The 81,870-square-foot building that formerly housed Gallahan's Furniture in Spotsylvania County is heading to the auction block.

The retail/office space at 9400 Market St. will be auctioned off on site at noon Aug. 26. Walker Commercial Services Inc. of Roan-oke is handling the auction for Wachovia Bank. Previews are available by appointment beforehand.

The property probably won't be sold during the auction itself, said Fitz Johnson, president of Johnson Realty Advisors on Lafayette Boulevard in Fredericksburg. Rather, the building and 4.66-acre lot--which are assessed at $9.7 million--will likely be sold at a later date. But Johnson predicts the auction will draw a good crowd of curious onlookers.

Thus far, commercial foreclosures haven't been nearly as much of a problem as residential ones in the Fredericksburg area. There was one on Lansdowne Road that Hugh Cosner bought and another in a strip shopping center in Cosner's Corner.

Johnson and others involved in commercial real estate worry that there could be more to come as vacancy rates creep up and rents come down, leading to less cash flow to pay the mortgage. It's also now harder for property owners to refinance their loans, as declining property values have sapped equity and lending standards have gotten tighter.

It's not all doom and gloom, however. Leasing activity for military contractors and the federal government remains steady, notes Phillip Baxter, who handles commercial leasing and sales for the Silver Cos. He's now focusing on the Quantico Corporate Center in North Stafford, which has been a bright spot for local leasing.

Jud Honaker, president of commercial development for the Silver Cos., doesn't think the commercial sector will get nearly as bad as the residential market has gotten because commercial owners have more experience in real estate ownership.

The Gallahan's building, where the store opened in 2001, once saw brighter days. It was the area's largest furniture store, with a huge inventory that drew people from the Washington area. The two-story layout featured ample natural light.

Franklin H. Gallahan founded the company in 1970. The store was formerly on Lafayette Boulevard near the Spotsylvania-Fredericksburg line. The founder committed suicide at the store in 1994 after his company got into financial trouble. It went bankrupt, and Phil Kennett's Stone-Lee Partners LLC bought it in June 1995.

Severegn Furniture Management, a company partly owned by Jim Shrawder, took over the Gallahan's lease and business from Stone-Lee about three years ago. The store closed at the end of last year, and the building has remained empty since.

In October 2008, Shrawd-er told The Free Lance-Star that "Gallahan's just simply fell short of our performance requirements" despite successful efforts to lower expenses and boost sales. "End of an Era" was written on a huge sign over the store during last fall's liquidation sale.

The building has drawn some interest since then. The Spotsylvania Technology Center looked at it but could not work out the financing, said executive director Bob Duffy. Stone-Lee still owns the property, and Wachovia is the lender.

Bill Freehling: 540/374-5405
Email: bfreehling@freelancestar.com