News

Advice for city: Don't be a landlord

By ERICA HALL

The Mirror

A three-member panel of local development experts says Federal Way would be ill-suited to act as landlord of its soon-to-be-vacated old City Hall, essentially guiding officials toward putting the building up for sale when they move out this summer.

Mark Clirehugh, senior vice president of commercial real estate firm GVA Kidder Mathews, told members of the city's Finance, Economic Development and Regional Affairs Committee that it was remarkable the three panelists had the same recommendations, considering they didn't get together beforehand to compare notes.

The developers told the committee that acting as landlord –– a possibility created by the acquisition of a new City Hall that's scheduled to fully open in August –– would cost the city a significant amount of money during the first couple years. If the city was to lease the building, it would have to provide so many tenant improvements, and it'd be two years –– after the building is fully leased, which could take 12 to 18 months –– before the building started providing a revenue stream.

Even still, every time a tenant moved, the city would have to recarpet and paint, which costs about $12 a square foot today, Clirehugh said.

"Personally, I don't think government makes a good landlord," he said. "It can't move quickly enough to keep up with competitors."

Connie Boyle, a sales associate at real estate firm Colliers International, said the building has a few disadvantages that would require expensive tenant improvements before anyone would probably want to move in.

Mark Freitas, a commercial real estate consultant with Craig L. Michalak Inc., said the building is an excellent economic development opportunity for someone else, but not necessarily the city.

"The economic potential might lie in the business that locates here," he said.

He echoed his colleagues' remarks about tenant improvements, especially considering the roughly 20 percent vacancy rate in which corporations are currently shopping.

"The question is how prepared are you to be a landlord?" Clirehugh said. "I don't think you're prepared for it."

Clirehugh's company brokered a deal in which the city last year bought the former Paragon building as its new City Hall. The Police Department and Municipal Court have moved into the new facility. Other city departments are scheduled to follow next month.

Selling the old City Hall building presents fewer problems, but it could be a while before the building changes hands, depending on the price and the terms, the real estate experts said.

The panel provided information about the market and knowledge about selling and leasing, but ultimately encouraged city officials to sell the building.

"With all the other things going on in the city, I can't fathom you doing anything else with the building," Freitas said.

Staff writer Erica Hall: 925-5565, ehall@fedwaymirror.com.

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