing the Macy's remodel as one to emulate.
A long-standing problem
Craig Sweitzer, principal with retail brokerage Urban Works Real Estate, is less optimistic.
"It is a problem and it is an issue," Sweitzer said, calling it a deterrent to businesses considering locating downtown. "Retailers are evaluating when and where they will locate after the construction is complete."
Reiter, the chef, opened Blueplate in the Dekum building at Third and Washington about 18 months ago. The small restaurant is a success, with positive reviews, lines out the door and reasonable profits.
"You've got to be aware that your marketplace is Monday through Friday," Reiter said.
The Dekum, built in 1890, can't easily accommodate a restaurant. Reiter, for instance, cannot have a deep fryer because of ventilation issues, so he simply tweaked his menu and serves mashed potatoes instead of fries.Other business owners might not be so forgiving when buildings thwart their plans.
Sweitzer said older buildings have lots of limitations that make them difficult for retailers. Their windows are limited and even if space is level with the sidewalk, customers usually have to enter through the building's main lobby, a huge turnoff.
Brock Switzer, a retail broker with HSM Pacific Realty, is taking over leasing responsibilities for several of the Beardsley-owned buildings on Southwest Third, including Oregon Pioneer.
"Third is not necessarily the retail core," he said.
There may be plenty of vacancies, but he said they are balanced by top-drawer retailers who have elected to do business there. Besides the Nordstrom Rack and Macaroni Grill, Ruth's Chris Steak House, Borders Books Music & Cafe and Sleep Country USA, loom large on Southwest Third.
The street isn't likely to become a major retail destination, but there's hope it'll pick up.
"I think what we're seeing is a little bit of a turnaround," he said.
Upbeat merchants anticipate end of downtown construction
Fifteen months into a $557 million light rail project that has disrupted traffic across Portland, some of the retailers most affected by the torn up streets are in surprisingly good spirits.
"It will be worth it," said Mark Ellsworth, manager of the Three Lions Bakery, 135 N.W. Fifth Ave., which currently is all but cut off by a maze of safety fences and detoured traffic as workers install tracks down Southwest Fifth Avenue.
Business has dropped he said, but construction workers stopping in for coffee and baked goods goes a long way toward closing the gap.
"They're doing a great job," he said.
That's a pretty typical attitude, said Jennifer Koozer, TriMet community affairs representative, who works with businesses affected by the project.
"The thing we hear most often is, 'It is not as bad as I thought it would be,'" she said.
TriMet shifted bus service from Southwest Fifth and Sixth streets to Southwest Third and Fourth in February 2007.
The buses will remain on their temporary routes throughout construction of the Max Green Line, which includes installing track between Portland State University and Union Station, and between Clackamas Town Center and the Gateway Transit Center on I-205.
The project hits a milestone today when the last section of rail in the last of the 57 blocks affected by the construction is installed.
The Green Line will travel from one to the other via the existing rail lines that run along Interstate 84.
Buses are scheduled to return to Southwest Fifth and Sixth in May of 2009.
The Max Green Line begins operations in September 2009.
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