Running on empty
When Jim Lundberg sold his commercial property in San Luis Obispo, Calif., so he could invest closer to his Applegate Valley home, stocks were still in the wild blue-chip yonder and light industrial space here was being snapped up as fast as it was built.
That was January 2000.
the time his 20,000-square-foot building at 3001 Samike Drive was completed a few months later, the stock market had sailed off a cliff and speculative building no longer achieved spectacular results.
Nearly three years after he expected to have the building leased, Lundberg is still seeking his first tenant. Making matters worse, his contractor went broke and Lundberg wound up paying twice for systems development charges and for some of the subcontractors.
— What should've been a &
36;1 million project, including &
36;300,000 for the land, became a &
36;1.4 million outlay.
Lundberg has had at least six interested parties ' from gymnastic clubs to churches ' to lease the building and one offer to buy. But he prefers retaining ownership.
I definitely don't want to sell it, he admits. Then you have to decide what to do with your money and money is not much good, because of taxes for one thing and inflation eating it all up.
The attractive structure not far from where South Stage Road intersects Highway 99 is highly visible from the highway. There is a large For Lease banner on the west side of the building, which has 20-foot ceilings, an insulated roof and cement siding with steel studs.
When I built it, there was a demand for commercial buildings, Lundberg says. But by the time I got the situation with the contractor cleared up, the demand wasn't there and the economy had started going down.
Although their stories vary ' both in degree and detail ' many commercial and industrial buildings in the area have been for sale or lease for some time. To better understand the market forces at work, the reviewed a representative cross-section of available properties. Most are larger than 10,000 square feet and noticeably under-utilized.
In Lundberg's case, timing might have been the biggest issue. He also was banking on South Stage being linked to the south Medford freeway interchange project. Instead, Garfield Avenue was punched through behind Stewart Meadows Golf Course.
Everyone's going out by the airport, laments Lundberg, noting that Siskiyou Buckle Co. Inc. of Ashland checked his property out before announcing it would
build at Navigator's Landing.
Nonetheless, commercial real estate developers and brokers say that it's just a matter of time before the surrounding area around Lundberg's property ' originally developed by Mike Burrill and Sam James ' will be in demand.
Lundberg is hoping that it'll be sooner rather than later by dividing the space into four 5,000-square-foot units.
I think we ended up being a little ahead of time, Lundberg says, but I think the area around Phoenix is going to be growing.
Ashland developer Russ Dale, who spent six years overhauling the Medford Center Building on Central Avenue in Medford, lists several factors that determine a property's value: location, specific use, condition of the property and its owner and the economy.
Property is like stocks and bonds, you have to manage it ' this is an active participatory sport, Dale says. If someone is actively managing a property and continually lowering the price, eventually you should find a user. Theoretically, there never should be a building vacant.
Snapshots of other buildings for sale or lease follow.
In 1988, the late Tom Whittle, a Medford builder, donated a two-story, 14,810-square-foot building at 123 W. 10th St. to what is now the Southern Oregon University Foundation. The transfer value was &
The building was leased to Jackson County and housed its parole and probation operations until last August, when they moved to expansive new offices at 1101 W. Main St.
Today, the property is on the market for &
36;932,083 and the assessor's office lists its real market value at &
Luis and Penny Juaregui bought the 33-year-old property from Southern Oregon University for &
36;452,273 in 1997.
Although the county was liable for property taxes by terms of the lease, during its tenancy it was exempt from taxes. But the Juareguis are now paying the taxes. Luis Juaregui says he wants a single tenant to replace the one he lost, but the market may dictate otherwise.
If there is one tenant, they're responsible for everything, because they've got the whole property, Juaregui says. But if you have more than one tenant, there are common areas and you have to police those common areas as the landlord. If there are hallways or bathrooms, you have to provide janitorial care and watch over those particular areas.
For much of the 1990s, 160 N. Fir St. was a regular stop for local families as their children took classes at the former Flip City Gymnastics.
But since the club's demise in 2000, the 14,612-square-foot building has sat idle with the exception of a couple of earthshaking rave events.
Lou Budge, vice president and general manager of Budge-McHugh Supply Co., says his company bought the building from the owners of Bates Candy Co. for &
36;200,000 in July 1993 with an eye on expansion. But Budge-McHugh's need has yet to arise.
The people that have been looking at it don't need that much square footage, Budge says, and people that want that much space can find stuff someplace else as opposed to downtown.
Pulver & Leever's For Lease sign recently has come down and Budge says negotiations are under way with a potential lessee. The building also backs up to the Medford Urban Renewal Association's planned Evergreen Street along the railroad tracks.
I'm not sure how that's going to affect us at this point, says Budge of the pedestrian-friendly road.
Just when Fred Phelps was ready to move forward with his long-awaited remodel and seismic upgrade of the downtown Medford Cuthbert Building, which once housed J.J. Newberry's, Gov. Ted Kulongoski pulled the plug.
The governor, doubtlessly, didn't have the Cuthbert Building in mind when he ordered state agencies not to sign new leases. But the decision effectively halted the project until Phelps can secure another tenant for a 9,000-square-foot second-floor section of the 93-year-old, 24,000-square-foot structure at 38 N. Central Ave.
Right now, the project is in limbo, the owner of Evangel Family Bookstores says. We've been feeding this thing for four or five years and we're going to have to feed it some more until the Lord sends a tenant.
Phelps' financing for the &
36;2.7 million project is tied to having a lease agreement in hand.
Everything just has to jell, Phelps says. It's a nice-sized space with skylights and a patio that goes to the parking structure. I'm sure if the building were finished, we would have an interested tenant. It's sort of a Catch-22 situation. The state was sure ooohing and ahhhing over the plans.
Almost lost in the hubbub and excitement in replacing Kmart with a major tenant at the shopping center at 251 Barnett Road is the vacant space next-door to WinCo.
Ever since Old America liquidated its stock in November 1997, the 19,700-square-foot space has been empty. It was an attractive location before Kmart pulled out in May 1996 and the foot traffic generated by WinCo stands to make it a good spot for another tenant.
The property is owned by Joseph Ades of New York. R&D Management of New York oversees the 13.6-acre center, which recently saw another 13,000 square feet built by Batzer Construction.
The old Troutman's Emporium store on the north side of the Medford Center has been empty for more than two years. But the shopping center's new owner is working to close a deal that will fill the 42,000-square-foot space.
Pan Pacific Retail Properties Inc. is an equity real estate investment trust that operates 136 shopping centers up and down the West Coast, encompassing approximately 23.4 million square feet. It also owns Bear Creek Plaza.
We're very aggressively looking for a tenant, says leasing representative Scott Viehouser of Pan Pacific's regional office in Portland. We're working with a couple of national tenants and trying to finalize a deal.
Because the space was designed for Emporium, it doesn't necessarily fit into other stores' ideas.
We're in the process of altering the shell for other tenants, Viehouser says. I'm surprised it sat that way for so long without anyone cleaning out for a new user. When we get a space back, we gut it out.
Viehouser says there are another five spaces, totaling 15,000 square feet, still available at the center. He says Pan Pacific recently signed on Lassman's Fine Eyeware that will locate next to Caffe Diem and is close to announcing another lease with a salon near the former Center Trust office.
The bank building last occupied by Valley of the Rogue Bank at 701 E. Jackson St. sits on nearly half an acre. But it's more likely to be leveled for another use than snapped up by another bank.
Bill Haden, who was president of Valley of the Rogue Bank when the office was closed in August 2000, told the it was a poor site for a bank. The Bank of Oregon was the original occupant in the mid-1960s before it went through a series of ownership changes that included Security Pacific and Colonial banks.
B&G Properties Inc., whose president is Bruce Kellington and secretary is Walter Graff, own the land that is valued at &
36;204,770 by the county.
.Seemingly small overhauls can become expensive very quickly
Jim Lundberg discovered that while remodels and seismic overhauls are a must for many older commercial buildings, even simple add-ons such as bathrooms can create their own headaches.
The owner of a 20,000-square-foot building at 3001 Samike Drive spent &
36;3,100 for a bathroom to go with a second-floor conference room.
The construction itself cost &
36;1,500. The permits from the city of Medford totaled &
It just doesn't sound reasonable, says Lundberg.