Five years ago, Mike McClure and his partners at MJR Development were looking for business opportunities in the South Sound when their attention turned toward Lacey. MJR Development is headquartered in Kirkland, but its portfolio of mixed-use properties dots the Interstate 5 corridor between Olympia and Mount Vernon. And while each property is different, one common thread exists.

“We are value-add guys,” McClure said. “We love either vacant land for ground-up development, or we love to turn (existing) Class C and D properties into Class A properties.” What’s more, MJR Development looks for opportunities just outside population centers. “Outside of Seattle, we are in Federal Way, Kent, and Lynnwood,” he added. “Outside of Tacoma, we are in Lakewood. As people get priced out of population centers like Seattle and Tacoma, we are just bullish on (these outlying areas).”

For McClure and his partners, Lacey hit many of the company’s marks when it came to investing in and developing commercial real estate. Lacey is close to population centers (fewer than 30 miles south of Tacoma, fewer than 20 miles south of Joint Base Lewis-McChord, and fewer than 6 miles northeast of Olympia). In Lacey’s Woodland District, a cluster of buildings — once largely occupied by Washington state employees, but mostly empty since the last recession — was poised to be converted into Class A office space.

Lacey WA

The Hub at Lacey encompasses around 317,000 square feet of office and retail space. Photo courtesy The Hub at Lacey.

In the end, MJR Development acquired eight buildings on nearly 17 acres of land and turned them into The Hub at Lacey. The complex offers just under 317,000 square feet of office and retail space, and is home to more than a dozen tenants, including H&R Block, Keller Williams, KPFF Consulting Engineers, Northwest Kidney Centers, Ricardo’s Kitchen + Bar, Thurston-Mason Behavioral Health Organization, and Wells Fargo. The Washington Utilities and Trade Commission will soon establish headquarters at The Hub, and an events center onsite is a popular venue for weddings. McClure envisions The Hub eventually will include housing built on two vacant parcels acquired by MJR Development.

The development of mixed-use and Class A office space is a fairly new economic facet to Lacey, which is home to approximately 48,000 residents and is part of Thurston County’s workforce population of approximately 126,000 people.

For decades, the indoor South Sound Mall — and its anchor tenants Nordstrom, Peoples (later Mervyns), Sears, and Woolworth — was the city’s biggest draw. Between the early 1980s and the late 1990s, however, the South Sound Mall’s anchor tenants (save for Sears) shuttered, and much of the South Sound Mall was redeveloped (and renamed South Sound Center) to make room for Target and Kohl’s.

“The South Sound Mall was Lacey’s primary retail service and cultural hub,” Rick Walk, the city’s community and economic development director, explained during an interview in his office at Lacey City Hall, a collection of low-slung, angular buildings that house the police department, and are surrounded by towering Douglas fir trees. “Over time, as malls declined and there was a change in patterns, Lacey morphed into a suburban community that is now looking to create a core downtown area.”

Long before Lacey incorporated in 1966, the area was defined by Saint Martin’s University, a Catholic liberal arts college with roots that date back to the late 1800s. Over the years, people knew Lacey for its Northern Pacific Railroad train depot, horse-racing track (Lacey Downs Shopping Center is located on the former site), and lakeside resorts. Curiously, Lacey was almost named Woodland — but not because of its copious, tree-lined streets. Instead, 1890s settler Isaac Wood proposed the name — and even tried to establish a post office in Woodland — but was rebuffed when it was revealed a Columbia River town already had claimed that name. Instead, it was likely named Lacey after a then-prominent lawyer and real estate developer.

Today, the city’s largest employers are in the education and product distribution sectors. North Thurston Public Schools and St. Martin’s University employ 2,000 people and 418 people, respectively. Trader Joe’s and Target operate distribution centers that employ 300 people and 230 people, respectively. Other top employers include Affiliated Computer Services, a call center and Xerox subsidiary, which counts 650 employees at its Lacey location; Cabela’s, an outdoor sporting goods store, with 300 employees; and Panorama, a retirement community that employs 450 people.

Notably, Lacey has become a hub for distribution warehouse facilities. In addition to Target’s 2-million-square-foot operation (opened in 2002), and Trader Joe’s 500,000-square-foot facility (opened in 2011), MedLine opened a 700,000-square-foot facility last year and employs 250 people. And the Hogum Bay Logistics Center — 1.7 million square feet of warehouse space built on 97 acres — is under construction. When it is completed at the end of this year, Uline — a leading distributor of shipping, industrial, and packaging materials — will relocate from Auburn and occupy 800,000 square feet of space.

“Because of our positioning and access to the ports to the north and markets to the south, we’ve seen a lot of distribution warehouse facilities develop,” Walk noted.

One project that could create a more vibrant urban center is the 250-acre Lacey Gateway, the roots of which date back more than a decade, when a developer closed a deal that brought Cabela’s to Lacey in 2007. A recession that year derailed future development on the northeast Lacey site, and the property went into foreclosure. Mon Wig, a Bellevue-based developer, partnered with the Nisqually Tribe to purchase the property. The latest plans call for 320,000 square feet of retail space built on 28 acres. Future development will include a mix of entertainment, medical, residential, retail, and other uses, according to the developer.

“Cabela’s is a great store and doing well, but the rest of the town center master plan has stagnated,” Walk said. “We are working with new owners in trying to develop a new plan that meets the new retail and entertainment trends.”

Walk is optimistic more developers will come forward and recognize Lacey’s potential. Much has changed since Lacey’s early economic ties to the railroad, lakeside resorts, and indoor malls. “As time went on, those (early industries) phased away, and we have evolved into who we are today — and with a lot of potential,” Walk said.

Employment Growth Source: U.S. Census Bureau; Top Employers source: City of Lacey. Top Industries Source: Bureau of Labor & Statistics (2016)