February 22, 2001

NW retail: more bricks and more mortar

The beginning of the 21st century is truly a great opportunity for the retail consumer, especially here in our marketplace.

This 38,000-square-foot Crate & Barrel at Bellevue Square is one of several recent single-store market entries. Others include Winco Foods in Federal Way and Bassett Furniture in Fife.

A combination of the King County’s record low unemployment rate of 3.1 percent, continued population growth and a healthy median household income is attracting both new and sometimes improved categories of retailers to our region.

Just one of the names you will soon be familiar with, if you aren’t already, is Best Buy. Currently, Best Buy is the nation’s largest consumer electronics retailer of brand-name electronics, home office equipment, entertainment software, music and appliances. The Minneapolis-based company has 352 stores in 37 states, and operates a 45,000-square-foot prototype store in urban areas throughout the country.

Locally, Best Buy opened two stores before Christmas. One is at the Parkway Supercenter in Tukwila, and the other is a co-anchor with Target at the new 330,000-square-foot Northgate North vertical project, which is located directly north of the mall, on Northgate Way.

The Best Buy store is big, bright and fun to shop. The level of depth and choice for most categories is impressive, and the sales staff is quite knowledgeable. Best Buy is also committed to the music category, and offers a great in-store selection. Both CDs and DVD movies are available online through its Web site, BestBuy.com.

Best Buy will fill out Western Washington locations beginning this year with identified sites in Bellingham, Lynnwood, Everett, Federal Way and Puyallup. Two locations in Spokane are also expected to begin construction this year, and the retailer successfully retrofitted three vacated Future Shop facilities, one in Kennewick and two in Montana.

If you are thinking that a 45,000-square-foot store is pretty big stuff, wait until you see the 144,000-square-foot store that Fry’s Electronics is proposing to build on its recently acquired 23-acre site adjacent to Interstate 405 in Renton.

The subject property was a Boeing surplus parcel with adequate freeway visibility, but marginal access. Fry’s will be required to serve as a destination retailer since no other retail service is available in the site’s vicinity. Fry’s is hopeful that its deep discounts and huge inventory will be enough to entice customers to navigate their way to the latest retailer on steroids.

Fry’s, based in the Silicon Valley, made the Portland market its first Northwest inroad, assuming the vacated Tandy Co.’s Incredible Universe location in Wilsonville, Ore.

“Hot Doughnuts Now” in glowing red letters will soon be appearing from multiple Krispy Kreme stores soon to be dotting the Puget Sound landscape. The first local store will open in Issaquah at the East Lake Sammamish Center, a Johnson Underwood Properties development under construction at East Lake Sammamish Parkway and Issaquah-Fall City Road.

Krispy Kreme operates in its own free-standing buildings of about 4,000 square feet, equipped with a drive-through window and a vast selection of both yeast-raised and cake doughnuts. Though new to the Northwest, this company has been around since 1937, when its first store opened in Winston-Salem, N.C.

The featured product is the original glazed doughnut, which commands quite a loyal following. Transplants to this area familiar with the Krispy Kreme doughnut are eagerly anticipating the arrival of the first store, and local journalists have fueled the hype in their columns.

A crowded category gets more crowded as Sav-on Drugs continues to make moves locally to secure corner land sites. Sav-on joins Walgreens, and locally owned Bartell Drugs in its attempt to expand its store count to take advantage of the nation’s older demographic profile and convenience-oriented, one-stop shopping habits.

Sav-on announced future locations in Everett, Kent, Bothell and North Seattle that have been secured by one of its preferred development groups. Sav-on was part of American Stores and became part of the Albertson’s chain upon American’s acquisition by Albertson’s in 1999.

David Heerensperger spent little idle time after the sale of his Eagle Hardware chain to Lowe’s. Heerensperger’s new concept is World Lighting, which recently opened in Bellevue’s Overlake area. The store is approximately 25,000 square feet and will be opening stores early this year in Tukwila and Lynnwood.

Winco Foods and Basset Furniture each completed single-store market entries in Federal Way and Fife, respectively. Both stores are around 67,000 square feet. Another single-store entry, Crate and Barrel, holds 38,000 square feet in the much-anticipated redevelopment of Bellevue Square’s northeast corner. All of these retailers are seeking or will seek additional locations in our marketplace in the near future.

Coupled with these new retail players are established ones that continue to expand as well. Costco opened a 149,000-square-foot store in Puyallup adjacent to the South Hill Mall, and is building a 205,000-square-foot store on South 38th Street in Tacoma, off Interstate 5.

The Best Buy store is big, bright and fun to shop. The latest consumer electronics retailer to enter into the Puget Sound market is filling out at least five more Western Washington locations beginning this year.

Lowe’s recently opened a 164,000-square-foot store in Auburn, and will begin construction on sites in Mill Creek and Bellingham this year. Borders Books will open stores at the Northgate North project and the expanded Bellevue Square this year. Many of the grocery chains, including Albertson’s, Safeway and Fred Meyer, have followed Costco’s lead by selling gas at all new locations as well as existing ones that offer an adjacent land parcel.

Clearly, the variety and depth of retail choices in the local market is going to be plentiful. It is estimated that over 1 million square feet of new retail space is under construction within the Puget Sound area. But you’re not likely to feel too crowded because the majority of the space is either replacing existing vacated retail or is being blended into a mixed-use vertical project that takes advantage of the high cost and slim supply of land.

One thing is for sure — it doesn’t appear that the consumer is going to be quick to abandon the traditional shopping experience for Internet e-tailing. Although Internet sales over Christmas were roughly $10 billion nationally, double that of 1999, the fallout among dot-com e-tailers was huge.

The Internet retail business still isn’t profitable, which means a continued tinkering with the business model. This should continue to represent more shopping opportunities for the consumer both online and at the brick-and-mortar store of choice.

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Tim O’Kane is a commercial retail broker with the Bellevue office of Kidder Mathews & Segner.

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