KP Commercial Real Estate Can Be a Tough Sell for Now

Commercial property is limited, but not overly wanted by businesses on the Key Peninsula, at least for now.


Signs, signs, everywhere there’s signs.

Despite prime locations along State Route 302 and the Key Peninsula Highway, where anywhere between 14,000 and 17,000 cars pass through on a weekday, there are vacant lots and empty spaces that have been sitting for months, some for years, with large for sale-like signs hoping to lure a potential business interest.

Commercial property takes up less than 1% of the entire Key Peninsula due to zoning restrictions, yet much of the space is going unused or undeveloped, hardly suggesting the KP is a mecca for new businesses.

The yellow First Western real estate sign feels like a mainstay in front of Lake Kathryn Village, but 10 years ago that would not have seemed necessary. Engineering plans from 2014 on the Pierce County permitting site showed what a nearly fully developed Lake Kathryn Village could look like, complete with a 5,000-square-foot restaurant and retail space east of the Wauna Post Office. Drawings had a mini-storage facility behind Purdy Cost Less and what is now Ace Hardware. A large grocery store was envisioned in the lot next to what is today Dollar Tree. There were also a few other spots on the west side of the property designed for retail space.

Those plans never came to fruition and today the KP’s largest and most accessible shopping center has four of those lots for sale. That includes the 5.5-acre lot next to Dollar Tree and the 2.3-acre strip across the entryway from Burger King. Some development is on its way. The Wauna Post Office will welcome O’Reilly Auto Parts as its new neighbor sometime in the future and the property next to that was bought in 2023 but no plans have been announced for what will go there yet.

Another frequent sign drivers may see cruising along the KP Highway is the red and white Puget Sound Properties sign in front of Peninsula Community Health Services. It is not just a medical and dental clinic. The building is unassumingly large, but because of its odd shape it’s tough for passersby to see other businesses that make up what is officially called “Key Plaza.”

Kim Marvik, a realtor with the company, said there is a lot of flexibility and potential for a business in this building, with space ranging from 1,000 to up to 7,000 square feet. She thinks it is ideal for smaller businesses like art studios, salons, chiropractors, counselors and real estate offices, but with outdoor space, Marvik said it could even accommodate a daycare facility.

For those wondering when to test the waters in the business world, Marvik suggested now might be a good time while rent is extremely competitive. “Being in a rural area, we have a shallow pool of prospective tenants and the market isn’t really hot right now for leasing,” she said.

Commercial landowners like Lee Owens and John Holmaas understand why businesses on the KP may look to lease rather than build: it’s expensive to do the latter right now.

Owens, with his blue two-tone sign, has been trying to sell his triangular-shaped property at the intersection of 134th Avenue NW and KP Highway, across from Bischoff Food Bank, off-and-on for 20 years. A recent archeological and cultural assessment shows the site has been undeveloped since it was first purchased in 1891, according to Pierce County records. Owens bought it in 1983 for $19,000 and he values it today at about $800,000.

“That was quite the investment.” But it hasn’t been easy to get a return on that investment yet.

He blames government at the local and national levels for making it hard on businesses. Current Pierce County commercial fire code requires enough water, 1,500 gallons per minute for up to two hours, to help put out a fire. For businesses on a well system, that may not be possible. The solution would be to store water on-site in a 200,000-gallon tank, which is big, and unless buried, takes up valuable real estate. It’s a huge added expense on top of an already large investment.

“We’re in a period of uncertainty and I don’t blame anyone for not going forward with anything right now,” said Owens. He said if he doesn’t sell the property, he will just keep it in his family. “It’s an element of my existence now.”

Over the years the property has garnered interest from a McDonald’s franchise owner, a storage facility, and a coffee shop. More recently he said there was interest in building a nursery similar to Watson’s Greenhouse in Puyallup.

“(Because of the structure of a green- house) that may be a way to get around that particular fire code and would be a good option in this space,” he said. A company also recently looked at the property to operate a storage facility, but ultimately that did not work out.

But Holmaas has that covered. Holmaas, who recently developed the new 55-plus gated community near 138th Avenue NW and KP Highway, is turning two commercial properties he’s been trying to sell or lease into “something that will serve the entire community well.”

He plans to convert four of his 7.5 acres at the southwest corner of SR 302 and Wright Bliss, across from Drive-Thru Feed, into a well-lit, secure RV storage facility with a dump station. Holmaas has had a white and blue sign hanging on a fence to draw interest for over a year now.

Then on the southwest corner of SR 302 and 118th Avenue NW, he is looking to build another RV storage location along with climate-controlled storage units.

Another yellow First Western sign popped up in Key Center recently as a 4-acre commercial property is for sale at 9222 Cramer Road NW. Plans for this property back in 2020 called for a nearly 50-stall RV park.