Bellingham's working waterfront: Can it continue?

Bellingham has had a working waterfront for much of its history, with much of the activity involving the marine industry.

Now, with big changes expected as the community considers waterfront redevelopment, a group of marine business owners hope that industry remains intact.

The business owners, many of whom work at Squalicum Harbor, are forming an industry association to explain to the Port of Bellingham the importance of marine businesses when it comes to jobs.

Roger Van Dyken, founder of San Juan Sailing, said the group doesn't want to be confrontational, but does want a stronger influence because individual voices "have been lost in the cacophony of urgent business pressing upon the Port policymakers."

"We have to get the community, and the port, a lucid analysis of the looming cliff so that they can make intelligent choices that will affect the future of Bellingham's waterfront community," Van Dyken, one of the group's organizers, said in an email.

Several people in the group say they are somewhat satisfied with the port's handling of waterfront property, particularly given the economic troubles since the national financial meltdown in 2008, but they are concerned about the future.

They have seen changes in other waterfront communities, where warehouses and other facilities were replaced by condominiums and tourism-related retail businesses. They realize some of that development will be part of Bellingham's future, but want to make sure it doesn't come at the cost of losing the marine industry here.

"I have a long-term concern that Bellingham could follow the trend of other communities where developers outbid marine-related industries for waterfront property," said Jim Kyle, a longtime commercial fisherman. "Bellingham has a unique opportunity with this working waterfront. Seattle used to have a waterfront where you could walk to the businesses to get what you need (for a fishing boat), but now more Alaska fisheries' boats are coming here."

Squalicum Harbor has a more gentrified look than it did five years ago. In 2008, with the economy in a recession, the boating industry slowed down significantly and several businesses left the harbor. Some of the tenant spaces remained empty for a significant amount of time, which put the landlord - the Port of Bellingham - in a difficult position, said Brian Pemberton, owner of the yacht sales and charter company NW Explorations.

As a public entity, the port likely doesn't want to use tax dollars to subsidize rents for marine-related companies, but it also can't lose revenue by letting the spaces remain empty, he said. So in recent years, more non-marine businesses have signed leases for those spaces, including a fitness gym and other professional services.

"As a business owner, it's in my best interest to not have all those spaces vacant," Pemberton said. "Any tenant is better than no tenant, and the port has been a good landlord in that regard. With that said, they have a mission to support marine technology."

Some change was bound to occur at Squalicum Harbor, said port commissioner Mike McAuley. He doesn't think providing a more diverse tenant mix is necessarily a bad thing. He noted that one tenant space sat empty for 17 months, with no marine-related business stepping forward to sign a lease.

"If you are a private real estate owner, you're not going to do that," said McAuley, referring to the idea of having empty spaces sit empty for potential marine-related businesses.

He added that property on the water's edge, with waterways that offer boat access, should remain in place for marine businesses.

"It's so important to our economy, and once it's gone, it's gone," McAuley said. "We are a gateway to Alaska and it means a lot of jobs. If we hold on to what we have and strengthen it in some other areas, we'll be fine."

Shirley McFearin, director of real estate for the port, said Squalicum Harbor currently has a good mix of marine and non-marine companies, but stressed that more work needs to be done to attract marine-related firms.

In studying the tenant mix, she noted that nearly 33 percent of the tenant space at Marina Square, the building that's home to Web Locker Restaurant, is occupied by marine-related businesses, while nearly 37 percent are non-marine companies. The remainder, which consists of two 2,000-square-foot spaces, is vacant.

The mix is similar at nearby Harbor Mall, which has 40 percent occupied by marine-related companies, nearly 41 percent by non-marine ones, and 19 percent vacant.

Across all of the port's waterfront properties in Whatcom County, there is a 94.1 percent occupancy rate, with 65.4 percent marine-related.

Fairhaven Industrial Park, which has 150,000 square feet on 14 acres, is 100 percent occupied.

"Our preference (at Squalicum Harbor) is marine-related business," McFearin said, "so I would encourage the current tenants that if they know of businesses that would be a good fit, to send them our way."

Big waterfront facilities such as Bellingham Cold Storage and Bellingham Cruise Terminal may be the most noticeable, but there are plenty of small businesses that work in the boatyards.

According to a 2008 economic impact study by Martin Associates, tenants at Squalicum Harbor employed 2,172 people. There's also a significant indirect impact, particularly from commercial fishers and recreational boaters. Along with using such services as boat maintenance work and equipment installation, boaters also head into town to stock up on other supplies, including groceries.

IS HIGH RENT PUSHING BUSINESSES OFF THE WATERFRONT?

One of the concerns of the local marine industry is that higher rents are driving some marine-related businesses off the waterfront and into less expensive space farther from their core customers. Van Dyken said some policy changes, including a rezone at Gate 3 that allows other types of businesses in the area, threatens the working waterfront.

"Unless there is a policy change, we will watch one another continue to dwindle and die, as has happened so often in other marina areas," Van Dyken said. "Those that are making the working waterfront 'work' simply can't compete with attorneys, architects, engineers and other high-margin enterprises. We like all those enterprises; it's just that we can't compete with them for rent."

McFearin said the port is flexible when it comes to waterfront lease rates for marine businesses. The port regularly researches the local market for current lease rates, then comes up with a range and offers the lower-range rate to marine businesses, she said. It's a bit of a balancing act, she said, because the port commission has made it clear the port shouldn't undercut private commercial landlords in order to steal tenants.

"If the business is marine-related and should be on the waterfront, we will be flexible," McFearin said.

A couple of longtime Squalicum Harbor businesses, Rasmussen's Marine Electric and Radar Marine Electronics, moved into the Squalicum Lofts business park nearby on Squalicum Way in 2011. For Brian Rasmussen, moving his company was a business decision: His 10-year lease with the port was expiring and Squalicum Lofts offered him an opportunity to purchase the space.

"It was important to me to build some equity into the business instead of just paying rent," he said.

Moving off the waterfront has hurt his business, he said, because a significant part of his customer base is boaters pulling into Squalicum Harbor and looking for services near the boat slips. He's been working on marketing, and relies on word-of-mouth to help capture those customers who don't know the business is a short distance away.

"The port has done a good job getting the word out with its directory of businesses," Rasmussen said.

When asked about any challenges he had on the waterfront, he said a lack of control in some decisions sometimes was an issue: "Sometimes you just don't feel like you have a voice."

AN INDUSTRY LOOKING FOR A REBOUND

Marine-related businesses, particularly those that did boat maintenance and repair, where hit hard by the economic recession that began five years ago.

"All through the Puget Sound, you could see the impact that this last recession had on this group of businesses," said Dan Stahl, maritime director for the port.

But business has been improving the last couple of years, said Roger Schjelderup, who operates Top To Bottom, a diving and marine services company. Much of his work is done in the Bellingham boatyards.

"What I wish they would do is give the boatyards a little more free reign in terms of trying to develop as businesses," he said. "There's a lot of work that is done at these boatyards. Other towns have gotten rid of the boatyards, and it's been to their detriment."

Pemberton said 2012 was his company's best year ever for yacht sales and chartered trips, and bookings this year are looking good.

"I think it's coming back, but as an industry we still have challenges," he said.

Along with the economy and finding waterfront access, another challenge is the "graying of the industry." While the older generation continues to enjoy boating, younger people have more outdoor activities to choose from, Stahl said.

As for the Bellingham waterfront, Van Dyken said the key right now is to make sure the port and the community have a clear picture of the concerns of the businesses, which he acknowledges can be challenging because there are many other legitimate, pressing concerns.

"If the port commission and staff decide that the working waterfront should remain an important part of our community - both our economic community and our cultural community - then we would like to together discover what has worked in communities facing similar situations and develop a cooperative action plan to sustain the working waterfront," he said.

Reach Business Editor Dave Gallagher at dave.gallagher@bellinghamherald.com or 360-715-2269. Read his Business blog at blogs.bellinghamherald.com/business or get updates on Twitter at @bhamheraldbiz.

UPCOMING MEETINGS FOR WATERFRONT REDEVELOPMENT

The Bellingham Planning and Development Commission is reviewing plans for The Waterfront District, which involves the 237 acres of former G-P property. An overview presentation of the plan is scheduled for 7 p.m. Thursday, March 14, in Bellingham City Council chambers.

Two public hearings are scheduled following the overview presentation: 7 p.m. March 21 and 7 p.m. March 28, also in council chambers.

Documents are online at cob.org. Details: 360-778-8300.