Higher rents for commercial spaces has some merchants simply giving up.

The dilapidated, century-old buildings at Highway 305 and Winslow Way have been refurbished and preserved as “Winslow Corner,” enhancing the “gateway” to Bainbridge Island.

But in a trade-off that has some local merchants concerned, the tenants at street level are now paying steeper rents – a trend that is likely to continue in the face of heavy competition for retail space and parking and zoning restrictions downtown.

Winslow Corner owner Bruce Weiland said that as property values go up and the availability of retail space shrinks, downtown property owners will have to make some tough choices:

Will they preserve old buildings and retail businesses? Or raze them and build condos?

“One of the issues confronting Winslow,” Weiland said, “is, can we preserve some of the old buildings that we want to keep, and make it work in today’s climate? I don’t want to see a Winslow that turns into high-end galleries and boutiques.

“One of the things Winslow faces, is that the hardware stores, the coffee shops and the toy stores are having a hard time making payments on the rent.”

Instead of tearing his recently acquired building down, Weiland and his partners opted to renovate and preserve it this past year at considerable cost.

Now the long-shabby structure is spiffed up inside and out, and the upstairs sports the “Inn at Winslow Corner,” with two luxury units renting for $185 a night.

Weiland said he chose to establish the high-end use upstairs so that the tenants downstairs – Bargain Boutique thrift store, Island Ice Cream and the Chamber of Commerce – could stay. But their rents also went up considerably, as did the price for tenants Doozie and Winslow Shoe Repair in the companion building next door.

And yet, with a retail vacancy rate of less than 1 percent downtown, many of the tenants are paying the increase without complaint. They’ve got one of the most high-profile retail spots on the island, and know that the alternatives are slim to none.

“The conversion of this building has done wonders for the image of this corner,” said Kevin Dwyer, executive director of the Bainbridge Island Chamber of Commerce, one of the building’s long-time tenants. “It was tired and rundown and it didn’t reflect the new Bainbridge Island, and the kind of people and architecture that can be found here.”

“Now, are we paying more for that? Yes,” Dwyer said. “Our rents have gone up, and it reflects what the market will bear for this space.”

Downtown retail rents have increased 10 percent in the last couple years, primarily due to demand, said leasing agent Jerry Knipe of the Sunrise Group.

Depending on the age and condition of commercial property, the rates vary from $18 to $22 per square foot, plus taxes, maintenance, insurance and other operating costs.

Those rates have driven some merchants to simply give up – including the owner of the popular Chili Cosmo’s burrito shop, formerly at the corner of Winslow Way and Madison Avenue.

“The rents are just too high – it’s just, wow,” said Barbara Hagan, owner of the now-defunct eatery.

Hagan lost her lease a year ago, and was unable to find a suitable, affordable place since.

“It’s really expensive to start all over again.”

Competition

But “it’s not outside forces that are coming in,” and gobbling up the retail space, said Dave Nelson, a commercial agent for Windermere Real Estate, who is Weiland’s agent. “It is competition between locals,” for limited retail space.

The future of retail space on the island, Nelson said, will depend greatly on the “Winslow Tomorrow” planning process, and issues such as parking and zoning downtown.

Winslow Tomorrow project manager Sandy Fischer said that the parking code requiring four spaces for every 1,000 square feet of retail space is a significant impediment to redevelopment downtown.

Weiland was lucky, she said, because his project had parking on site, while many other Winslow properties do not.

Even if everyone rode their bike, she said, there is 40 percent less parking downtown than is required under the city code.

How could a business expand or renovate, and stay in compliance?

If businesses stay small, it remains to be seen whether they can afford the escalating rents, which will increase due to demand, if for no other reason.

“Everyone says how much they love the small businesses and the little shops,” Fischer said, “but what we treasure could be lost” if zoning and parking restrictions force property owners to consolidate their parcels to maximize their investments.

“It’s a concern of all the business owners of Winslow,” said Esther’s Fabrics’ owner Jennifer Rhoads. “I know that this shop has moved a couple of times and survived, but if there is no place to move to, or the rent is preposterous, then what do you do?

“I don’t foresee having to deal with that issue for several years, but who knows, it could be a whole new world down here by then.”

Like her neighbors at the Chamber of Commerce, Island Ice Cream owner Loral Ann Jorza is thrilled with her “high profile” location and the improvements that Weiland has made to the building.

But doing business on Bainbridge and paying Seattle rates for space is not easy, and she’s hoping the upgrades will attract new customers to make up the difference.

“My hope of hopes is that with the new look, it will make a huge difference once the busy season starts again,” she said.

There was one casualty of the Winslow Corner renovation project. Doozie, the eclectic antique and gift shop owned by Dee DuMont, will close on Feb. 12, as a result of rent that went from “affordable” to “continually escalating” once it was sold to Weiland, she said in an email letter to customers last week.

DuMont announced the news in her letter with “sadness, exhaustion and relief.”

“This past November, the landlords approached me with an offer to buy out the remaining time on my existing lease, because they wished to upgrade the building,” the letter said. “As you undoubtedly understand, the market forces now in play on our beautiful island do not make it feasible to move a shop like ours to a different location here.”

DuMont declined to be interviewed, noting only that Doozie Design Services, her family’s sewing and slipcover business, will continue operation and that their phone number will remain the same.

Taking over her space is Opus Northwest, a firm that plans to develop condos and shops on a five-acre parcel on Winslow Way, north of the Ferry Terminal. They will be using the space Doozie occupies as their sales office.

Opus has offered to substantially upgrade the building, Weiland said, with new carpeting, paint, windows and other improvements “that will make the building a lot nicer,” he said.