Wednesday, July 23, 2008

"If money wasn't an object...."

Again, it's the older businesses that are folding up. Kayo's is closing it's two oldest branches (I believe it had a site in south Bend for years). When you see only one of three restaurants doing well, I suspect it has a lot to do with management and labor. It's hard to split good help into three parts....

Tum-a-Lum going out? I suspect that the downtown area isn't a great place for semi-industrial anymore, which is why Parr's is leaving the area too. When you have to move, closing is another option.

I loved the comment by Redmond City Manager Michael Patterson: "We definitely want to see them in Redmond in one form or another. If money wasn't an object, we would certainly buy it."

Me too buddy. Me too.

Pesky money.

Anyway, I think we're going to see a lot more of this. Still way too many restaurants around.

I don't believe the real crunch time has even started. We've been coasting on vapors in Bend for the last six months to a year, and I think there is only a couple of drops left in the tank.

Going into this fall, and then winter, and then spring.

If things don't turn around early next summer -- which I personally don't expect, THEN we'll start seeing to real reality adjustments.

Which means, I think, that the feds just made a mistake not taking the 1.5 million dollar offer for the Liberty building downtown. Those prices for downtown real estate are just out of bounds, in my opinion.

When people ask me if their cards or comics are 'worth anything', I always say, put them on auction on E-Bay. Pure capitalism. What people are willing to offer is what it is really worth. Sure. You may hit a dud.

So try a second time, or a third time. You may get a slightly better offer, but you have to subtract the extra time, labor and investment. But go ahead.

It seems to me that the value of downtown real estate ought to be correlated to the dollars per foot generated by retail. On that scale, I'm betting we are way out of bounds. That is, if the Pearl District in Portland charges say 2.50 a foot, but generates an average of say 30.00 a foot; and downtown Bend charges 2.50 a foot and generates 20.00 a foot, than you see the problem. Those are completely made up numbers -- I'd love to see the real figures, but unlikely to ever find them. Still, I wouldn't be surprised if the proportions are about right.

That is, the downtown owners have real estate that is worth a fortune based on prices paid a couple of years ago, and their charging a comparable rate. But the retail in that space is seeing nothing like that kind of increase. But because the owners can still GET that increase, they're asking for it.

I suppose it will take a couple of boutique spaces staying unrented for more than a few months to change that.

But I can tell you this, based on the business I've seen downtown this summer, everything is overpriced.


Duncan McGeary said...

And they're getting those rates because the new businesses just don't know any better.

The older businesses can look at their history of bottom line and know if the rates are wrong and make a decision (usually to move or close and sometimes to gulp and re-up.)

RDC said...

When you start seeing 25%+ of the space going vacant and staying that way you will know that the correction has hit.

What you have seen so far is a slow down in the velocity of money passing through the area, not a major reduction in the quantity.

Bend Economy Man said...

What you have seen so far is a slow down in the velocity of money passing through the area, not a major reduction in the quantity.

The words don't make any sense to me but I understand the sentiment. But given that real estate sales were Deschutes County's one and only $1 billion-in-a-year industry of all time, and real estate sales are off by more than 50% in quantity terms, I don't think the sentiment is correct.

No other sector has made up for the massive falloff in RE money, so ???