What’s Olympia’s plan for vacancies downtown? Historic buildings are a challenge
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- City commissioned Leland Consulting Group to conduct a downtown vacancy study.
- About 66% of 34 retail spaces and about 57% of seven office spaces are long-term vacant.
- Consultants recommended sidewalk and facade improvements.
The city of Olympia wants to understand why there are dozens of vacant businesses downtown and how to fill those spaces.
Jennica Machado, Olympia’s Economic Development director, told the city council during its May 5 meeting that staff sought to better understand what is driving vacancies downtown. That led to a downtown vacancy study conducted by Leland Consulting Group, a Portland-based planning and real estate economics firm. Machado shared the results of the study with the council at the May 5 meeting.
The entire study can be found on the city’s website. The city paid $40,000 for it, from the General Fund in the Economic Development budget.
She said the goal was to get data about vacancies downtown and outline ways the city can help fill those spaces. She said this work “recognizes the strong connection between vacancy and vibrancy.”
Chris Zahas, Managing Principal with Leland Consulting Group, said they took a walking tour of downtown Olympia that included the full inventory of ground floor vacancies. He said they have been collecting data since October.
Zahas said Olympia isn’t alone or an outlier in the fight to limit vacancies downtown. He said Olympia has fewer vacancies than some of its peer cities.
He said a lot of the challenges driving vacancies are outside the city’s control.
“There are national economic factors at play. There are global trends, post COVID, work from home trends, things like that, that impact the health of downtowns. There’s the homelessness crisis that doesn’t directly drive vacancy, but it’s a factor in downtown.”
Jennifer Shuch, senior analyst with Leland Consulting Group, said the study breaks vacancies into three groups: short-term and long-term vacancies, and ground floor vacancies in mixed-use buildings built since 2016.
Shuch said the short-term vacancies include businesses that are turning over and may take a couple of months to lease the space, but activity is happening. Long-term vacancies are mostly seen in the older historic buildings downtown, she said.
The study looked at 34 retail spaces, seven office spaces, two industrial properties, two dining spots and one entertainment space that are some level of vacant. Shuch said 66% or about 22 of the vacant retail spaces have been empty long term, and 16% of the 34 buildings were built since 2016. Most of the chronically-empty spaces are in older buildings, she said.
Shuch said 57% or about four of the seven vacant office spaces are also chronically empty.
She said part of what’s driving vacancies in mixed-use buildings is that the spaces are usually empty shells, and the cost of tenant improvements is high.
“These are challenging for smaller businesses to cover, and so a lot of times, landlords try to amortize those costs over the term of the lease,” Shuch said. “The higher the cost, the longer the lease term is needed.”
She said longer-term leases can be risky for small businesses and landlords. She said longer-term leases and higher rents narrow the tenant pool, which means it can take longer to find someone to take over the space.
Shuch said historic retail buildings are a big contributor to the longer-term vacancy problems in Olympia. She said a lot of the spaces are large, and they’re not ideal layouts for modern retail.
“So a lot of them are pretty narrow and then deep,” she said. “And when you think about retail layout, you want to have a lot of that front of house space, the space where people can see windows from the street. And so what ends up happening is that retail has this kind of back of house space that’s not as well used, but because retail rents are at a price per square foot, they’re still paying for that space.”
Shuch said some of the historic retail buildings have not been well maintained.
“There’s a need for modernization, and significant renovations and adaptive reuse are expensive due to high construction costs,” she said.
Shuch said office vacancy is a challenge nationwide, but the state’s shift to remote work has had an outsized impact on downtown Olympia. She said there isn’t a near-term replacement to take up that unused office space.
Shuch said they learned through discussions with real estate professionals that the expense of converting these older, larger office buildings into spaces with modern amenities would be around $600 per square foot. She said that’s about the same as ground-up construction.
The study included a map of where people are visiting downtown. Shuch said the areas around the Hands On Children’s Museum and City Hall see less traffic. She said visits drop off substantially once you’re north of the Transit Center.
The area along Fourth and Fifth between Columbia and Jefferson, where many bars, restaurants and entertainment spots are located, are hot spots for traffic, Shuch said.
The study also included a map showing where industrial and warehouse spaces are, which Shuch said could be adapted for different uses.
She said the city already allows a lot of uses for different types of spaces, but it does not currently allow live work spaces. She said these types of arrangements bridge the gap between residential and commercial space.
Zahas said another barrier is that the city requires businesses to fund street improvements when a space sees more than 20 trips per day, and if the street receives a low pavement rating. He said it’s often out of the building owner’s control whether they happen to be on a poorly-rated street, and that the city should consider changing this requirement.
He also recommended the city continue to cultivate relationships with business and property owners and downtown organizations.
“That’s a best practice for cities,” he said. “Really, the underlying thing behind this is downtown is a very complex environment. And it really takes relationship building over a long sustained time period to build those bridges and create those relationships, and create the knowledge flow so that you know what’s going on on the ground.”
Zahas said the city should also increase transparency around its business policies. Zahas said it was difficult for his team to find policy information on the city’s website or anywhere for that matter. He said the more transparency and access you can provide to outsiders, the better.
“That creates certainty for them, assurance that they know what the pathway is and there won’t be surprises,” he said.
When it comes to ground floor vacancy in mixed-use buildings, Zahas said they’ve seen some cities create programs where they provide assistance for the initial outfit of a new business like restaurants.
Zahas said the city should also prioritize downtown for sidewalk repairs. He said as visitors to Olympia, they noticed a lot of downtown sidewalks are in poor condition. He also recommended a facade improvement program to improve the look of storefronts downtown.
Lastly, he said the city should explore the need and feasibility of a downtown parking garage, as well as street eateries. Zahas said Olympia is a unique city for its size to not have a parking garage, and coming from Portland, he was surprised to see virtually no street dining options in Olympia.
“There’s not a sort of designated place coming in off I-5 where visitors come here, park here, and walk,” he said.
Council member Kelly Green said there are two large parking garages downtown, one built by a state agency and the other by a private company. She said their situations have changed drastically since 2020, and she wondered if there are ways to collaborate and open those spaces to people looking for parking downtown.
Mayor Dontae Payne said he’s supportive of revisiting Olympia’s downtown strategy and making some changes based on the recommendations in the study. He said he has one long-term vacancy in mind that he thinks would be a good space for a miniature golf course.
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