Market Reports

The Portland multifamily market continues to slowly improve in spite of the unemployment rate stalemated at 10.6 percent — now entering its 10th month. When Portland headed into the recession, many believed its multifamily market would experience a similar plight to that seen in the Southern California and Arizona multifamily markets. It certainly dipped, but fortunately didn’t hit their low values estimated to be 50 to 60 percent below the original prices for some properties there. Rents have returned to pre-recession levels, concessions temporarily came into the market and net operation income went down, causing apartment values to decrease between 15 to 20 percent. But through the worse of the recession, and even today, vacancy has held around 5 percent. However, it should be noted that in some pockets of the Portland market, like Gresham, certain areas of Beaverton and outer Hillsboro submarkets, vacancies are somewhat higher. At first glance, when comparing Co-Star year-to-date multifamily sales numbers (August measure for transactions ≥ $1 million) of $196 million with $116 million in 2009, it appears that transaction sales numbers are up by 59 percent. Yet, on closer inspection, a different story emerges. Since the beginning of the year, there have been …

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With a population of 2.2 million, Portland is the 28th largest metropolitan area in the country, the fourth largest city on the West Coast and the largest city in Oregon. Sportswear and equipment businesses Nike, Adidas-America and Columbia Sportswear are all headquartered in Oregon. National publications often cite the Portland area for its coolness factor. In 2009, Men’s Journal named Portland the third “Best Beer Town in the U.S.,” the Wall Street Journal dubbed it the fourth best “Youth Magnet City” and it was third in the Forbes annual list of safest major cities. Unfortunately, it’s not all positive news for the area. Oregon has the fourth highest statewide unemployment rate in the country. During the past year, Oregon has lost 100,000 jobs, and the unemployment rate is now holding steady at 11.5 percent. However, for the real estate sector, the state had the foresight to have well thought out land-use planning laws, and this has benefited the region in these tough times. In the early 1970s, Governor Tom McCall commissioned a study on the future of the Willamette Valley, whose farms and forests were being threatened by a wave of new growth and poorly planned development. Knowing that Oregon’s …

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Three significant Portland multifamily buildings delivered downtown in the first two quarters: Cyan/PDX (352 units developed by Gerding Edlen Development) and the Ladd (332 units developed by Opus Northwest) and the Riva on the Park (294 units developed by Trammell Crow). Downtown Portland has historically been a healthy submarket for multifamily, and much recent construction has been centered there, so the area is now becoming very competitive. All three of the aforementioned projects are also pursuing LEED certification, which appeals to Portland’s urban tenant. Vacancy is an important factor in Portland’s multifamily market as it is an indicator of the overall market’s health. The vacancy rate has been trending upward in recent quarters, which should continue in the second half of the year. It’s important to note that the increase in vacancy is due to economic pressure on tenants, not migration of people out of the metro area. Expect vacancy to regain its footing next summer or when economic conditions improve. Portland’s Urban Growth Boundary sets it apart from other multifamily markets in the West. The UGB has prevented overbuilding in both the single-family and multifamily markets in the last 5 years. This means that despite the recession, Portland’s apartment …

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What area is your expertise? Sales and leasing of industrial and commercial property in Portland, Oregon. What trends do you see presently in industrial development in your area? Industrial development continues to be fairly strong, provided land can be found to be developed. Overall, within the Portland Metropolitan Area industrial land supply is short on top-quality sites. Consequently, secondary and redevelopment sites, though limited in supply, continue to be the choices available to development firms. What type of industrial product is doing well in your area? There are two types that seem to be doing fairly well. One is 40,000 to 50,000 square foot and larger spaces for warehouse/distribution use in newer developments that are located along major freeways with easy access. The others are 5,000 to 20,000 square foot spaces for local or semi-regional companies with a need for corporate headquarters, assembly manufacturing and/or warehousing. Who are the active industrial developers in your area? Locally, firms such as Specht Development, Pacific NW Properties, PacTrust Development; national companies such as Opus, Prologis, Birtcher and Trammel Crow continue to be very active in our area. Please name one or two significant industrial developments in your area. What impact will these projects …

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What area is your expertise? Central Business District, Portland What trends do you see presently in office development in your area? We see a lot of new class A properties coming out of the ground, delivering approximately 2010, with a lot of rehab in the Class B market. Who are the active office developers in your area? Shorenstein, based out of San Francisco; TMT, a local developer; Winkler; and Unico are a few of the most active companies right now. Please name one or two significant office developments in your area. What impact will these projects have on the market? First & Main will be the next new construction out of the ground in the downtown core. It is a 13-story Class A office building with a completion date set for First Quarter 2010. Construction on TMT Development’s Park Avenue West has recently begun, also in the downtown core. This will be an office/retail/condo mixed-use building that delivers approximately late 2010 or early 2011. These projects will have a huge impact on the market, where the Class A supply is very tight. Where is the majority of development taking place? Why is this area doing well? There is a lot …

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What area is your expertise? Apartment brokerage in Portland What trends do you see presently in multifamily development in your area? Downtown development is strong. Large, high-end transactions from late 2007 continued into first quarter 2008. The high level of acquisition activity on the institutional front will continue in 2008. By the end of 2007, activity of smaller (below $5,000,000) properties was down 20 percent from 2006. This will be the trend for 2008. Who are the active multifamily developers in your area? Opus Development, Trammell Crow, Unico and Gerding Edlen. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? The Wyatt — Northwest submarket — just completed — Bob Ball and Evergreen Signature, LLC, developers. It was converted from condos to high-end apartments – will fit growing demand for luxury apartments. The Lovejoy — Northwest submarket — under construction — Unico, developer. Mixed-use with Safeway grocery store, 231 units of multifamily space and office. Supplying grocery to an area of Northwest/downtown neighborhood that has not had a grocery store. Where is the majority of development taking place? Why is this area doing well? Downtown core – close-in (to …

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What trends do you see presently in retail development in your area? Developers continue to move forward on projects in which they have an anchor tenant and financing. Land and construction costs have risen to a point where the rents developers need aren’t feasible to tenants, thus putting the project on hold. What type of retail product is doing well in your area? Regional malls and our two lifestyle centers continue to perform very well. What retailers are new to your area? Dick’s Sporting Goods, Famous Dave’s, LA Boxing, and over a dozen new tenants to our area that are currently in negotiations with landlords. Who are the active retail developers in your area? Center Cal, CE John and Company, Gramor Development and Opus NW are the most prominent players right now. Please name one or two significant retail developments in your area. What impact will these projects have on the market? Cascade Station was recently completed located next to Portland International Airport, on the east side of Portland near the border of Oregon and Washington. This project’s success was banked on the fact that customers who don’t want to pay a Washington State sales tax will cross the Columbia …

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