More than 567,000 SF of new office and creative space will be added to Portland inventory next year. Where will the new tenants come from? Although a steady influx of Bay Area and Seattle firms are re-locating to Portland for our favorable economics and lifestyle, the majority are home grown.
In recent years the majority of growth has been led by existing, homegrown Portland companies. So it’s good news that Portland doesn’t need to depend on big out-of-state tenants relocating to keep the momentum going forward. We just need to take good care of our existing employers and keep Portland attractive to the entrepreneurs who will start the next big companies.
Our city is in the midst of one of the strongest development cycles of the past 30 years.
Look at Portland’s Central City skyline today and you see cranes everywhere. From the Pearl District and central business district (CBD) to the Lloyd District and Central Eastside, our city is in the midst of one of the strongest development cycles of the past 30 years. Hotels, new apartments and even a new condo project are changing the cityscape seemingly overnight. The balance of this development boom is a very active office market that is simply on fire both in terms of new construction and the renovation of existing structures. Apex Real Estate Partners is currently tracking over 1,349,000 square feet of new office supply coming on line in 2017 and 2018.
The Central Eastside has quickly become the hottest and most sought after submarket in all of Portland.
The gritty, edgy nature of this warehouse district has attracted a wide array of creative service and technology firms. This submarket benefits from excellent access to and from the CBD and multiple transportation options including the Portland Streetcar. Most importantly, this emerging office district offers close proximity to the major housing hubs of Portland’s creative class. Simple Technology recently relocated to Killian Pacific’s Clay Creative District in large part due to the heavy concentration of employees who live in neighborhoods along Hawthorne Boulevard, Division Street or Clinton Street. Rather than drive to work, many of these employees bike, walk or take public transit. Simple’s former location in the heart of the Pearl District seems light years away from this raw industrial neighborhood with local coffee shops, breweries, micro kitchens and distilleries, all within steps of an active train line.
This is not your father’s Central Eastside.
Current office rents are among the highest in all of Portland, at over $40-per-square-foot full service, rivaling Park Avenue West and Pearl West, the two newest office buildings that opened their doors this year.
The Towne Storage project at the Burnside Bridgehead will add 100,000 square feet of creative space in May of next year. This former warehouse and artist studio space will provide exposed wood ceilings, brick facade and a rooftop penthouse overlooking downtown. Interest is very high due to the character of the building and prime Eastside location.
Meanwhile across the river in Northwest Portland, the ambitious Fields Office project just broke ground and will create an additional 300,000-square-feet of office space in a campus-like setting along Naito Parkway just North of N.W. 17th Avenue. The newest Pearl District office project at Ninth and Northrup will break ground later this month. Developed by Williams & Dame Development and Miller Global, this building will add another 167,000 square feet of high quality modern office space to Portland’s growing inventory.
So the $64,000 question begs, where will all the tenants come from to lease these projects?
The steady influx of Bay Area and Seattle firms to the Portland scene should continue given Portland’s more favorable economics and lifestyle. Yet in recent years the majority of growth has been led by existing, homegrown Portland companies. Puppet, Simple, and Elemental Technologies (recently acquired by Amazon Web Services) have all enjoyed tremendous growth over the past several years. This growth is in addition to Jive Software, New Relic and Survey Monkey who all have out-of-state headquarters but a heavy Portland presence.The List: Top 3 Largest Metro-Area Office Buildings
So it’s good news that Portland doesn’t need to depend on big out-of-state tenants relocating to keep the momentum going forward. We just need to take good care of our existing employers and keep Portland attractive to the entrepreneurs who will start the next big companies.
The caution lies in the simple fact that real estate is a cyclical business and at some point the market will soften and tenant demand will slow.Mark Friel is a director at Portland-based commercial brokerage Apex Real Estate Partners.
Ranked by Total square feet of floor space
1. U.S. Bancorp Tower 1,073,000
2. Montgomery Park 850,540
3. Wells Fargo Center 756,000