What’s Driving Real Estate in the Portland Metropolitan Area?
By: JOSEPH S. VOBORIL
To kick off our Oregon Real Estate Review series, we set the stage with key trends that are driving real estate activity in the biggest and busiest market in the state, the Portland Metropolitan Area.
When it comes to big buildings, the suburbs have been where the action is. The largest projects and transactions in the past 12 months have been in the Portland area's western suburbs. Nike recently added 1.3 million square feet to its World Headquarters Campus in Beaverton and UPS settled into the 266,000 square foot Majestic Westmark Center near Amazon’s 300,000 square foot sorting center in Hillsboro. Also in Hillsboro, Intel is planning a 1.5 million square feet addition to its chip factory, a 1 million square foot support structure, and 2,200 parking spaces. Curious about all the cranes dotting Portland’s skyline? Here’s a rundown of city building projects underway.
Oregon land use laws may be the only thing standing in the way of an industrial property boom. Industrial facilities are prize targets for both investors and tenants. Why the scarcity? Oregon’s state land use laws require all cities and counties to adopt urban growth boundaries within which urban development must take place. This has led to a perennial shortage of industrial land. More industrial land is available for those willing to take on contaminated sites -- Portland alone has 900 acres of brownfield sites. Many of these sites are well located, but they come with a particular set of challenges.
Even with a slight slowdown of new project starts in 2018, multi-family remains the most attractive product type to investors. The industry is voicing concerns about overbuilding as well as rising construction costs. And even as several large multi-family projects were paused or abandoned after the one-two punch of rent control and an inclusionary housing policy, plenty of builders are staying busy in the affordable housing space.
The office market has remained strong and fairly stable. At mid-year 2019, year-over-year asking rent in the Portland Downtown submarket increased by 4.7%, while year-over-year asking rent in the Suburban office market increased more modestly by 1.4%. Even with these increases, office rents across the Portland Metropolitan Area remain considerably lower than office rents in other large west coast cities. Co-working spaces are a buzzy new addition to the market but have not had much, if any, effect on the vacancy rate or asking rents. Retail vacancies are relatively low with rents increasing slightly. No surprise since little new retail space was brought to market in 2018.