Business Community

Rent increases followed new owners’ purchases of downtown buildings

For some tenants in John and Luke Xitco’s downtown Gig Harbor properties, the brothers’ arrival as landlords meant rent hikes. In several cases, the businesses left or plan to leave due to the increases.

The Gallery Row cooperative art gallery has operated out of 3102 Harborview Drive for 22 years. After the Xitcos, through their company X2 Harborview LLC, bought the real estate including that building last October, they informed the gallery it would see steep rent increases after its lease runs out in February 2024.

The rent increase is progressive over three years. But by the third year it will be “not double, but close,” said Donna Moen, one of Gallery Row’s artist-owners.

Gallery Row at 3102 Harborview Drive plans to leave in February due to increased rent. For the Love of Spice, a shop that was next door at 3104, departed in August for the same reason (they are now a block away at 3122 Harborview). Photo by Ted Kenney

“For our business model, it was not going to work,” Moen said.

“We’re disappointed” but most in the co-op are of the age to retire so they are not looking to find a new space, she said.

Love of Spice moves up the street

Next door at 3104 Harborview was a shop called For the Love of Spice. Last month it moved to a new space down the block (3122 Harborview) because of a rent increase, owner Windy Payne said.

She said the Xitcos informed her in February of the hike that would have raised her rent by close to 30 percent.

John Xitco acknowledged the rent increases and said they were needed to cover maintenance and repairs that had been deferred for years by the previous owners, a mother and daughter who operated Bonneville Weavers until retiring in 2000.

The rents paid to the previous owner were well below market rate, Xitco said. “When the property became available for sale it was marketed at a price of what rents should be, not what they were.”

For the Love of Spice owner Windy Payne in November 2022. File photo by Julie Warrick Ammann Julie Warrick Ammann

To help tenants cope with the rent hikes, the Xitcos offered to make the increases gradual over three years, he said.

Improvements made

“Every space that has become available since we purchased the property has been cleaned up, marketed and quickly leased at market rent,” Xitco said. “I see this as a strong indication of interest to do business in Gig Harbor and a rebounded economy. Unfortunately, many businesses have not been able to recover since Covid. We wish all our tenants, past or present, much success.”

The Xitcos also raised rents at 2907 Harborview Drive, the waterfront parcel their X2 Boat Barn LLC acquired in 2018.

Eric Haugen ran his graphic design business there for more than a decade. After the Xitcos bought the building, “they raised the rents so high, it was cost-prohibitive.”

Haugen said rent boost caused him to exit the building. “I said, ‘I’m out of here.’”