Portland, Ore., has come a long way since 2010. The metro’s growing tech scene, affordable cost of living and ease of commute to employment centers have all contributed to its blossoming economy. Recent Cushman & Wakefield research found that the city’s transformation has been dramatic, with 85 million square feet of new development over the past 10 years.
In an interview with Multi-Housing News, Research Analyst Samuel Hatcher and Senior Director Jim Lewis, both from Cushman & Wakefield’s Portland office, talk about the market’s evolution and provide their expectations for the next decade.
What triggered Portland’s growth at the beginning of the last decade?
Lewis: Portland’s growth has been consistently above the national average for decades. It really seemed to change and accelerate this cycle with improvements in technology that make physical distance less important. People and companies can more easily locate here and still access venture capital in the Bay Area for example. Or a team within a larger company can choose to locate here even if corporate headquarters is in a different state.
Which areas of the metro have seen most transformation and why?
Lewis: The entire Portland metro area experienced over 84 million square feet of new development over the last 10 years. More than half of the total new development has been in the multifamily sector, with over 43 million square feet of development alone. The most visible concentration of development has been within the central business district and adjacent close-in markets including the Lloyd District, Northwest Portland and Central East Side, where over 22 million square feet of combined development has taken place, representing about 26 percent of all development in this cycle on a square footage basis. These areas are attractive because of their proximity to employment downtown, surrounding amenities and the cultural vibe.
The Sunset Corridor, which includes Portland’s “Silicone Forest,” also saw incredible growth with over 12 million square feet of new construction. This was driven by the Intel and Nike expansion and related support businesses as well as apartment buildings and retail to support all the new employees and residents moving to Washington County.
What property type performed best in Portland during the past 10 years and why?
Lewis: Class A office rents in the CBD have increased over 45 percent, which is stronger than retail and industrial rent growth. That’s been driven by a strong demand for creative type office spaces and is also a function of the high construction costs associated with building renovations and tenant improvements. Industrial, on the other hand, has achieved historically low vacancy rates, currently standing at 3.4 percent as of the fourth quarter of 2019 and has had an incredible run over the last 10 years.
Hatcher: Park Avenue West—It was the first major CBD project out of the ground coming out of the recession. It signified that the Portland market was back.
Broadway Tower—This was a mixed-use project of office and hotel product and was impactful for continuing to move the center of downtown Portland further south.
The YARD—This 284-unit apartment project was the first very notable Burnside Bridgehead high-rise project. You can’t miss it on the Close-In Eastside. It also is emblematic of all the growth going on in the Close-In Eastside.
The downtown area is one of the hottest in terms of new construction. There are cranes everywhere. Tell us about the projects you think will have the most impact in the long run.
Hatcher: Block 216 will bring the Northwest its first Ritz-Carlton Hotel. The development will have 251 rooms and a 19th-floor pool will sit atop 166,000 square feet of premier Class A office space. The modern tower was designed by GBD Architects and is being developed by BPM Real Estate Group. With a price tag of $600 million, the 35-story tower will replace the iconic 10th and Alder food carts.
MLK is a 17-story, mixed-use building currently under construction in Portland’s Close-In Eastside. The building will be located on the corner of Burnside and MLK, at the base of the Burnside Bridge. When complete, the property will accommodate 15,000 square feet of retail space, 220 apartment units and 120,000 square feet of Class A office space. Views from the top floors include the Willamette River, beautiful downtown Portland and Mount Hood on a clear day.
Notably, this cycle, how office space is utilized and experienced has been radically transformed. It has spurred significant renovations at almost every Class A office building downtown. A perfect example of this is PacWest, which underwent a massive transformation including a luxury fitness center, an indoor bike hub and tenant lounge that opens up to a covered outdoor terrace.
Where do most transplants come from and why do they choose Portland?
Hatcher: These days, a majority of transplants are moving from Seattle, San Francisco and other areas in the region, primarily due to the overall higher cost of living in those markets—especially for families—and for companies the cost of doing business, including real estate costs. That being said, I would not say only people from major West Coast cities are moving to Portland, nor is cost always necessarily the reason.
I can speak for myself. Having moved here from Cleveland in late 2018, I was immediately drawn to Portland after only one visit. Eager for a change of scene—and weather—from the Midwest and having an opportunity to chase the waterfalls and watch the Pacific Northwest sunsets, the initial breath of fresh air I received from that trip was enough for me to know Portland would be the next place I called home.
For tech workers in the Northwest, Portland has become one of the most viable options. Tell us a few details about quality of life in Portland today.
Hatcher: Tucked away in the Willamette Valley, Portland offers its residents an hour and a half drive west to the Pacific Ocean and a one-hour drive east to Mount Hood National Forest. With a relatively low cost of living and ease of public transportation, amongst other things, Portland continues to be recognized as a great place to live and work.
As of September 2019, tech’s share of total employment in Portland was hovering around 7 percent and since January 2010, 58 of the 89 San Francisco Bay Area-headquartered tech and life science companies have taken over 1 million square feet of office space across the Portland metropolitan area. Established tech companies such as Amazon, eBay and Google are occupying space in Portland’s downtown, while startups are beginning to enter the close-in submarkets, attracted by Millennial density and old industrial properties being repurposed into creative office spaces. The area is extremely bike-friendly, has great mass transit and took the food cart craze to a whole new level, all adding to the unique and authentic feeling of the city.
Lewis: There is a saying “Keep Portland weird” that really kind of defines the culture here. Developers have generally done a really good job of focusing on local business over national chains. Some of our land use regulations encourage redevelopment over new construction, leading to unique and creative spaces. Finally, things like the annual “naked bike ride” just keep Portland, well I don’t know… weird.
Oregon was the first state to enact statewide rent control. What role will this play in Portland in the next decade?
Lewis: I think certain tenant protection regulations are useful, but mandated rent control and inclusionary zoning are ultimately the wrong way to address a housing shortage. I think the region would be better served by promoting the flow of capital into housing rather than making it more difficult and risky to put capital to work.
What will Portland look like in 2030?
Lewis: The main predictions are that many of the suburbs will begin to take on a more urban/town center look with typical urban amenities. You already see that happening in places like downtown Beaverton and Lake Oswego. The biggest transformation of the skyline will be the continued growth and development of the CBD and Close-In Eastside. It’s great real estate and it will only get better over the next 10 years.