By Ruth Longoria

There’s a wide range of rates for retail and office space on the Island as thousands of square feet of new commercial space open up in the Town Center. As can be expected, rates in the new buildings look to be substantially higher than that of existing facilities.

Small Island businesses are already beginning to feel the pinch of the potential rent hikes. They worry that leases on new space will drive up existing lease rates.

“Apparently the price of ground on Mercer Island has gotten much more valuable,” said Island Books store owner Roger Page. “And because of that, building owners have adopted something of a Gold Rush mentality.”

Page, who has operated Island Books at 3014 78th Ave. S.E. for the past 31 years, said he was told there’s a proposal for about a 30-percent rent hike at his building. Rent at Island Books is currently “in the teens” per-square-foot, he said. And, in addition to raising the rents, leases are getting shorter to provide property owners an out and enable them to raise rates more often, he said.

“I don’t blame the property owners and I don’t think they are being unreasonable,” Page said. “It’s just a tricky transition period. People have to figure out how to adjust to these times of change.”

Retail and office space rates on the Island range from $14.50 per-square-foot net (which means there’s additional operating expenses) for office space at the 9655 Building on S.E. 36th Street (which currently has all its 22,225 feet leased) to an expected $40 per-square-foot at some of the newer buildings.

“Forty-dollars is an optimistic goal — the $30 range is more realistic,” said Michael Christ, president of Seco Development, which is in charge of pre-construction leasing of Island Market Square and 7700 Central.

Spaces at Island Market Square are already mostly spoken for in the mid-$30 range. Those spaces are tentatively leased at rates of $33 to $35 per-square-foot, triple-net-lease, which means renters can expect to pay an additional about $5 per-square-foot annually for taxes, insurance and maintenance, said Monica Wallace, the leasing agent handling Island Market Square rentals.

Of Island Market Square’s 38,000 square feet of commercial space, all but three spaces are leased or tied up, Wallace said last week. That’s six months before Island Market Square is set to be completed.

“This is really rare; it’s not standard to rent that quickly,” Wallace said. “We had a pretty large group of tenants ready to lease before we even poured the concrete.”

Still available at Island Market Square are a 487 square feet office next to the leasing office, a 1,745 square feet space and a 2,400 square feet space.

Although the other spaces are already leased or in the final paperwork stage, Christ won’t say who the new tenants are, excluding the two real estate companies, Coldwell Banker Bain Associates and John L. Scott, who previously rented on the land and will be returning to the new construction upon completion.

Property owner Steve Cohn previously told the Reporter that a spa and dry cleaners also have leased space on the property. Christ said other rental spaces in the building will include a mix of fast food and sit-down restaurants. However, he won’t confirm a rumor that Taco del Mar is one of the fast food restaurants set to open at Island Market Square in early 2006.

One space in the 7700 Central building, to be built where the Coldwell Banker building is now, will be marketed specifically for a sit-down restaurant, Christ said.

David Hoy, president of HMI Real Estate and HMI Construction, said there aren’t any tenants he can talk about yet, but he’s hoping for some high-end retail tenants, including possibly a wine and cheese bar at his 7800 Plaza complex. Hoy’s five-story, 24-unit high-end residential and 10,000 square feet office and retail building is set to begin construction in September on S.E. 27th Street, across from Island Market Square.

“Our prices will be comparable to Island Market Square and other retail in the area,” Hoy said. Hoy also owns a retail and residential building on Capitol Hill in Seattle, 700 Broadway, which rents at $30 to $40 per-square-foot, he said.

“It’s not high priced if we can solicit the right kind of tenant,” Hoy said. “We’ve had a lot of local interest, but, we’re trying to be selective because we have a responsibility to the residential tenants who will live there. I wouldn’t mind a high-end spa or something related to the kids, but it has to be something nice.”

The largest available space on the Island, a 27,289 square feet retail facility currently occupied by Tru Green, at 2441 76th Ave. S.E., is offered through Collier’s International at $15-per-square-foot net. The current renters have another four years on their lease, but plan to move their company to Kent once the leasing agents are able to find a new renter for the building. Tru Green does much of their business in the south King and Pierce counties area, so a move would be practical, where rents are lower, said Tim Foster, who handles the lease. And, though, Foster said, there has been some recent interest in the building, Tru Green could be there a while despite the relatively low — for the Island — rental rate. “Go in to the building to see why it’s cheaper,” Foster said. “It’s an old building.”

But, just being an “old building” doesn’t guarantee low rental rates.

Page said he hopes the expected growth and new vitality in the downtown area will make up for higher rents through more revenue from an increased numbers of shoppers. He’s also looking at expected changes as a challenge.

“Change is probably healthy for a small business and this is one of those challenges we hope we can turn into an opportunity,” he said. “Our desire and intent is to be around and thriving in the new Mercer Island downtown. It’s going to be difficult, but we’re hopeful.”