Western Real Estate Business

JUL 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

Issue link: https://westernrealestatebusiness.epubxp.com/i/1001516

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Page 20 of 32

M A R K E T H I G H L I G H T: P O R T L A N D 20 • July 2018 • Western Real Estate Business www.REBusinessOnline.com Portland's economy has been flour- ishing over the past several years. Unemployment is at 3.9 percent with net migration increasing every year as people from around the world are drawn to the city's uniqueness as well as its affordability (although that is up for debate as home prices and rents have skyrocketed). Port- land is attracting Millennials, par- ticularly college-educated ones, who are fueling the work force and lead- ing to many changes in the real estate sector. All of this is having a positive impact on the performance of the Rose City. Portland's office market is catego- rized by record-high rental rates and extremely low vacancy rates. The city has seen rents increase over the past couple of years. Overall average ask- ing rents have increased by nearly 16 percent since 2015. The average ask- ing rate in the first quarter of 2018 capped out at $27.81 per square foot on an annual full-service basis com- pared to just three years prior when it was $24 per square foot. The parts of downtown in highest demand have seen rents jump to nearly $45 per square foot. While demand for office space re- mains strong, forward-thinking land- lords are stretching now to make deals as there is 1.2 million square feet of office space to be delivered in 2018, followed by nearly 300,000 square feet in 2019. These numbers do not include all the infill redevelop- ment projects that range from 10,000 square feet to 30,000 square feet. As this new competition comes on the market, the pendulum could begin to swing back toward the tenants. Tech tenants have been a driving source of demand in downtown, and we have seen many Bay Area com- panies open offices in this area over the past several years. They are fore- going the ease and comfort of the suburbs to trade in for creative work space with significant amenities. For example, Autodesk moved into an adaptive reuse in the close-in eastside submarket from the suburban Kruse Way submarket this past quarter. Portland's vacancy rate will expe- rience some volatility during the re- mainder of the year. This will be due, in large part, to new office building construction within the CBD. 9North and Broadway Tower are two signifi- cant deliveries that will add a com- bined 380,653 square feet to CBD inventory when they're completed in the third quarter and late sum- mer, respectively (although Broad- way Tower is 67 percent pre-leased). Volatility in the vacancy rate should prove to be only temporary, however, as this new supply is absorbed into the expanding market. It is too soon to tell how the fundamentals of the Portland market will change in the next few years with nearly 1.5 mil- lion square feet of new office space on the horizon. Portland is still an attractive place for both individuals and companies looking to relocate. The area will remain robust with op- portunities for existing, expanding or in-migrating tenants. NEW OFFICE PRODUCT COMING ON LINE AMIDST MORE DEMAND, RELOCATIONS Mark Carnese Executive Director, Cushman & Wakefield Privately Owned with Fast and Flexible Decision Making Capabilities Direct Lender – Credit and Pricing Completed in House Structured more than $26 Billion of Loans $13.4 Billion Servicing Portfolio Agency, FHA and Proprietary Financing Programs Unmatched Local Market Expertise Highest Client Satisfaction Ratings You will work with our most experienced financing experts on the West Coast. Hunt Mortgage Group finances all types of multifamily rental housing including: small balance, market rate, workforce housing and affordable communities. With a 45-year proven track record, and as one of the industry's most respected commercial lenders, Hunt Mortgage Group clients benefit from our dedicated expertise in financing and underwriting commercial real estate. Experience the Hunt difference. Hunt AdvAntAge: The power of Hunt's people: Experience. Service. Expertise. CERTAINTY OF EXECUTION. CLARITY OF THOUGHT. TM Mark Besharaty Director 949-442-2400 Matt Frank Vice President 480-861-5223 Suzie Cope Director 212-521-6391 www.huntmortgagegroup.com September Market Highlights San Diego Northern California EDITORIAL OPPORTUNITIES: Nellie Day nday@francemediainc.com ADVERTISING OPPORTUNITIES: Scott France scott@francemediainc.com

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