What's Next for Portland?

What's Next for Portland?

An esteemed group of real estate professionals in the local Portland, Oregon market made up the panel on What’s Next? The panel and their presentation offered insight into the current and future state of Commercial Real Estate that is in the planning and development stage in our region.

ON RETAIL:

Fred Bruning, CEO of CenterCal Properties says that retailers put Portland high on their priority list due to having no local sales tax. He says that according a study on retail business, there are an estimated 87,000 new concept retail locations that will be needed in the next two years. Although CenterCal has a 96% occupancy rate, they are planning to accommodate this future need with approximately 4,000,000 square feet that is in the pipeline to be built around the western United States.

ON URBAN LIVING V SUBURBAN LIVING:

According to Jonathan Malsin of Beam Development… Urban areas will continue to flourish and this trend is lasting, especially in Portland and Eugene. With this desire for retailers and residents to be where the action is at, the rents will continue to rise, leaving some to be pushed out to the suburbs to survive.

HOMER WILLIAMS:

He says that the fundamental ways that people do things has changed due to the economy and the need to be more frugal. This is the reason that no large new condo projects will likely be built in the near future. Development in the future will be focused on the needs of a larger portion of the population.

ON MULTIFAMILY:

This is a market that appears to be getting a bit frothy and may be set for a bubble. There are currently about 6000 – 8000 new units scheduled and in the pipeline for development in Portland in the near future. This is an accelerated growth from the 1100 units in 2011, and the 2000 units in 2012 that were completed and the 3000 units in 2013 that are expected.

ON COMMERCIAL OFFICE:

The Park Avenue West building by TMT is the largest and only newly planned office building in development which is scheduled to continue in 2013 after a several year hiatus. Although the vacancy rate in downtown office makes this a competitive and tight market, the economic downturn did not result in fluctuations in office rent as it did in San Francisco and Seattle. The Rates in our region stay relatively level compared to our neighbors to the north and south says Damin Tarlo of Gerding Edlen.

Among the most interesting thing happening in commercial office space is the re-development of class C buildings to show a class A façade. This is being done to drive up rents, but the adjustment to the space and in some cases the lack of completing the space to fully function as a class A office space is expected to come back to haunt these owners.

CONVENTION CENTER HOTEL:

Although new to the Hotel Development world, Homer Williams has said that his company is scheduled to begin construction on the Residence Inn by Marriott in November 2012 and will begin construction on the South Waterfront Hotel (rumored to be a Hyatt product)  in summer 2013. This is in addition to the 400 room property under construction in Los Angeles.

On the convention center hotel, he says that this will make a devastating impact on the local existing hotels and be a very negative event.  Only time will tell if the project will be a success.

ON RECOVERY:

The Portland market seems to have entered the recession a little later than other regions, but is slower to get out. The real draw for businesses here is the small organic company with their hands in the dirt trying to make a difference. This is in contrast to the venture capital backed organizations in Seattle and San Francisco. This is good, but we also need large companies like Nike and Intel to drive our economy.

ON PARKING, MASS TRANSIT and NEW TENANT NEEDS:

A proposed multifamily development is trying to get away with having no parking, but is experiencing backlash from the community and these projects will likely be punished in the future. Although mass transit becomes more important all of the time with increased fuel cost and the green movement, most car owners do not want to give up their cars. It is also important to consider that mass transit funding in the future will be increasingly tough. Consider that Portland has identified about $30,000,000,000 worth of infrastructure needs in the coming years with no real plan on where the money will come from to make these projects a reality.

Another trend that has been influential in development is “the pet owner”. One panelist said that 70% of his residents in one building own pets and they are now considering how to incorporate dog wash areas into the building.

OTHER NEWS:

• It would be nice if the local government implemented a plan like the National Park Service that include historical tax credits to assist with the redevelopment of some costly items such as mechanical screens.
• The North Park Blocks are looking at a strong redevelopment in the next several years with multiple redevelopments on the horizon. One building that is still in question is the Customs House. This property presents a neat building with seismic issues and other non-retail grade space that will be interesting to see as it redevelops.
• Homer Williams is using a different technique to build the 24 story hotel in LA that could potentially save about $8,000,000 in construction cost on local projects.
• Portland is in some ways an easy place to develop, but in other ways it is not because the community gets involved and speaks their mind. Portlanders like to engage.
• Parking Centers may play a more important role in the future of Portland.
• Looking forward the panelists all have projects in the pipeline with development expected to stay fairly flat in the next 12 months, but an expected increase in the following 12 months that will last through 2016.

Brian Resendez, Hotel Broker