SEQUIM — As commercial real estate specialist Colleen McAleer sees it, the long run of commercial expansion in the city that aims to be the big-box retail center of the North Olympic Peninsula appears to be slowing to a halt.
“We’ve got a terrible commercial market” in Sequim, she said bluntly. “I think we’re done.”
That professional assessment from the RE/MAX 5th Avenue Team McAleer agent comes as a $3.5 million Walmart supermarket expansion rapidly rises next to the existing Walmart store.
Across West Washington Street, a Ross Dress For Less retail clothing store and a Grocery Outlet supermarket — a more than $5 million project — are nearing completion, their parking lots already paved and landscaped for opening in the coming month.
McAleer said Ross has been looking to enter the Sequim market since 2005 and she believes that the economic downturn, along with city of Sequim development impact fees, are factors that will contribute to a slowdown in commercial growth.
Sequim still dwarfs Port Angeles and East Jefferson County in commercial growth, fulfilling in great part a goal set by city fathers in the mid-1990s to make the city in the rainshadow the commercial center of the Peninsula.
With the addition of Grocery Outlet and the Walmart supermarket expansion, Sequim will soon have four supermarkets to choose from — including the rustic, intimate, family-owned grocery-shopping alternative, Sunny Farms Country Store, to the west in Carlsborg.
The 27,690-square-foot Ross Dress For Less, which sells fashions for women, men and children at discounts, and the 17,784-square-foot Grocery Outlet store, a Berkeley, Calif.-based “extreme value retailers” of food, beer, wine, toys personal care products, are being built on a 7.61-acre site between Costco and The Home Depot south of West Washington Street.
The Walmart expansion is the second phase to the original store, which was opened in late 2004. The Walmart supermarket adds 35,577 square feet to the store.
All this for a Sequim-Dungeness Valley retirement area with a population of less than 30,000, although Port Angeles and East Jefferson County residents often shop in Sequim — to what extent being unknown.
The new stores mean additional jobs. Walmart is now hiring 85 additional “associates.” How many jobs are created at Ross or Grocery Outlet is unknown.
Port Angeles now has a new Walmart with a supermarket, the most recent commercial development in that city, with two Safeways and an Albertsons, and is about to lose the discount Saars supermarket to closure.
East Jefferson County still has two supermarkets, Safeway in Port Townsend and QFC in Port Hadlock, plus Port Townsend’s mostly organic alternative, The Food Co-op.
McAleer, who produces an annual state of real estate report, said commercially zoned land in Sequim continues to drop in prices and she does not expect to see commercial land prices rise for “many years to come.”
Her report cites a number of 2010 commercial property sales in Sequim “ranging wildly in price.”
They include Madison Sequim LLC, developer of the Sequim Village Marketplace shopping center, which includes The Home Depot, Petco and adjacent retail stores and space, sold to developer Sequim Reef LLC for $11.75 million, less than what was owed on the property, $11.88 million.
The Walgreen’s building at 490 W. Washington St., sold for $5.6 million, far less than the asking price of $6.25 million.
To the east at 645 Washington St., remodeling is under way on a new Columbia Bank office.
Columbia Bank bought the property formerly owned by First Federal last year for $820,875, down from an asking price of $1.2 million.
McAleer and her REMAX associate and agent Shawnna Riggs, said they doubted commercial growth will pick up anytime soon, since developers not seeing gains in their investments.
“No way,” Riggs said. “With the economy uncertain they’re not going to take the risk.”
Development impact fees are another issue that real estate brokers such as McAleer raise.
She said, for example, a commercial developer pays roughly $136,000 in impact fees on a 20,000 square foot structure.
In Port Angeles, she said, there is no such fee and that city has joined the International Council of Shopping Centers to lure commercial development there.
“Representatives in Port Angeles are trying to attract retailers to come to Port Angeles and we’re doing the opposite,” McAleer said.
That’s why city leaders such as Bill Huizinga, a former Sequim-area real estate agent who has served on the City Council since 2001, supports cutting impact fees on both commercial and homes development.
Huizinga contends that retail sales are what bolsters city sales tax and he wants to ease fees that discourage commercial and housing growth.
He recalls when Costco wanted to come into Sequim, making two offers to build a store inside the city in 1999.
“The city’s charges for infrastructure . . . were too high and they went to Carlsborg,” Huizinga recalled.
“When Walt [Schubert, former Sequim mayor] and I got on the council we lowered them, and [Costco] came back.”
Walmart was what spurred initial commercial in Sequim, Huizinga recalled, and all the rest followed, substantially raising sales tax.
City Manager Steve Burkett said the city is budgeted this year for $2.4 million in sales tax revenue.
The peak of the city’s sales tax revenues came in 2007, with $2.6 million.
The lowest amount of sales tax revenue was $2.2 million recorded last year.
He estimates big-box commercial retailers in Sequim amount to more than half of the overall sales tax the city collects.
The city is estimating 2 percent growth this year, Burkett said, giving Costco as an example of showing growth in sales, with company recently reporting overall profits up 6 percent.
“I think they’re growing slowly,” Burkett said of city sales tax revenues.
“It is flat compared to what it was few years ago.”
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Sequim-Dungeness Valley Editor Jeff Chew can be reached at 360-681-2391 or at jeff.chew@peninsuladailynews.com.
