Sunday, November 11, 2007

The hidden cost of construction.

Remember the term 'urban renewal?' The idea that government officials could tear down old homes and build shiny new apartment buildings. Which instantly turned into slums? Old neighborhoods torn down to make room for highways and office buildings? Turns out, wasn't so easy to replace neighborhoods with instant recipes.

Several times, lately, there have been ambitious proposals or plans announced by city officials to 'fix' 3rd Street and the 'corridor' into downtown Bend, the corners of Greenwood and Franklin. Because I have one store on the corner of Greenwood and had thought about having a store on the corner of Franklin, I paid attention to these proposals. And what is never mentioned is -- what happens to the people who are already there? Don't they count? After all, they were willing to take a chance, to open a business and try to make it work.

Several times over the last month or so, I've come to work and found the entire east block of Minnesota closed for construction trucks. This morning there was an article in the Bulletin about how the hotel is still a year away from completion. That means the restaurants and stores on the block have full year of construction noise and dust and trucks to look forward to.

That block hasn't stopped to take a breath in years. First the Masterson St. Claire building, then the old Mattress Factory building, then the Firestation, and then the parking garage. And now the hotel. There was a Teddy Bear store there for years, and in talking to the owner, I think she thought -- I thought, too -- that all the construction would end some day and she would benefit from all the new stores around her. But she's gone and the construction is still happening, with at least a year to go. I remember at one point that she had a big dirt pile in front of her store, and it seemed as though it was there for months.

Every time a new store has gone in across the street from us, we have to endure weeks of white panel trucks taking up the parking. A few days ago I had a huge truck, big enough to block the entire store, parked in front. Which means anyone walking across the street or down Bond wouldn't see us. I was there for hours -- and it didn't appear that anyone was using it. Finally, I went out and saw a 'special' parking permit from Diamond Parking on the dash.

Turns out it was a plumber who was working on the 'men's salon' (A MEN'S SALON?! Bend has changed) where Eddie's Canton (then Double Happiness) used to be. There are other empty storefronts across the street, and so I suppose I can look forward to more white panel trucks. Even more concerning to me is the long -term prospect that the owners, who are also the guys who tore down the building next to Deschutes Brewery and who own the St. Claire building might have bigger plans. I'm not sure I want to endure what the people on the east end of Minnesota have been enduring for the last 5 years or so.

The Treefort 'kid's urban store' (KID'S URBAN CLOTHING?! Bend has changed) is just getting worked on (after sitting empty for months). I can't see how they are going to be ready in time for Thanksgiving, and or ready for Christmas, but it appears that instead of doing the work in the relatively slow months of Sept.-Nov., they are going at it during the Holidays. It's like a Bizzaro world of retail where it apparently seems like a good idea to be closed during the Summer and Christmas, but hurry to be open for the desert months of Jan-June.

When is Bend going to settle in to being rather than becoming? I've been lucky so far in that most construction is just off the radar. Not by much, but enough to brunt the effect. But I wonder at what point it will enter my zone -- either my own building or the building across the street. And I need to really include that prospect in my plans.

Can't stop progress? That's great for everyone who comes in after the dust settles. Not so great for us who are choking on the dust fumes. Besides, when does the dust settle? I suppose it's better than having a moribund downtown like so many places. Maybe the trick is to keep trying to dodge the major construction if possible, and endure the major construction on other blocks.

NIMBY, I guess. But I don't underestimate the cost of construction on business sales. Everyone says, yeah, but it will be better when it's done. But as a business, that's like saying that island over there is much nicer; all you have to do is hold your breath for twenty minutes and you'll get there.

10 comments:

Bend Economy Man said...

What do commercial leases say on this? You'd think at some point there should be a lease payment abatement, at least if it's YOUR landlord's building where the construction is taking place. Clearly a pile of dirt in front of a teddy bear shop is a pretty serious matter in terms of the viability of that business.

Duncan McGeary said...

My attitude toward landlords has always been, they leave me alone, I leave them alone.

I think in most cases it's an all or nothing thing.

I think I need to look at the situation myself when the next lease is due and make my own decision and not count on the landlord to help.

I figure either the economy will be so in the tank that they'll keep the rents about the same, or it will have been good enough for me to make money either to stay or go.

But, it will probably be muddle through, as usual.

Anonymous said...

The Bulletin did publish a long article about shrinking equity. But it was buried three pages in, and was a generalized national content.
*

I didn't see the article, but make this clear I'm talking 'liquid' equity. I'm seeing 'rich' folks BURN their equity, they're 'investments' haven't panned as planned. Sure there is OLD money, I know lots in Bainbridge,... But in Bend its largely new money, and they have spent & spent. The 4%/yr, isn't keeping the principal reduced.

How long? I'm seeing a lot of 'rich' cutting out the golf, and the cooks, my gawd, I would hate to be a gourmet in home chef right now, its not like it was two years ago.

My personal opinion is that over 90% of Bends new money is 'noveau' money, and they had big plan's.

It's amazing how many cali's were told by their CPA's that you just had to be here sitting on a +$2M home, and you could get 15%/yr forever, ...

visitbend.com, all of our taxpayer money going towards reeling the fish in, and then what??

Forget about the real estate the equity, is the burn-rate that feeds all of the investments. New money in Bend, easy come, easy go. Actually lucky come, easily gone.

Duncan McGeary said...

We've always been good at that. People move here thinking they'll show the small town how to do it. We say oh and ah, and take their money, then look at them and say, "Well, you staying or going?"

It's still a small town, relatively, and it's overbuilt at least 25% and if you want to stay you better get humble fast.

I see them walking in my store, and they say, "Are you the only comic shop?"

And I ask where they're from and they mention a suburb of San Fran that's no bigger than Bend and they think it's similar. And they think I should be doing things the way the comic shop back there did them.

One of two things are going to happen. Either I try to do things like the shop back home and go out of business, or they get used to the way I do things, or they quit.

But Bend isn't Santa Barbara (92,000 vs 78,000) even if we're close in population.

No jobs. Tourist trade. Welcome, spend your money.

Duncan McGeary said...

What I'm trying to say, is that has been going on for years. People come into my store and have very high expectations of jobs and income, they were successful elsewhere and they see no reason they can't be successful here.

No amount of me warning them in advance helps. 20 years ago I'd say, hey, there are less than 20,000 people here, and every year since....and yet, the same thing happens.

I don't think the last 3 years have changed anything except to create an even bigger illusion.

In some ways, since this is a tourist town, people who move here because they love it become permanent 'tourists' -- which has got to be expensive.

So you see these people years later and they're picking up side jobs, or planning to leave, and sometimes (and these are people who came to town some money) working in a chainstore.

Rich people? Hardly ever see them, or at least they never spend enough money in my store for me to go, "Wow, you must be rich."

Maybe I see them on my way to the parking garage on the way home, dressed to the nines and planning to blow a few hundred on a fancy meal.

But I'm convinced that rich people are just as susceptable as others to a downturn. It may be more psychological than material, but it counts. And many will leave if the party is over.

Duncan McGeary said...

Anyone remember the episode of Twin Peaks where the deaf old F.B.I. agent played by David Lynch shouts,

"I'm going down to Bend, Oregon. It's a happenin' place! A happenin' place I tell you!"

Anonymous said...

But Bend isn't Santa Barbara (92,000 vs 78,000) even if we're close in population.

No jobs. Tourist trade. Welcome, spend your money.

*

Yes, but Santa Barabara, is over $1M median, for REAL. It's 1-1/2 hr to LA, where most lawyers, doc's, cpa's easily make $250/hr or more, easily. Then there is Bend, sure its 3 hr's from PDX, but so what, its a place where a few people escape the rain.

As BEM said the other day, there is NO income here, oh YEA there was two years ago, MTG, RE, ... CONS, but that income is GONE now.

Yea, there's a few surgeons @ st-charles do penis enlargement, breast implant, and back surgerys, but that isn't going to make Bend.

Bend is where you SPEND your money, a NOT where you make your money. Get a good job in CALI, and come here for 2-4 weeks a year, and get a good whore @ Pronghorn, and enjoy, but don't think for a minute about setting up shop here.

New? Nothing, I think that both me & duncan can tell you its been this way forever. I can think of dozens of guys that came here in the 80's, and setup a good biz, and all left. Why? It's like Duncan's gig, why work for min wage? Duncan is obviously a rare bird, but most move on.

It's really surprising that Super-Burrito signed on to lease that horrible location with no parking, I hope they make it, you know the old place was cheap shit-hole, the new place, next to the fancy-dan break-fast place ... No Parking, good visibility, but who in the HELL knows what super-burrito is?

They'll probably raise their prices, to pay for the new lease. Too bad, I hope they didn't sign a triple net 5yr, or something silly like that.

L. Ottaviano said...

As a huge Twin Peaks fan (do you have any TP-related items in your store?), I appreciate the mention of that quote from the series. I don't personally recall that line, but now wonder if subconciously it affected my willingness to follow my (then) fiancee here in 1999.

Duncan McGeary said...

Not a thing. It's a real gap. But I don't think I've ever seen anything offered. Must have, can't think of it.

Anonymous said...

. It's like a Bizzaro world of retail where it apparently seems like a good idea to be closed during the Summer and Christmas, but hurry to be open for the desert months of Jan-June. .

I don't thinks it's bizzare. Think about this, the money is no longer available, commercial REIT is shutdown, only the stuff on the line is currently on-line. Shutdown, or suspend and your 'draws' are over. Take your time, keep building drag it out, keep everyone busy,... Keep your subs busy, keep things moving along. Keep the new hotels moving, new penthouse condo's. Don't stop for a minute, someone might question the forward momentum.

There will be NO NEW money. Things will keep moving, the current stuff will slow down, the liens will go astronomic, as suppliers will start to worry. Some of these projects will get stopped, many of there commercial REITS have had tons of redemptions in the past few months. The money is gone. The banks, start realizing they're throwing good money after bad, many of the condos will become apartments, this is what is happening today in PDX.

WRT the city and little business, NOTE that Bend is NOT about YOU the little businessman, Bend is about the BIG picture "WWW.VISITBEND.COM". Nobody really cares whether a little guy pays his bills during the holiday, or whether another ma&pa biz goes south. What matters is that BIG projects are happening, and they keep everyone employed, and the BULL can report new BIG projects.

Keep everyone optimistic, nobody gives a SHIT if your store if covered by a street fair, or a semi.

Probably by Spring, things will be at a crawl, by then the new money will be almost impossible to squeeze, the suppliers will have extended maximum credit to all, the draws will no longer becoming. Much of the new stuff will be perpetually never-done, just like the Plaza today. The plywood all over downtown will be there for years, until someone steals it some night for building materials for a shed down in LA-PINES.

In summary,

1.) Keep the building moving forward as long as the banks keep making draws, these things will never be finished, thus that is an irrelevant concept.
2.) Nobody in City Government gives a shit about small business, because that is NOT who runs the town.