JJ Wood Energy, LLC has purchased 14-acres of industrial land in Longview, WA for $1.5 million. NAI Norris, Beggs & Simpson Associate Vice President Ron Kawamoto and Senior Real Estate Broker Sierk Braam represented both the buyer and seller. The land will supplement the expanding business of bark manufacturer, Swanson Bark Wood Products, Inc.
Conveniently adjacent to Swanson Bark’s business, the vacant 14-acres found on 80-90 Tennant Way proved to be a perfect opportunity of both time and location. The land will be a welcome addition to Swanson Bark’s existing 68-acre property as well for the impending seasonal gardening rush.
“It was a great opportunity that benefited both parties, which made for a pretty straightforward negotiation,” Kawamoto explained. “The timing and location could not have been better.”
Founded in 1928, Swanson Bark has evolved and grown into a successful full-service soil business specializing in natural rock, soil mixtures, landscaping materials, as well as 10 different types of bark.
We’ve just completed our newly rebranded First Quarter Market Reports! Not only does it feature a brand new format, but the report ensures accuracy due to the annual truing up of our database.
- The Central City office market’s vacancy rate saw little change at 10.92% with negative absorption of 111,443 sf.
- With a vacancy rate of 14.6%, the Suburban office market benchmarked another record-low since 2008, and ended First Quarter with a positive 253,906 sf absorption.
- The Vancouver office market’s vacancy was all but unchanged at 10.38%, having several lease-ups under 3,000 sf. Activity may pick-up within the year, especially since Clark County attained a major economic milestone by recovering all of its 10,000 jobs it lost in the Great Recession.
- Industrial vacancy dropped to 8.91% with positive absorption of 650,843 sf. This is the lowest vacancy and highest absorption since 2007.
- As the second lowest rate since 2001, the 11.35% flex vacancy this quarter reflected the expansion seen in the latter half of 2013.
- The First Quarter retail vacancy remained flat at 6.20% from 2013 over last quarter.
- Albertsons announced two more Clark County grocery stores closures, and Nordstrom said it will close its stores at Westfield Vancouver mall and Portland’s Lloyd Center in 2015.
- Portland currently reigns as the seventh hottest apartment boomtown, ahead of both Seattle and San Francisco.
- The multifamily market boasted another healthy 2.46% vacancy rate with rents jumping north of $235 from last quarter and both permits and construction still on the climb.
Polygon Northwest Company, LLC bought a 9.67-acre piece of land in Hillsboro, for $3.4 million. The metro and city of Hillsboro sold the land to become a single-family residential community. NAI Norris, Beggs & Simpson Vice President Denis O’Neil and Associate Vice President Mike Tharp represented the seller.
Located at NW Quatama Road and NW Cornelius Pass Road in Hillsboro’s Orenco Station neighborhood, the 9.67-acre lot was originally part of a sprawling 50-acres owned by Hillsboro. The lot will be transformed into new custom-built housing while the surrounding land, still owned by Hillsboro, will become a public park.
“This deal was a win-win for everyone,” O’Neill explained. “It’s a major attraction for Hillsboro and it creates community. It’s great news for the local economy too.”
Polygon Northwest is a homebuilder and developer of single-family homes, town homes and condominiums based in Bellevue, WA.
Doug Jones on office
So much can change in a city over the course of three decades – especially in Portland, which seems to reinvent itself overnight. Yet the effect on Portland’s office market during the past 30 years of economic booms and busts has been relatively moderate as evidenced by its consistent downtown Class A office rental rates.
Unlike other consumer goods, the cost of Class A office space has remained surprisingly stagnant over the past 30 years. For example, unleaded gasoline sold for $1.21 per gallon in 1984 versus $3.46 today. In contrast, office space on the top floor of the newest high-rise building downtown rented for approximately $30 per square foot in 1984, and the same space would rent for close to that amount today.
Why? In short, like many other cities, Portland has a downtown office market that has experienced increased competition from the emerging suburban office market. In 1984, the unadulterated farmlands of Kruse Way and the Sunset Corridor were only beginning to transition for an impending flight to the suburbs. Low-cost suburban office and flex space became the hot new trend.
Fast-forward to today, with our economy in recovery mode and the urban growth boundary reigning in suburban expansion, and suburban office rates are starting to increase. The current trend in office space has shifted back from the suburbs to the central city markets, including the downtown Central Business District, the Pearl District and the close-in eastside.
High demand for creative and green office spaces are a symptom of Portland’s revitalized urbanization, largely driven by young Millennial professional and creative types. And the surge of interest for more close-in urban options, despite consistent rental rates, has only fueled and bolstered Portland’s competitive office market.
Michael Hale on industrial
The Central Eastside is losing its foothold as a safe haven for manufacturers, as it evolves into Portland’s next trendy hub of culture and community. The growing pains speak to an undercurrent of change much deeper than a simple market shift, but rather to the area’s identity crisis as a new intersection of gritty and mainstream. Of course, the area’s manufacturing and distribution roots are part of its alluring charm, but its marketability is proven by rising property values and spikes in rent.
Traditional industrial space is being repositioned to fit the growing demand, and major developments are slated for the next 18 months. As the area gains more retailers, office users and residents, existing industrial tenants face tough competition. Even walking down the street has become a challenge in identifying whether a business is manufacturing or creative, when in recent past it had been without question.
The gentrification process is not new to Portland, as exampled by the Pearl District. Yet, the big push for revival of the Central Eastside is helmed by Portland Mayor Charlie Hales, who is working to make it a formidable employment district for years to come. These major efforts include an overhaul to transportation with the addition of bike lanes and accessibility to light rail beginning in 2015 with a new transit bridge.
The efforts by the city aren’t without merit, because the region’s population growth in the past five years has been driven by young professional Millennials hungering for close-in urban living. Demand in this new submarket is for accessibility to transportation, work, culture and community all within a five-mile radius. Seizing this opportunity, the Central Eastside is now primed to accommodate.
Pam Lindloff on retail
Today, landlords of retail properties are seeing a strong level of interest in space from a new category of tenant – the medical community. All types of medical service providers are considering retail locations for expansions or relocations of their businesses. These include general physicians, physician specialists, urgent care clinics, physical therapy groups, plastic surgery and cosmetic surgery centers, general and specialty dental clinics, chiropractors, and both vision and vision surgery services.
Why would these medical service providers choose a retail shopping center over an office building or a medical clinic facility? Specifically, providers want the very qualities and features that make a shopping center what it is. A retail shopping center’s most attractive amenities typically include ease of access, strong location, convenient parking often at tenants’ doors, excellent signage opportunities and a strong presence in the center with its own storefront signage. Oftentimes a pad location, like a bank or a fast-food restaurant, is perfectly suited for a new urgent care clinic.
The above qualities aside, retail centers drive significant customer traffic gaining the medical tenant exposure beyond its patient base. Neighborhood centers anchored by grocery stores have consistent foot traffic, which in turn translates to repeatable customers and thus potential new patients for a medical tenant.
Additionally, medical tenants are a good fit for retail centers. With many typical retailers adapting to the impact of online shopping and developing smaller store formats, landlords are seeking new tenant types to fill available spaces. Service businesses, including all variety of medical services, are a more stable tenant not subject to Internet dilution. In fact, the medical tenant tends to strengthen the tenant mix at many shopping centers. Medical tenants have a heavy build-out requirement, but they are also able and willing to pay competitive lease rates in order to achieve their goals and take advantage of a retail center’s benefits.
Doug Jones specializes in the leasing and sales of office properties at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-273-0332 or email@example.com.
Michael Hale specializes in the leasing and sales of industrial properties at NAI Norris, Beggs & Simpson. Contact him at 503-223-7181 or firstname.lastname@example.org.
Pam Lindloff specializes in the leasing and sales of retail properties at NAI Norris, Beggs & Simpson. Contact her at 360-852-9622 or email@example.com.
Portland Oregon – Open 4 Business Production, LLC, a digital production company, has leased 11,000 sf in the competitive Northwest market. NAI Norris, Beggs & Simpson Real Estate Broker Michael Hale represented the tenant in their lease at 2350 NW York Street.
An industrial park may have been the easier, more preferable location considering the tenant’s amount of space and parking needs, but the market’s competitive sub 5 percent vacancy rate presented limited options, and Hale was tasked to find the best space within the city limits.
“It was a creative but challenging deal,” Hale said. “Not many properties would have considered it, but the lessor, Trial Guides, LLC, was the perfect match for such a strong tenant. It’s a great opportunity and an excellent location.”
Open 4 Business, LLC began their 6-month lease in December 2013.
Norris, Beggs & Simpson Companies awarded advanced titles at the company’s annual Awards Banquet February 1, and named Sierk Braam, a land and investment sales broker in the Vancouver office, Senior Real Estate Broker.
Sierk Braam began his career with NAI Norris, Beggs & Simpson in 2009 and focuses on the sale of financially distressed commercial real estate, bank owned real estate and investment sales.
Ode to Roses, a two-story 5,780 sf mixed-use building designed by Kevin Cavanaugh, was sold for $1,267,697. It was purchased by an urban commercial real estate owner from San Francisco, 4440 NE Fremont, LLC. NAI Norris, Beggs & Simpson Vice President Robert Black represented the seller.
As one of the first buildings completed by pioneer architect Kevin Cavenaugh, Ode to Roses is both innovative and unique. Named after the former site of Rose’s Famous 24 Flavors ice cream shop, the landmark building remains a stimulant to the development of the pedestrian-oriented Northeast neighborhood.
“Ode to Roses possesses the spirit of the neighborhood,” Robert Black said. “The buyer sought commercial real estate with deep roots to the community and unique personality, so Ode to Roses was an obvious choice. With over a decade of positive influence.”
With Grand Central Bakery anchoring the ground floor and ten pod executive suites for creative upstairs, Ode to Roses will continue to influence and add to the fabric of the neighborhood.
As featured in The Portland Business Journal, Texas-based Nation Tours, specializing in Segway city tours, has finally arrived to Portland, having leased 606 sf at the Governor Building. NAI Norris, Beggs & Simpson Real Estate Broker Geri Varvel represented the lessee, Oregon Nation Tours, Inc.
Having been successful in Texas, Nation Tours eyed Portland’s ever-growing tourism industry. According to Travel Portland, the Portland-metro area welcomed 8.1 million visitors in 2012 generating $4.1 billion in direct spending. And that market continues to grow with Portland’s popularity as one of the nation’s top destinations.
“Segway tours fit the city’s personality,” Geri Varvel said. “It’s a great opportunity and the Governor Building was the perfect spot for Oregon Nation Tours’ debut in Portland. Both Portland natives and tourists will truly enjoy these unique and fun tours along the Willamette River and throughout Downtown.”
Oregon Nation Tours will open in March 2014, offering 5 Portland Segway tours daily and bike tours on weekends.
There is a lot of change happening in Portland. It’s obvious that Portland’s economic forecast has trended from typical, expected “gray skies” to “sunny with a few showers”. We’re by no means basking in the glow of a booming economy, but our progress as a city shows. According to the Value of Jobs Coalition, Portland has regained 65,900 jobs of the 72,400 jobs lost between August 2008 and August 2009, and Portland ranks first among three peer metros (Sacramento, St. Louis, and Cincinnati) in terms of employment gained and median household income growth. These aren’t just feel-good facts, but substantial indicators of steady recovery. And this progress has significant impact within the commercial real estate office market, especially when Norris, Beggs & Simpson’s third quarter office market report show Portland to have an overall office vacancy rate of 12.5 percent, the lowest level since the peak of activity in 2008.
Are we trending toward a landlord’s market?
Due to the low office vacancy and job recovery, we are starting to see a transition from a tenant to landlord’s market. Before the Great Recession, there was the Field of Dreams attitude that, ‘if we build it, they will come.” The Sunset Corridor is a testament to this type of uninhibited assurance in the market and was overbuilt because of it. But due to 2008’s economic dropout, the market now restrains from such flagrant displays of confidence. The market’s natural and expected caution is also true of Portland’s current transition toward a landlord’s market because we’re not seeing the traditional shift indicator of rental rate growth. In fact, despite changeable economic climates, Portland’s rates generally don’t fluctuate over time, and consequently cannot be used as reliable market shift indicators.
Rental rates just don’t fluctuate in PDX
Unlike other burgeoning metropolitans like Seattle or Sacramento, Portland’s office rental rates remain consistent and invariable. I recently came across an Umpqua bank flier dating from the mid-1990s advertising the same rental rates as today at $26/psf, full service gross. Furthermore, I even have a client from Beaverton who vacated the Griffith building in 2005, only to reoccupy the same building in 2013 at approximately the same rate. During the 8 years of my client’s vacancy, there was only a quarter difference between the 2005 rate of $16.25/psf, full service gross compared to the 2013 rate of $16.50/psf, full service gross. Whereas other markets may show a spike in rental rates during a landlord’s market, Portland’s rental rates cannot be trusted to show the market’s gradual transition.
Evidence of Portland’s trend toward a landlord’s market is therefore not an increase in rental rates, but rather an apparent decrease in tenant concessions. Though there are still offers of free rent, there are simultaneous decreases in moving and tenant improvement allowances. At the bottom of the market, landlords were offering $.50-$1.00/psf in moving allowances, which is seldom seen today. Such a tightened market only drives the submarket inventory’s competition, which is unmistakably happening to the Sunset Corridor, and for the first time in several years we are seeing multiple offers on the same space.
Sunset Corridor leads revival
The Sunset Corridor epitomized the Field of Dreams attitude in anticipation for a booming high-tech market, but like so many other projects pre-Great Recession, was left to the wayside in its aftermath. During this time, the Sunset Corridor’s overall vacancy peaked at 26.9 percent in 2011, and then steadily trended lower. But it wasn’t until 2013 that the Sunset Corridor’s vacancy rate experienced a noticeable drop between 18.7 percent in the fourth quarter of 2012 and 12.8 percent in the first quarter of 2013. This difference kicked off the Sunset Corridor’s revival, with vacancy continuing to drop to 10.75 percent at the close of the third quarter of 2013.
The sharp contrast between 2011 and 2013 speaks to the evident market shift and the rise in demand for spaces like the Sunset Corridor. The biggest reason is the demand for greater pockets of space, and the Sunset Corridor offers just that with large contiguous floors. Such big spaces are otherwise difficult to come by or pose creative challenges when there is little to no new construction developments.
Rental rates tend to go up when there is no construction to compete with and supply is constant, but as of now, the Sunset Corridor is meeting the high demand with fierce competition. The market is still too raw for any new construction, so buildings that can accommodate this need are being sucked up. For example, I recently had a client looking for 25-30,000 sf in the Sunset Corridor, and we only had three to four options to consider.
Although tenants may not necessarily welcome the shift in the market, Portland’s move away from a tenant’s market is indicative of an overall improving economy. The Sunset Corridor’s spike in activity is proof to this trend, and with unemployment rates dropping to a five-year low, Portland’s office market stands to gain momentum as a landlord’s market in 2014.
Robert Greenfield specializes in the leasing and sales of office properties throughout the Portland metropolitan area.at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-273 0323 or firstname.lastname@example.org.
I spent Halloween visiting my daughter and son-in-law at the home they recently purchased in close-in Northwest Portland. Walking around their neighborhood, I was amazed at how many young families with children lived in the area. On one block alone, there were four sets of couples who worked at Intel. Young families like my daughter’s and her neighbors would previously have flocked to the suburbs, but today they are much more likely to choose an urban lifestyle in an area like Northwest or the close-in Eastside.
This demographic shift to close-in living is no longer just a trend, but is the new normal. People of all ages are just not as interested in the suburban lifestyle, and are willing to sacrifice financially to live an urban lifestyle. They are forgoing features like more square footage, yards, garages and well-funded schools, which are readily available in the suburbs, to live near amenities like restaurants and arts and entertainment options.
They’re paying for the convenience and amenities of urban living. For instance, RMLS’ September reports on the single-family market showed a median sale price of $292,500 in NE Portland, while the median price of a home in Beaverton and Aloha was $251,500, and $238,100 in Hillsboro and Forest Grove. A recent study by the chief economist at real estate website Trulia also examined the urban population shift. In Portland, urban home prices have grown 15.7 percent year-over-year, while suburban prices are up just 12.4 percent in the same time period.
Renters are also paying a premium for urban spaces, as NAI Norris, Beggs & Simpson’s Third Quarter reports show. Some renters in prime locations are paying nearly twice the amount per square foot for a close-in location as compared to the suburbs. Overall price per square foot for an apartment downtown (which includes the Pearl/Northwest) is $1.80, compared to 95 cents in Beaverton/Aloha. When price per square foot is so high, the trend toward micro-units makes perfect sense.
No matter whether people live in urban or suburban areas, retailers continue to adapt to the new reality of online shopping. Black Friday is generally the don’t-miss shopping day, and is top of mind for retailers at this time of year. This year, however, Adobe expects online shoppers to spend $1.6 million on Black Friday, up 17 percent from 2012, and many online shoppers will not even wait until Black Friday – they’ll start on Thanksgiving.
Amazon paved the way in online shopping, and legions of retailers continue to try to remain competitive with its free shipping. Walmart, for instance, recently announced its foray into same-day delivery from its superstores. Retailers, particularly large-format ones like Walmart, continue to shrink their brick and mortar stores and move more of their sales online.
Retail investors are closely attuned to the new realities of both urban living and online shopping, and these play a major role in their investment preferences and risk analysis. The two retail asset classes that institutional investors are most bullish about today are malls and lifestyle centers. Even as consumers prefer to do some shopping online, malls and lifestyle centers have their niche, as there will always be items that people want to see and feel before buying. Shopping destinations like Bridgeport Village and Clackamas Town Center will continue to draw a critical mass of shoppers.
And even when a traditional retailer at a mall or lifestyle center downsizes, as we’ve been seeing frequently in the past five years, another specialty store will be there to take the additional space. The combination of more traditional department and smaller-format stores, and more boutique-like, specialty stores, creates a synergy that draws shoppers, and the risk for investors is less because of this multi-tenant mix.
In addition to malls and lifestyle centers, investors also understand Portlanders’ preference to shop near their homes, and to spend dollars locally. That’s why they remain interested in convenience shopping, neighborhood centers, urban retail, strip centers and single tenant credit NNN.
Portland’s retail vacancy remains healthy, continuing its downward trend to 6.15 percent during Third Quarter. Strip center and urban retail cap rates are holding steady despite a temporary increase in mortgage rates. Investors are moving to well-located convenience centers in secondary markets like Portland, as the risk profile of multi-tenant properties is so much less.
Portland is uniquely qualified to benefit from the demographic shift and increasing retail investor interest. Its excellent transportation infrastructure is a major asset, and the preference by residents to shop local is helping to strengthen resurgent neighborhoods. 2013 saw increased retail sales volume and price per square foot, and this trend is driven by a surge of private investors and 1031 buyers. 2014 will be even stronger yet.
Vice President Denis O’Neill specializes in retail, investment and special asset sales at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or email@example.com.