Wednesday, November 19, 2008

Commercial real estate struggles in Ketchum

More than 30 buildings sit vacant


By DELLA SENTILLES
Express Staff Writer

The old Golden Rule grocery store building on the corner of Main and Second streets in Ketchum, most recently the home of Iconoclast Books, now sits empty a full year later.

Walk around downtown Ketchum, and the truth is inescapable: The commercial real estate market is soft. A recent tour of Ketchum showed more than 30 vacant store fronts.

Some spaces are empty because previous tenants, such as Iconoclast books, have changed venues. In others, businesses have simply closed their doors. The latter includes the Images of Nature Gallery on Main Street and Ski Time Cinema on First Avenue.

"I've been doing this for six years, and it seems like, yeah, there is probably more today than has been available since I moved here," said Matt Bogue of Paul Kenny & Matt Bogue Commercial Real Estate.

All the empty space has commercial real estate agents concerned.

"I don't think there is any question that the economic climate is weak and the retail market will be under pressure through the holiday season, through the Christmas season and into the New Year," said Tim Eagan, president of Eagan Real Estate Inc. "It is not going to be easy."

But it is not just the national economy that has people worried. It is also the lack of year-round residents and tourism in the area. For many, the business is simply not there.

"If we don't have the number of visitors to support the higher-end retail, then the high-end retail cannot survive," Bogue said.

Bogue is not alone in his assessment.

"Our community is of course a tourist economy and without any real push from any hotels or the traffic we need, it just makes it difficult to meet all your costs every month," said John Shetron, an agent with Windermere Real Estate.

George Kirk of the Kirk Group also points to the lack of year-round employees living in Ketchum. While people may be earning their money in Ketchum, they are often spending it in the towns where they live, whether it's Hailey or Twin Falls.

"Sales for the general retailer have been diminishing year-in and year-out probably for the last decade," Kirk said. "I think a big contributing factor is a change in the nature of our economy coupled with the demographics shift."

Tenants, however, tend to see the lack of year-round business as just part of the problem. In their minds, the rent is simply too high.

For 18 years, Bud Siemon, a real estate agent with Pioneer Associates, rented a 600-square-foot house on the corner of Sun Valley Road and First Avenue. In October, he moved out.

"With the real estate market being practically comatose, I couldn't afford the rent," said Siemon. "It was also very high, believe me."

Siemon said the building's owner raised the rent about 4 percent each year.

Real estate agents blame the purchase price of area buildings.

"I have heard a lot of people here comment on the price of renting commercial real estate," Shetron said. "That it is high. In reality, it is pretty low when you compare it to a ski town and most certainly low when you compare it to the value of the purchase price. People are really surprised to find out what it costs to purchase compared to what it costs to lease."

Shetron said a standard lot in the commercial core of Ketchum of about 5,500 square feet could cost anywhere from $1.2 to $1.5 million. If a buyer were to take a loan of 80 percent of the asking price to buy the building with a decent interest rate of 7 percent, he or she would be paying $7,000 to $8,000 each month.

"Leasing commercially is a huge burden on the property owner," Shetron said. "Of course, there is one on the business owner as well."

Shetron said that what allows individuals to buy buildings is the long-term value and the desire to invest in the community. He and other real estate agents are still hopeful that people will buy property here.

"Every week I have people contacting me to buy my building," Shetron said. "A lot of people have aspirations of creating a business, but then they realize it takes more capital for inventory and overall start-up costs than they thought."

Bogue also mentioned four people who said they want to expand their businesses from Twin Falls to Ketchum, as well as a company from Salt Lake City that plans to open a store for high-end luxury goods in town.

"I still deal with people every week that either want to relocate or operate a new business in Ketchum," Bogue said. "There just seems to be no shortage of optimistic, entrepreneurial people that want to do something."




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