Last Word On The Market Building, For Now

Posted by Chris Berry on September 17, 2008 in Local Politics, Roanoke Valley

I hadn’t planned to write anything else on the Market Building controversy, but I received a ~~nasty~~ dissenting comment on a previous post this morning that changed my mind.

Oh yes Chris, blame the tenants for the disrepair, not the landlord. That makes perfect sense. Yes it is Chico’s fault that the city has shown no interest in renting any of the empty stalls you mention. Damn that Chico, he should just offer to pay for the 3/4 of the building (oh yeah, the upstairs too!!!) that the city has not tried to rent (and indeed, has pushed vendors out of). Now you and the City Manager and council members can blame current tenants for the empty stalls. Damn that Chico. Damn that Chico for not keeping the building he rents in better repair, damn that Chico for taking away parking at every chance he gets, damn that Chico for simply trying to have some involvement in the business he’s invested his entire life in, damn that Chico for going through an entire year of renovation (which effects his business) only to be asked to leave, damn that Chico for simply wanting to be in a conversation that the city has not asked him to participate in. God the nerve of these City Market Rats.

There is a huge difference between a private and a public landlord: the public one has accountability to more than its bank account, and does not own the property. Chico, me, you, and any other tax paying citizen own the property. So yeah, when Chico’s happy, I’m happy.

I apologize for singling Chico out, but it just so happens that our mayor made the initial comment about Chico’s happiness. I just want to take a moment to examine what it’s going to take to make Chico and the other tenants happy.

Let’s assume that the renovation cost projected in the coalition proposal was correct, and that the building requires upgrades and modifications totaling $7 million. The two main floors of the building are approximately 15,930 square feet each for a total of 31,860 square feet. If we include the mezzanine added during the last remodeling, the building total is roughly 40,000 square feet. Let’s also assume that roughly half of the total square footage can be configured as leasable space, and the balance would be set aside for common areas and mechanical systems. Now we have to look at the total renovation cost divided by the revenue producing square footage.

If the mezzanine is kept in place, and all three floors are used as retail space, we get a renovation cost of $350.00 per leasable square foot. If the mezzanine is removed and the two main floors are used for retail space, the renovation cost per leasable square foot becomes $439.42. Under the rejected proposal, the mezzanine would be removed and only the main floor would be used for vendor space. Under this scenario, the renovation cost per leasable square foot works out to an incredible $878.84. What exactly does all of this mean? At 100% occupancy and annual rent of $25.00 per square foot, it would take between 14 and 35 years just to recoup the $7 million dollar investment without interest.

On a per square foot basis, the food court vendors are already paying some of the highest retail rents in the Roanoke Valley. This is justified by the fact that their actual spaces are quite small. The reality is that in order for the proposed renovations to make sense from a pure business standpoint, the current vendors would have to be willing to pay 3 or 4 or 5 times their current rent. Otherwise, the citizens of Roanoke would be subsidizing their operations with tax dollars. Is this a price we are willing to pay to make Chico happy?

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8 Comments on Last Word On The Market Building, For Now

By John on September 18, 2008 at 8:47 am

ignoring your new post for a moment, explain to me one thing: what, besides disagreeing with you, makes my comment “nasty?”

By Chris Berry on September 18, 2008 at 9:15 am

John,

I apologize for my poor choice of words.

Chris

By Megan on September 20, 2008 at 7:18 am

I would like to throw in a little more of the owner’s perspective. I work in the building and have heard the owners often say that if the city wants to move in a new direction, one that doesn’t envolve them, they wouldn’t mind. They just want enough notice to be able to plan what to do. I know that many people would say that the one year leases are that notice. However, what many people don’t realize is that during the whole time the city officials have repeatedly told the vendors that they will not be forced out of the building and that they will be included in future plans. Its the being told one thing and hearing rumors and seeing signs of something completely different that is so upseting.
I’d also like to address all those empty spots in the building. I’ve spoken to many people over the years that were interested in opening a business in the Market Building. Just a few of the problems I’ve repeatedly heard from them is
1. The people in charge of leasing the locations never return their phone calls. This I really don’t understand. Even if its to say “thanks, but no thanks” a return call is just common curtesy.
2. “Your business idea just doesn’t fit the “feel” of the building”. That one came from a woman wanting to open a small furniture, home decor boutique. Considering the current assortment of vendors, I’m not sure what the “feel” of the building is supposed to be.
3. People who actually are offered a location are only given a one year lease. Now considering that most businesses don’t start turning a profit until they’ve been open for a couple of years, there is no logic in investing in a business without being able to have a solid plan more than a year in advance. Also many of the currently available locations are in such disrepair that to open a business there would require 20 to 30 thousand dollars worth of repairs on top of any other start up costs. So someone would have to have absolutely no business sense at all to open up shop in the building at this time.

I think the bigger issue here, the one that voters/taxpayers, should really be concerned with is this shining example of the city’s mismanagment of our money.

By Matt on September 20, 2008 at 8:09 am

Just something to point at as far as the currently unrented spaces in the Market Building:

1. The corner location between the bicycle shop and the Salem Avenue entrance is currently being used by the city as the building’s trash dump location.

2. The old Kim’s Seafood location, one of the largest exterior spots, is being used to store all of the contractor’s supplies. Essentially, all that square footage is a giant supply closet.

3. The old salad location has been consistently used as a storage location for the maintenance staff. The city’s employees are, effectively, keeping it in a state of disrepair that will cost the next rentor thousands to fix (this has already been discovered after the loss of an individual who was recently interested in renting the location, only to be told he would have to pay to clean up the mess the maintenance staff has made.)

The inability to rent these locations falls under the city’s responsibility, not that of the current vendors.

By Chris Berry on September 20, 2008 at 9:14 am

Megan & Matt,
Thanks for sharing your thoughts. I agree that the city has done a terrible job managing the building for the past several years. It’s just one more example to prove that the city has no business trying to be a real estate developer. As far as the vacant spaces are concerned, it’s obvious that the city has had no interest in leasing them since the decision to renovate the building was made. This makes perfect sense from the landlord’s point of view since they will ultimately need all of the tenants to vacate the premises. The thing I can’t understand is why they continue to pretend that the spaces are available.

By Matt on September 20, 2008 at 11:26 am

Chris,

The only explanation I can assume as to why the city continues to publicly view the spaces as available goes hand-in-hand with their ambiguity when answering questions and concerns from the vendors. The city wants to renovate the building or, at the least, put the management of it into other hands. This much is a given… the problem it causes, however, is that no one in the city’s leadership really knows what this will mean for the current vendors or for future vendors. They don’t want to upset the current rentors, as it may cause the loss of that revenue should the city elect to take a course of action that would keep these vendors operating in the building. As such, they need to maintain the appearance of operating the building in its current state, offering these spaces as ‘available’, but always having a reason as to why a business won’t ‘fit in’ with the building or refusing to offer more than extremely short-term leases.

That was a bit of a ramble, but it covers the points. The city is, quite understandably, trying to play on all of their potential options which includes the pretense of offering spaces they don’t really intend to lease.

I’m not overly fond of it, but my past retail management experience provides me with some basic understanding as to why they’re doing it. It’s not a method I would’ve condoned in my store, but there is some method to the madness, no matter how chaotic it is.

By Robert Hodges on September 25, 2008 at 12:47 pm

The trouble with your analysis is problematic.

for the reasons below

1, the government is not suppose to “Make” money on the property, therefore that is why it is in disrepair, had the property been in private hands, then it would have been kept up, and the Vendors would have made sure of that.

2. The government could do better than they do, if they had a eye in drawing more revenue to themselves by having a clean, modern space on the market.
revenue sources.
1- rent
2-meals tax
3-parking fees
these revenue sources the government can claim, that a personal business cannot.

3. when you see the mismanagement that the current tenants have to deal with, it should be renovated, with their input!!! Besides it is only fair that they fix what they let fall into disrepair. If it was maintained properly, and managed properly, there would not be a Problem!!! It would need very little renovations.

By Chris Berry on September 25, 2008 at 1:15 pm

The only reason that the city is stuck with managing the property is that no private company is willing to touch it. When the previous management contact expired, F&W walked away and had no interest in renewing the deal. With their leases set to expire, the input of the current tenants has no more weight than that of any other taxpayer. Given the projected cost of the renovations, the majority of them would not be able to afford the increased rent in the updated building anyway.

Please feel free to share your thoughts. Without your comments, I'm just some guy talking to myself. Let me know if I'm right, wrong, or completely full of sh*t.