Business haven or overpriced strip?

By Holly Michels - 04/19/2008

Vacant lots, for sale and for lease signs pepper Harrison Avenue in Butte, one of the town’s main business arteries. Above right: Jim Smitham, executive director of the Butte Local Development Corp., talks about the issues facing development along Harrison Avenue last week.

On a recent weekday morning, a steady stream of traffic moved north and south on Harrison Avenue, the main thoroughfare for one of Butte’s busiest business strips.

Shoppers cruise the 4.5-mile stretch from the Civic Center to Five Mile Road, buying groceries, home furnishings and other goods. They also stop at their banks, pick up dry cleaning and tend to other business.

Harrison has all the hallmarks of a typical commercial avenue: a handful of national chains, car dealerships and fast-food joints.

But what it also has — about a dozen vacant lots, some with unkempt buildings and acres gone to weed — is unexpected along a town’s main artery.

The lots sit empty not for a lack of interest, said Jim Smitham, executive director of the Butte Local Development Corp.

Rather, Harrison Avenue has a pervasion of over-priced parcels and inflexible owners who won’t budge on their price.

“We’re in a time now when there is interest for development, commercial and retail, along our main corridor and it’s not happening because of the cost of land,” he said. “From what I am seeing, and it’s been confirmed by others … many of the places that are vacant have been or are still priced out of the market.” When it came time for Bugs ‘N Bullets, 40 Sportsman Way, to move from its old Harrison Avenue shop to a new location about two years ago, owner Ray Nichols couldn’t afford to stay on the same street.

“The price (of land) for our business was definitely too much,” he said.

Bugs n’ Bullets, a sporting goods store, found an affordable parcel behind the Wal-Mart SuperCenter, at 3901 Harrison Ave.

“I can’t remember what (owners) were asking (for land on Harrison), but it’s a lot more than my business could afford,” Nichols said.

A handful of companies that Smitham declined to name have abandoned plans to open in Butte after looking at land prices along Harrison Avenue, he said. He recalls a client with whom he was working who wanted to lease a building, yet Smitham found owners asking more than $21 per square foot.

“The client thought that was out of market (value); it was,” he said.

But building owners refused to lower their prices and deals fell through.

Defending land prices Real estate agents selling land on Harrison, however, defend their prices.

Clay Raaka, a broker with Wisdom Real Estate, has two listings on the street. Both his 6.7-acre parcel in the Five Mile area and 2.7 acres in front of the YMCA Family Fitness Center have been on the market more than a year. Raaka declined to say what they are listed for, but a lot similar to his smaller parcel is being offered for $487,000 by another real estate agent, according to the local multiple listing service.

“We’ve had a fair amount in interest, but haven’t made any deals yet,” he said.

Raaka said clients “aren’t all that motivated,” but he did cite a new Toyota dealership set to be built near his land and a proposed Home Depot as catalysts that might help his lots sell.

“Generally speaking, when someone like that comes in, that would really make a difference along the avenue,” he said.

Some listings are overpriced, Raaka said, but that’s part of the business.

“I just think that’s normal,” he said. “People put a higher price with the aim of negotiating. The only thing that matters is the sale price.” Yet, he admits some parcels “won’t even come close” to selling at their current prices.

Remodeled building waiting for tenants Rulon Nixon, a Utah-based developer, isn’t selling vacant land, but renting office units in the old Smith’s grocery store, a 43,000-square-foot building at 3745 Harrison Ave.

The building, which Nixon purchased five years ago and “spent a lot of money” remodeling, only has two tenants, United Blood Services and Check ’n Go. Six units sit empty.

“We could have had the building filled,” Nixon said. “We’re just looking for the right standard of quality tenant.” Nixon also said some Butte businesses might balk at his going rental rate — $12 a square foot. Smitham said an appropriate price for Butte commercial rentals is about $9 per square foot.

“Locals are used to paying a lower rent,” Nixon said. “A lot of the Uptown in the old, old buildings has been available for low rent … There’s been a lot of people approach (me about renting), but the price has frightened some off.” Nixon wants to fill the main frontage space with a large, possibly national, retail tenant. He said smaller units on the south side, where the current tenants are located, can be filled with office-space renters.

“It’s hard to find large retail tenants,” he said.

Still, Nixon, who owns other commercial space in Kalispell and in Utah, is convinced Harrison Avenue is the place to own land in Butte.

“We think Harrison Avenue is the golden mile,” he said. “We think that’s where all the development is moving.” He partially bases that opinion off The Home Depot’s planned store on another vacant lot, dubbed the “sand pit,” at Harrison and Meadowlark. That project is currently stalled.

“The Home Depot spends a lot of money doing the analysis to see where they’ll move,” he said. “We’ve been watching them and it’s just amazing what happened. (If they come) it will help the rest of us take some new blood in.” Toyota: Harrison best for business Those who are developing on Harrison, like Toyota of Butte, 2611 Harrison Ave., say locating on the strip is the only place that makes sense to do business in town.

“We basically just feel Harrison Avenue is a major part of the business district of Butte,” said Ron Dollar, president of the local Toyota dealership.

Toyota is working with another firm that purchased 5.8 acres and will build a 26,000-square-foot facility. The dealership plans to lease from the firm.

Dollar said the price of the land was high, but Toyota needed a specific-sized lot.

“Cost mattered to a certain point, but getting the right size was very important,” he said. “We had to have the size, but if the price of the land was unreasonable, I wouldn’t have bought it.” Mike McLeod, broker at McLeod Realtors, 1905 Holmes Ave., traces the root of Harrison Avenue’s vacant lots to a lack of options, especially from Interstate 90 south to Wal-Mart.

“Really what we’re fighting is a lack of inventory,’” he said. “Secondly … (some) sellers just aren’t that motivated to sell them.” “I don’t know if they’re being unreasonable.” McLeod, whose firm has several listings on Harrison, isn’t convinced asking prices are too high.

In the last three years more national retail chains have looked at land on Harrison Avenue, McLeod said.

“Interest is up, but with national clients if it just doesn’t all fit, they just leave.” He said commercial real estate deals are always challenging, not just on Harrison.

“To put a deal together is difficult because you’re dealing with multiple people and they’re all dealing with different motivations,” he said. “You need to go knock on a few doors.” Land Uptown, on Continental Smitham said he’s showing clients more land on Butte’s other commercial streets like Continental Drive and in the Uptown area.

“If we only look at Harrison we’re playing right into the hand of those folks who are pricing their land so high,” he said. “If we develop alternative commercial corridors … we create competition for people who own the land. They can’t say they’re the only game in town.” Going off Harrison was a risk for Bugs n’ Bullets, Nichols said, but it paid off.

“At first it was a little scary because everyone puts it in your head you should be on Harrison Avenue,” he said.

But the shop’s sales are up 38 percent this year, he said. He is also planning to sell extra land around the store for $4.25 a square foot.

“The location is still important, but we’re still down on the Flats and it is getting built up around us,” he said. “But when you hear those numbers (of what he’ll sell land for), you know it’s crazy not to get off Harrison.” Reporter Holly Michels may be reached via e-mail at holly.michels@lee.net.