National retailers finding more to like in Bellingham

by Dave Gallagher
Growing up in Bellingham in the 1980s, one of Erin Sundean’s first jobs was working at McDonald’s. At the time, there weren’t many other options.
“I think there was a Wendy’s on Lakeway, but I can’t think of too many other ones in town,” said Sundean, a commercial real estate agent and owner of The Bedford Group. “It’s amazing how many more choices there are in Bellingham now, especially with what we’ve seen in the past three years.”

Erin Sundean of The Bedford Group said national retailers are casting a more approving eye on Bellingham as it grows.

As Bellingham continues to grow, it is attracting the interest of national retailers that would not have considered this market five years ago. According to the Puget Sound Business Journal, which recently reported on an International Council of Shopping Centers luncheon held in April in Bellevue, several national retailers are making expansion plans into the Puget Sound region, and Bellingham is one of the cities being considered for new locations.
According to the article, these companies include Del Taco, a California-based Mexican food chain that has two restaurants in Washington but is planning to open 10 more in the next five years; Massage Envy, a company that has sold 10 franchise locations in the state (although not in Bellingham yet) with plans to start 15 more; and Specialty’s Bakery & CafÆ�, a company that is expected to expand from 11 stores to more than 30 in the next three years, focusing on the Pacific Northwest.
Panda Express, one of the nation’s largest Chinese food chains, has already committed to Bellingham and expects to have a building constructed in the Lowe’s shopping center on Sunset Drive later this year.
The pace of chain stores entering the Bellingham market has been particularly strong in the past five years. An example of this is restaurant chains. There have been 10 restaurant chains that have either broken into, or increased their presence in the Bellingham market, opening a total of 15 eateries. This includes Quizno’s, Taco Del Mar, Appleby’s, Papa Murphy’s and The Pita Pit. 
A prime example of a chain increasing its presence in the local marketplace is Starbucks. In the past five years, the number of Bellingham Starbucks has increased from six to 11, including the recent opening of its downtown location.
There are many reasons for this increase in companies entering the Bellingham market in recent years, but the main one is demographics, according to Brian Finnegan, a commercial real estate agent and owner of WestCom Properties.
“The first thing you learn as a commercial real estate agent is that every retailer has a different set of demographic research they focus on, whether it’s a chain store or someone moving into the area that’s interested in opening their first business,” Finnegan said. “In the past three years, Bellingham has been meeting the demographic qualifications of a lot more retailers.” Finnegan said one of the more common numbers retailers look at is population. According to the state Office of Financial Management, forecasting division, Bellingham had a population of 71,080 people as of April 1, 2004, up from 67,171 in 2000.
“There are some national retailers that are waiting for Bellingham to hit 100,000 (people), but seeing an area grow is also a factor,” said Finnegan.
Average annual income is also important to national retail companies. In 2000, Bellingham’s annual income was $26,307, which is below the state average of $37,059, according to the U.S. Department of Labor and Statistics. but in the past few years its been rising at a faster rate than those other communities.
“For some companies, income in an area can be a big issue. But now research is showing there are more people moving here with disposable income, and you can see different industries reacting to it. That is why you have seen several new day spas being built or expanded in Bellingham in the past year. Research is telling them that Bellingham can support it.”

Looking deeper
It’s not just the retail chains that use demographic research in deciding whether to open a Bellingham location; nearly every business person moving into the area does. Faith Bult, a dentist who opened a Bellingham office nearly three years ago, said she started doing demographic research with her husband, Dan, as she was finishing dental school and looking to open her own practice.
“We were interested in Bellingham because some of my family moved there 15 years ago and we found it to be a beautiful area,” Bult said.
In doing their research, they had discovered that Bellingham did have quite a few dentists to serve the current population, but they found some opportunities when they looked a little deeper.
“We discovered that at the time we were doing the research there weren’t many female dentists, which some patients might prefer. We also found there were a significant number of older dentists who might be ready to retire in the next five to seven years,” Bult said.
With that information in hand, they went forward with plans to open a practice in Bellingham. Bult said they’ve exceeded their expectations in the number of patients they’ve seen in the first three years, and she sees a bright future for her practice. “Since we’ve started, other female dentists have also entered the local market,” Bult said. “But I still wonder about the number of dentists reaching their retirement age. There are fewer students in dental school today, so we might be even busier in the coming years.”

The trends with chain stores
Ron Bennett, a commercial real estate agent, said in recent years the retail chain stores have been changing their requirements in entering a market.
“What you are seeing more often from retail chain stores is that they are downsizing their store in order to get into more markets,” Bennett said.
One example of this is Walgreen Drug Stores. In the past five years, the company has been building stores across the country, including two in Bellingham.
“They entered quite a few markets that they couldn’t before by building smaller stores that could serve a population of around 16,000 people,” Bennett said.
When national franchises are looking at the Bellingham market, Finnegan said it is usually because of one of three situations: The parent company has Bellingham on its list of places it wants to go; somebody who is interested in buying a franchise convinces the parent company that it would work; or a space becomes available in a good location to grow into.
“In the first option, what I often hear is parent companies calling Bellingham a one-and-a-half-store town,” Finnegan said. “We’re considered by many of these companies to be big enough to have one of their stores, but just not quite big enough for a second location.”
However, if they have a qualified individual interested in buying a franchise to open in Bellingham, it’s difficult for the parent company to turn that offer down.
“Most of these companies are driven by getting as many franchise stores out across the country as possible,” Finnegan said. “If the individual has the money and has a good plan, they usually go for it.”
Finding a prime location can also convince a company to toss aside the demographic research and take a chance, figuring Bellingham is growing fast enough that the store will survive, Sundean said.
“Many national companies would grade this market a “B,” with “A” markets being places like Seattle or Portland,” Sundean said. “But if they are presented with a chance to get a great location, they may look at it a little more closely.”
When a company is unsure, Sundean said they will test the market. He said an example of this is Grainger’s growth in the market place. Grainger sells construction equipment.
“They were a mail-order for this area, then decided to open a small store out on Hannegan Road a few years ago,” Sundean said. “It only took a few years to convince the company to move into a much bigger location on Ohio Street.”
However, most national chains will stick to their numbers. One notable example is the grocery store Trader Joe’s. A petition drive was started last year by a Bellingham resident trying to convince them to come here. When previously contacted, company officials have said they have looked at the Bellingham market, and this area wasn’t in their short-ter plans.
The grocery store’s nearest location is in Everett.
Finnegan said that while a petition drive was probably flattering for the company, it still comes down to what the numbers are telling them.
“A company like Trader Joe’s has thousands of potential locations that they are looking at, so they can’t spend a lot of time trying to figure out if Bellingham would work,” Finnegan said.

What’s ahead
With most of the prime retail locations (particularly along the freeway) already developed, the next step for national retailers entering this market is redevelopment.
“If the demand is here, these companies will figure out some way to establish themselves,” Finnegan said. “The next natural step is redevelopment.”
He sited the Allsop building on Meridian Street as a prime example.
The property is currently for sale as the company hopes to build a new building in Bellingham.
“When that building was first built for manufacturing, there wasn’t much else out there, but obviously Meridian is now a major retail corridor for Bellingham,” Finnegan said. “It’s a good spot to be redeveloped into a retail location.”
The growth in national retail chains seen in Bellingham the past few years is something the rest of the country is seeing, and Finnegan said he expects it to continue.
“There are just so many companies that are rolling out expansion plans for areas like the Pacific Northwest, that I think retail will keep growing at a healthy clip in Bellingham,” Finnegan said.
“There was a time when the Canadian dollar was strong (in the early 1990s) when Bellingham had too much retail, but then it stopped growing and the demand caught up. Before this recent growth period, I think the retail market was a bit underserved, and now it’s catching up to the demand.”

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