Stalled projects, scarred neighborhoods

A crater-sized hole near Green Lake. A derelict corner in Lynnwood. A sorry shopping mall in Kirkland.

Retail development projects, slowed or stopped by a flailing economy, are revealing themselves as blights on neighborhood business districts.

Plans have gone adrift, leaving developers unable to secure commitments from anchor tenants that are crucial to getting projects off the ground. Chain retailers are leery of expanding during a time of economic uncertainty.

In Seattle's Green Lake neighborhood, a six-story retail-and-residential project planned for the former site of the Vitamilk Dairy is stalled because the developer can't find a grocery store to anchor the street-level space.

After the dairy shut down in August 2003, the longtime landowners hired Lorig Associates to help them redevelop. Lorig heard a desire from the neighborhood to have a grocery there and got the property rezoned while negotiating a long-term lease with Metropolitan Market.

Demolition of the dairy began in May 2007, with work at the site involving the removal of hazardous soils ending five months later without a deal from Metropolitan Market. Fallback negotiations with a grocery chain out of Portland also fell through.

For a year, the neighborhood has tolerated a block-wide hole in the ground secured by concrete barriers and a chain-link fence with "Danger Keep Out" signs attached.

Tom Bartholomew, Lorig's senior project manager, said the goal remains to attract a grocer as anchor tenant. "But at the same time, we have to expand our scope, by necessity," he said.

The family has owned the land for decades and thus can wait it out until an anchor tenant is found.

"The main cost to the family is opportunity cost — the opportunity to collect rents every month that right now is not occurring," Bartholomew said. "Nothing about waiting is ever easy."

Lynnwood: No Home Depot

In Lynnwood, a developer got caught in the dwindling demand for building supplies.

David Schooler, president of Sterling Realty Organization of Bellevue, was prepared to clear the land along Highway 99 and 196th Street Southwest in anticipation of building a Home Depot store. But the national retailer pulled out of the project earlier this year, and the lot became an eyesore of mostly derelict buildings.

Over the last couple of months, Sterling demolished several of the buildings. "The property became a dumping ground and we were getting squatters," Schooler said.

Atlanta-based Home Depot, which had been expanding at a rate of about 100 stores a year during the building boom, announced last spring it was cutting the number of new stores in half, and Lynnwood didn't make the cut.

Chairman and CEO Frank Blake, while discussing the company's second-quarter earnings, said: "The housing and home-improvement markets remain very difficult."

Schooler can attest to that. "We have an asset that we're not earning anything — or very little — on," he said.

Some retailers have expressed interest in a revamped site plan — a 130,000-square-foot retail center featuring several smaller stores instead of one big anchor, Schooler said.

"It's a bit of a nice surprise," he said. "It's not the world's greatest moment to try to design and build something."

Kirkland: Malls behind

In Kirkland, the proposed redevelopment of Totem Lake Malls is occurring far more slowly than the city had hoped, said Eric Shields, planning director.

In January 2006, the city approved a redevelopment plan of more than a million square feet of retail and office space, housing, and a multiplex cinema. Stores were to open by 2011.

But as of this month, the city still was waiting on a design plan for the first phase of development and a sense of what stores might go into the new mall.

Shields said he has been told the developer still is trying to negotiate leases for anchor spaces. Developers Diversified Realty, of Beachwood, Ohio, did not return calls from The Seattle Times.

While Totem Lake Malls still operate, much of the main mall is vacant. The biggest sign of life is a retailer that temporarily moved into an anchor space to sell Halloween supplies.

Auburn, Woodinville cautious

City planners are nervous even where projects are proceeding as anticipated, such as in Auburn, which has major redevelopments planned for downtown and the Valley 6 Drive-In theaters site.

"I read the national economic news, same as everyone else," said Dave Baron, Auburn's economic-development manager. "What haunts us is that we don't know what impacts the financial markets will have on the developers as well as on retailers' plans to expand. And the two go hand in hand."

A major mixed-use development that would remake eight blocks of downtown Woodinville is not stalled but is proceeding at a much more deliberate pace, said Hal Hart, Woodinville's development-services director.

Economic realities are allowing developers to proceed more cautiously because they no longer need to build fast to exploit ideal market conditions. And that's not necessarily a bad thing, Hart said, as it allows time for planning a better-designed project.

"Developers still see the golden lining at the end of tunnel," Hart said. "It's just cloudy now and no one can say for sure how long the tunnel is."

Stuart Eskenazi: 206-464-2293.