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FRANK, ASHFORTH ACCLAIM PORTLAND'S DIVERSITY;
DESPITE SLOWDOWN IN SAN FRANCISCO, RENTS SKY-HIGH
November 16, 2000
PORTLAND
Retail is also performing well in the market's robust economy. "(The growth) is rather dynamic to see. We have a very healthy economy right here. As a result, we have consistent growth and a lot of demand in all sectors of real estate here," explained Mason Frank, president of MBK Northwest Ltd. "We have every reason to be optimistic. We have a really good balance of Old Economy and New Economy up here." …
SEATTLE
Development in the retail sector is also taking place. "The Pacific Northwest has a very healthy economy, a very diverse economy," noted Mason Frank, president of MBK Northwest Ltd. "It's certainly part of the New Economy."
Involved in two large developments, MBK is experiencing this healthy new economy firsthand. The Parkway Supercenter is a 750,000-square-foot project with nine restaurants, a movie theater and 15 major retailers. It is in its last phase and will be completely finished by the end of the year.
Tacoma, Wash. is home to the company's second major redevelopment. The 1.2 million-square-foot Lakewood Mall will be demolished and replaced with a civic center, which will include a city hall, a performing arts area, a neighborhood shopping center, a major power center with approximately 10 major national retailers and an entertainment component consisting of a renovation of the theater as well as four new restaurants. This is all located on 10 acres of land and is slated to begin next year. …
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FRANK, ASHFORTH ACCLAIM PORTLAND'S DIVERSITY;
Despite Slowdown in San Francisco, Rents Sky-High
November 16, 2000
Home to the dot-conomy and the Technology Revolution, the Pacific Northwest as a region is experiencing one of its best years ever. Volatile stock market notwithstanding, it boasts skyrocketing rents and microscopic vacancy rates, making for a success that -at least from the landlord's perspective- has reached new heights in the millennium
PORTLAND
RECORD-LOW VACANCIES NO HINDRANCE TO ACTIVITY
"Portland is still ticking on with great numbers," noted Hank Ashforth, president
of Ashforth Pacific Inc. "We've been able to absorb the new. We're as busy as
ever; I wish we had more space."
Class A office space has only a 3 percent vacancy rate and the vacancy rate for the entire office market is listed at 5.4 percent. But given Oregon's urban growth boundaries, developers have done all they can. According to Ashforth, in the last three years, 1 million square feet have come on line, including three
brand-new Class A office towers. Liberty Center and ODS Tower are both 100 percent leased, while Fox Tower has leased more than 90 percent. And Insignia/ESG Inc. broke ground in October on 1201 Lloyd Blvd. Like its predecessors, 1201 Lloyd should experience good leasing activity. "All indications are that a strong leasing environment will continue," Ashforth predicted.
Spieker Properties Inc. was able to cash in on the buyer's market with its purchase of the 735,000-square-foot Lincoln Center. The office campus consists of seven buildings that are located in the Portland submarket of Washington Square/Tigard.
Retail is also performing well in the market's robust economy. "(The growth) is rather dynamic to see. We have a very healthy economy right here. As a result, we have consistent growth and a lot of demand in all sectors of real estate here," explained Mason Frank, president of MBK Northwest Ltd. "We have every reason to be optimistic. We have a really good balance of Old Economy and New Economy up here."
Portland, like the rest of the Northwest, is enjoying the presence of high-tech companies, but that is mixed well with a more traditional tenant base. Thus, Portland is well diversified and well prepared, Ashforth believes, yet with enough high-tech to create more growth. High-tech companies such as Intel Corp. are keeping the economy healthy, he said, and they are also demanding more space.
Portland's downtown is ready to accommodate such requests. With its many amenities, in addition to terrific mass transit, small blocks and abundant urban housing, the city offers an inviting environment for these companies.
Perhaps the greatest beneficiary is the Pearl District, located on the northwest fringe of the CBD. In this warehouse district, filled with old brick buildings and now a trendy and chic urban environment with inexpensive parking and a popular nightlife, developers have nearly 1 million square feet of space planned for the next 24 months, according to Craig Reinhart, managing principal at CRESA Partners L.L.C. This space would be a combination of retail and telecommunications properties. And in this technology-heavy market, even space in the district that was set aside for office is now being absorbed by telecom.
This space is attracting interest even though it must go through expensive upgrades because it is located in an earthquake zone, according to Reinhart. These upgrades make it just as costly to rent as Class A office space. In fact, given the expense and the willingness of tenants to pay the consequent rents, it has become just as cost effective to demolish and build something brand new in the same style. The city approves of these redevelopments as long as the new buildings look old.
SEATTLE
COMPANIES SUBLEASE; KEEP SPACE ABSORBED, VACANCY RATE LOW
Once hurt by layoffs at Boeing Co., Seattle was hit again by the volatility in
the high-tech arena. But while approximately 600,000 square feet of space has
been returned to the market due to consolidations and business failure, the real
estate market is not panicking.
Seattle is extremely tight, with a vacancy rate of around 1 percent, so those that no longer need their space are finding others to sublease it in a remarkably short amount of time. Amazon.com Inc., for example, gave up 95,000 square feet and in three weeks had a letter of intent on the space. And Rivals.com has tenants in all but about 4,000 square feet of the 26,000 square feet it had to sublease. Meanwhile, Onvia.com Inc. is scaling back from its 120,000-square-foot lease by subleasing 30,000 square feet of that.
"The beat goes on. The market is tight; nobody can produce fast enough," observed Dale Sperling, president and CEO of Unico Properties Inc.
"We have seen nothing to scare anyone at this point in time," concurred Douglas Hanafin, principal at Washington Partners Inc. Nonetheless, the real estate market is proceeding cautiously. "All the office buildings that are under construction today are pre-leased. There is no new spec space on line today -nothing of significance."
Hines Interests L.P. is building a major Class A office tower in the CBD that is expected to open in April 2003. Only 70,000 of the 850,000 square feet is not pre-leased.
More development is taking place outside the traditional boundaries of the CBD, since the expansion space downtown is limited. Growth is occurring in all directions, but especially to the north and south -north along the waterfront around Lake Union and south around the Safeco Field/Pioneer Square area.
Developers are putting up a series of moderate-sized projects in these areas generally between 150,000 and 300,000 square feet and are at least 70 percent pre-leased. But all of it does get absorbed.
Development in the retail sector is also taking place. "The Pacific Northwest has a very healthy economy, a very diverse economy," noted Mason Frank, president of MBK Northwest Ltd. "It's certainly part of the New Economy."
Involved in two large developments, MBK is experiencing this healthy new economy firsthand. The Parkway Supercenter is a 750,000-square-foot project with nine restaurants, a movie theater and 15 major retailers. It is in its last phase and will be completely finished by the end of the year.
Tacoma, Wash. is home to the company's second major redevelopment. The 1.2 million-square-foot Lakewood Mall will be demolished and replaced with a civic center, which will include a city hall, a performing arts area, a neighborhood shopping center, a major power center with approximately 10 major national retailers and an entertainment component consisting of a renovation of the theater as well as four new restaurants. This is all located on 10 acres of land and is slated to begin next year.
Overall, though, development will remain limited because of geographic constraints. It is difficult to put product into the market because Seattle does not have a lot of flat vacant land available. This is beneficial to the market because it keeps things tight, Sperling said.
"Overall, even with those potential negatives, there is enough stability in the market. I don't see the boom cycle here, but I certainly don't see the bust cycle either," observed Byron Steenerson, president of EF&A Funding L.L.C.
Commercial Property News, by Rebecca L. Johnson
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