Retail, office vacancy rates shrink in Eau Claire

Mar. 2—EAU CLAIRE — Fewer office and retail spaces in Eau Claire were empty at the end of 2020 than the year before, according to a new report from a local developer.

Commonweal Development recently released its annual market analysis, showing that the area's commercial and industrial real estate fared well despite the influence of the coronavirus on the economy.

"Although 2020 was a tough year for many regions, industries and businesses, the commercial real estate market in Eau Claire didn't seem to feel the effects of the pandemic," Commonweal stated in its report.

Of the 6.37 million square feet of retail space in Eau Claire, Altoona, Lake Hallie and the town of Washington, 12.84% stood empty at the end of 2020. That compares to a vacancy rate of 14.65% in 2019.

Stuart Schaefer, president of Commonweal Development, cited incidences of big box stores in the Eau Claire area that had been empty due to retailers who struggled prior to the COVID-19 pandemic now seeing reuse by other businesses.

"It wasn't a total surprise that the market was kind of stabilizing," he said in a telephone interview with the Leader-Telegram.

The defunct Younkers anchor store at Oakwood Mall became the new location of HOM Furniture last year. The furniture store's previous location didn't stay empty for long as Midwest Home Supply moved into the large building on Mall Drive.

Eau Claire's overall inventory of retail space did shrink last year with the demolition of Kmart, 2424 E. Clairemont Ave., which had been empty since 2015. However, a 95,000-square-foot Hy-Vee grocery store already is under construction at that site and set to open later this year.

While numerous office-based businesses had workers do their jobs from home during 2020 to prevent spreading COVID-19 in the workplace, companies did not move out of their buildings.

Last year, 8.1% of office space sat without a tenant — an improvement from the 9.4% vacancy rate from the previous two years.

Aaron White, Eau Claire's economic development manager, said he was pleasantly surprised that more workers telecommuting didn't result in buildings without tenants.

"There was concern there would be a significant uptick in office space vacancies," he said.

Two new office buildings went up in the area last year — Martin Dental in Altoona and Oak Park Dental in Eau Claire.

But there was a net loss of 16,219 square feet of office space last year due to buildings that were reclassified for another use or demolished. However, this only represented a 0.4% reduction in the Eau Claire area's inventory of more than 3.7 million square feet of offices.

The stable sector of industrial real estate did see a small rise in vacancy last year.

Less than 2.5% of industrial building space was empty at the end of 2019 in the Eau Claire area, but that rose to 3.4% in 2020.

Commonweal cited Phillips-Medisize's exit from the Eau Claire market as the main reason for the vacancy increase.

The developer notes Eau Claire's industrial vacancy rate remains below the Midwest and nationwide averages, which were both 5.6% in the latest report available from global real estate services company Colliers.

"With plenty of available land and the continued expectation of growth for e-commerce, Eau Claire's industrial sector should continue to trend upward in 2021 and beyond," Commonweal's report stated.

Commonweal uses public records, interviews with government officials and landlords, internal records and visual observations when developing its annual market report. The report's statistics do not include rental housing, hospitals, public buildings, auto dealerships, hotels, restaurants and self-storage facilities.

Looking forward

Last year's shrinking retail and office vacancies came while there was a dearth of new buildings created for those uses.

Schaefer said the lack of big building projects wasn't due to the pandemic, but fewer planned during preceding years.

"There wasn't a lot of activity in the pipeline going into 2020," he said.

The Hy-Vee grocery store, new offices being built in Altoona's River Prairie development and several other projects already publicly announced indicate this year will be better for new commercial buildings.

"There's more happening there than what happened in 2020," Schaefer said.

Though it doesn't track activity for financial institution branch buildings or stand-alone restaurants, Commonweal's report notes that there are plans already announced for Associated Bank and Royal Credit Union to erect new buildings, as well as construction of a Panda Express. Kwik Trip is also building three new locations in Eau Claire — two replacing defunct gas stations and the other an entirely new convenience store by Walmart.

White said some developers who had plans in 2020 did put them on hold, including an apartment building with first-floor commercial space planned for downtown Eau Claire. The city official did tie delays in that project to the pandemic, but said that and other buildings that had hoped to break ground in 2020 are now eager to begin construction this spring.

"A lot of those businesses are storming back right now," White said.