Old or new, commercial buildings in Columbia are still filling up, despite a four-year rise in office vacancy rates nationwide.
From the fourth quarter of 2000 through the third quarter of 2003, office vacancies around the nation doubled to more than 18 percent in suburban areas, according to a study by Los Angeles-based commercial real estate firm CD Richard Ellis. In the fourth quarter of 2003, the national rate fell back to 18 percent, its first drop in three years. This indicates that a turnaround may finally be in sight, much to the relief of real estate executives around the country.
While a few office buildings in Columbia are still vacant, local developers say the city, for the most part, has avoided the national trend.
Jay Lindner, vice president of the Forum Development Group, is trying to sell one of these rare vacancies: the Crown Shoe building, located near Famous-Barr, which has been vacant for more than one year. In his experience, such a long vacancy is unusual for well-located Columbia properties.
“The building, which is currently under contract for sale and (that contract) will close toward mid-March, is more than 25 years old,” Lindner said. “The value of this property is based primarily on the land since renovation of this particular building would not be economically feasible.”
Lindner said Columbia’s stable economy and level of growth are attracting new tenants to the community who were not previously interested.
“Although older properties in a state of disrepair can be more difficult to rent, the Columbia commercial rental market has recently allowed property owners to substantially and successfully renovate older Columbia properties,” Lindner said. He cited as an example the site formerly known as the Strollway Center, which is now called the Atkins City Centre.
Even so, many businesses are drawn to new buildings rather than older vacancies. Dave Miller of RE/MAX Boone County said this is nothing new.
“I would call it a fact of life. People who have commercial needs have very specific needs,” Miller said. “That’s why you see a lot of signs around downtown that say ‘build to suit.’”
John Peters, owner of Barkley Center General Partnership, has been building strip malls in Peachtree Plaza for 15 years. All of his existing spaces are filled except for one near Cici’s Pizza. While he has no tenants lined up for his current building project, he is confident it will be filled in a reasonable amount of time.
“I don’t think the older buildings will have a problem finding tenants, but I also don’t consider them competition, either, because there are two different types of tenants,” Peters said. “New space might cost a tenant 50 to 75 percent more than older space. It depends on if a tenant needs high visibility or a just a place to work out of.”
Visibility plays a part in whether a business will move into an existing building. Businesses that don’t need high visibility move into older buildings where the rent is more reasonable.
“Retail stores, like the bicycle place up on College, don’t need high visibility,” Peters said. “If people want a bicycle, they’re going to go there. People aren’t going to drive down Nifong or Providence, see a bicycle shop and think, ‘Gee I want a bicycle.’”
According to Miller, location is the main determinant in how quickly space will lease, but location has its cost.
“If you look at the Columbia Mall, you have a constant turnover in the food court,” Miller said. “The rent is very, very high and sales do not meet (the tenants’) expectations. Within a very short time, they’re out of there. ... You want to be in a high traffic area, but those are the really high-priced, high-cost areas. You have only a certain amount of time to make it or break it.”
Other high-visibility areas, like downtown, have parking difficulties. For this reason, many business owners opt to take root in strip malls where rent is cheaper and parking is plentiful.
Joe Strawn, owner of Joe’s Wines and Spirits, leases his space in the Village of Cherry Hill, one of Columbia’s newest commercial properties. The Village is a development modeled after a small town with retail and residential spaces built around a town square. Strawn said he likes the location because it gives him optimal space and limits parking hassles.
“Being in the business for 10 years, I knew what size I needed, and we created a great unique-size store,” Strawn said.
Although they’re not built to suit, older buildings can still be marketable. Peters said it’s all about how much the building owners put into it before they try to lease the space.
“I can’t find any fault with older buildings just because they’re older,” Peters said. “If you go to an area like Boonville and look at their older buildings — which no one has done anything to upgrade, they’ve got a terrible time leasing their space. But an owner will be able to lease if he takes care of the property and sees to it that it’s properly insulated, has a street-side look to it and is willing to remodel to the tenants’ satisfaction.”
The bottom line, Miller said, is that even in light of increased office vacancies around the country, nearly all commercial property in Columbia can be occupied.
“Almost every piece eventually sells,” Miller said. “If it doesn’t move, then investors are motivated to get the price down to what will move. It’s like everything else, it will sell, but it has to get down to a certain price.”
— Missourian reporter Greer Hitch contributed to this article.