By LEAH WEATHERSBY

For the last three years, the Lake City community has watched the property at the northeast corner or Lake City Way and NE 125th St go from a fire-devastated ruin to a soon-to-be completed flag-ship building for the neighborhood's urban center.

When speaking about his new six-story mixed-use building, property owner Jo Rekhi has been unwaveringly proud and enthusiastic. Already, he said, 50 percent of the residential units, which range in price from $695 per month for a studio to $1,195 per month for a two-bedroom, are rented. Many view the building as an important redevelopment in the neighborhood.

But recently the project was dealt a financial blow. Tully's Coffee, which had been expected to become the Rekhi building's anchor retail tenant, decided this spring that it would not take the space after all.

"It's not Lake City," said Tully's marketing manager, Kim Novak. "We're just slowing down our growth drastically this year."

"It hurt me so much," said Rekhi of Tully's decision to scrap its plans for a Lake City store. "I was depending on Tully's as my anchor tenant."

As of late June, none of the Rekhi building's five commercial spaces have been leased. Faye Garneau, an Aurora Avenue property owner who also serves as executive director of the Aurora Avenue Merchant's Association, said Rekhi's problem is not uncommon among developers of mixed-use buildings. Garneau said that the City's requirement of including street-level commercial space for multi-level, mixed-use buildings in neighborhood business cores unfairly burdens developers because some communities may already be saturated with commercial space.

In other words, the commercial units may stand empty long after condos or apartments are taken, according to Garneau.

Rekhi attributed his lack of commercial tenants to a slowing economy, which might make businesses reluctant to start new ventures. However, he was still confident about the long-term success of his building.

"It's just a matter of time," he said.

"You're always at a greater risk when you're the pioneer in the area," said Susie Detmer, a leasing agent with CB Richard Ellis, a commercial real estate brokerage. According to Detmer, lease rates for commercial space in the Lake City area generally range from $14 to $25 per square foot per year.

Rekhi is seeking commercial tenants who would be willing to lease spaces in his building in the range of $15-$27 per square foot per year.

"Retailers will pay a premium to get the No. 1 location in a spot like that," Detmer said of the Rekhi building.

Meanwhile, a few blocks north on Lake City Way the three-building Simpson Housing project is nearing completion. The massive 238-apartment complex covers a large site between NE 127th and NE 130th, from Lake City Way to 33rd Avenue NE.

Like the Rekhi building, the Simpson project also includes street-level commercial spaces. Kevin Buckley, regional property manager with Simpson, said his company will most likely charge between $20 and $22 per square foot annually for lease its retail spaces.

"I'm not too worried about (finding tenants)," Buckley said. "(Lake City) might be the next urban village that comes up in the area."

Rekhi said that despite the lack of commercial tenants thus far for his building, he's not sorry he spent more to add special touches to the property such as the fountain and clock, which will likely be installed at the front of the building at the end of June. He also hopes to break ground on a second building, to be constructed on the lot directly adjacent to the first building, next year.

Detmer said in the long run, high density and high-traffic volumes in Lake City will likely pay off for businesses and developers.

"Build it and they will come," Detmer said. She added, however, that exactly when they come may be in question. (