Higher rents, increased competition quickly separating the wheat from the chaff
|Chris Brainard and David Killian — owners of The Colophon Cafe — say business is still bustling despite a recent increase in other Fairhaven restaurant options.|
Remember when Fairhaven was a bohemian enclave? When the floor creaked underneath your feet at Village Books and there were fewerthan six places to eat?
The district may seem like an entirely different place now to some, as it has seen an explosion of commercial and residential growth in the last few years. The oldies, like Village Books and Dos Padres, are now surrounded by the newbies, like Sirena Gelato, Avenue Bread and The Fairhaven Toy Garden.
The last two years, especially, have hosted an enormous addition of commercial space to the area and a slew of new developments are on the way.
With all of this new space, business owners are noticing a range of impacts on the health of Fairhaven’s micro-economy, from more customers to a few growing pains.
New commercial space
Since 2005, developments like Fairhaven Gardens, Harris Square, 12th Street Village and Fairhaven Heights have added 51,671 square feet of commercial space to Fairhaven. Such an enormous burst of available space has had a tangible impact on the area’s business owners.
The Colophon Café, a longtime Fairhaven fixture, has experienced a plateau in business growth because of the increase in surrounding restaurant options, but still does a brisk business selling peanut butter pie and African peanut soup.
Chris Brainard began managing The Colophon Café in 1988 when it was just a small ice cream and coffee shop in what is now the restaurant’s deli area on 11th Street. He said the business grew steadily over the next few years and experienced a rate of 30 percent growth between 1990 and 1992.
“That was a real bubble time,” he said. “As a business, we had trouble keeping up with as fast as we were growing.” At the time, The Colophon and Tony’s were the only two viable lunch restaurants in Fairhaven.
After 1993, the high rate of growth dropped off, but the business continued to grow. A few years ago, when Fairhaven began experiencing a surge of development and increased businesses moving in, the restaurant’s growth reached a plateau.
“Our piece of the pie has not grown as far as customers,” Brainard said. “However, there are more customers around.”
David Moody, a real estate agent at Fairhaven Realty for the past 24 years, said that while there has been an increase of new available space and new businesses, overall the area seems to be doing well. He said that the area seems to support startup businesses that make it past their third year.
“What I know is that Fairhaven has a higher (than average) percentage that stay in business … that’s anecdotal,” he said.
He mentioned businesses like Flats Tapas Bar, Rebecca’s Flower Shoppe and Arabella as startups that have continued to survive in Fairhaven.
The extra commercial space has not come without some challenges for developers wanting to lease their space out quickly, however.
“In the past year there have been substantial changes, the biggest of which is the amount of square footage available for retail businesses,” Moody said. “For those to be absorbed, you’re going to have some new businesses, and some vacancies show up. It’s not going to be absorbed immediately.”
He said demand for ground-floor retail space has remained steady, with central spaces renting out as soon as they become available. Some even have waiting lists.
Other spaces that are on the periphery of Fairhaven, like Harris Square and 12th Street Village, are taking a bit more time to fill up, he said. But he doesn’t think that is out-of-the-ordinary, considering how much space has been added.
“It’s the first time since the turn of the century when the Waldron building was opened that you had that amount of retail open up all at once,” he said. “There are these new spaces in Harris Square that are kind of pioneering, they’re kind of in a new area, and how many people really walk down there?” he said. “But it seems to be doing fine, it’s getting absorbed pretty well.”
The 130 new condos built in the past year or so should help offset those vacancies as they fill up with new residents, he said.
But whether all the new residents are able to support all the new businesses, plus the older ones, is questionable.
“You have a lot more people spending a lot more dollars, but you also have a lot more businesses sharing that revenue,” Brainard said.
Survival of the fittest
While the area continues to see immense growth and activity — new buildings climbing into the sky, new residents clamoring for a scoop of gelato at Sirena or waiting in 6 p.m. checkout lines at the once-sleepy Fairhaven Haggen — some business owners notice the area may be a bit more challenging for business owners than other areas of the city.
An analysis of BBJ Online tips found that Eight businesses either closed or moved, or have been put up for sale, in Fairhaven in 2006: Spoiled Rotten, Tweeks Music Supply and Repair, Padden Creek Marine, Northland Specialties, Bohemian Bliss, Manninos, Nibiru and The Lazy Cricket. During the same period, 38 businesses either closed or moved in downtown.
However, of the Fairhaven businesses that closed or moved, all either shut down or moved out of Fairhaven, and 75 percent closed. In contrast, only 11, or 29 percent, of the 38 downtown businesses closed, and the rest simply moved to another location. Of the downtown businesses that moved, 40 percent of them moved to a different location downtown and 60 percent moved to a different area in the city.
The stakes may be higher for businesses in Fairhaven because of the higher rents.
Lease prices range from $12 to $28 per square foot per year in Fairhaven. The prices are lower downtown, from $7 to $20 per square foot per year, according to Moody. However, prices for space in Bellis Fair mall are quite higher, at $18 to $74 per square foot, he pointed out.
Given the higher prices, Fairhaven business owners need to have an especially well-thought-out business plan.
“Being a local independent business owner in the state of Washington is very difficult. You have to have a good idea, a good product and a good location, but you also have to have good business sense,” Brainard said. “You can do a lot of business and still go out of business really quickly if you don’t know how to run a business.”
He said this is especially true of businesses in Fairhaven because of the higher rents.
“Survival of the fittest is one aspect of it,” he said.
At the same time, Brainard said there must be enough revenue coming into the area to warrant the amount of businesses opening up.
Carol Beecher, who opened Vie — a women’s clothing store in 12th Street Village last year — decided this month to sell the business for personal reasons.
She said the location, which is outside of Fairhaven’s main district, has less walk-in traffic than its central area.
“It appears that while there is a lot of growth in commercial space and condos, the rents are getting so high that it is difficult for small businesses to come in and be successful,” she said of Fairhaven in general. “We are seeing many (businesses) go out within a year of opening.”
Another major impediment to Fairhaven’s continued success as a restaurant and retail destination is its traffic situation, which most business owners bemoan as getting worse every day.
“Parking is a horrible issue. We’ve lost regular clientele because of the parking problems in Fairhaven, and I think every business has felt that,” Brainard said.
Moody said he hopes more people will start using alternative forms of transportation to ease the parking jam in Fairhaven. But he also thinks when most of the construction is complete, the congestion will ease up.
Within the next few years, another 48,503 square feet of commercial space will open in Fairhaven, with the construction of developments McKenzie Square, Fairhaven Harbor, the Triple I Building at 1112 11th St., The Waldron and the Young Building. How will all of this new space affect an area that has already seen so much recent available space in the last few years?
“With all of the continued projects of condominiums being built, the local marketplace will provide enough commerce to have these places be successful, but there will still be a transition,” Moody said. “There will still be retailers that don’t make it and retailers that do.”
He said he expects some of the new projects to experience some initial prolonged vacancies, but that is only natural.
“If you’re talking to a landlord that is sitting over an empty space, they’ll say it’s not filling up fast enough; but if you stand back and objectively look at what absorption would normally be, they’re going to fill up just fine.”
Prices won’t drop as the new spaces come online, because the builders and owners need to pay for construction costs, Moody said.
Brainard agreed that business will only get better in Fairhaven, despite a few growing pains along the way.
“I think business will keep growing and any business that can’t survive the high rent in this district will be replaced by businesses that are willing to give it a try,” he said.