Demand for industrial space in Portland continues to outpace inventory in 2017. With a market-wide vacancy rate of 3.9 percent and rents up 16 percent year-over-year, vacated space gets snatched up before it even has a chance to hit the market.
Specht Development’s Vista Logistics Park in Gresham will deliver 733,000 square feet. Photo Capacity Commercial Group
2.3 million square feet of new industial space delivered in 2016
Here’s an illuminating set of numbers for Portland’s industrial market: In 2016, developers delivered some 2.3 million square feet of new industrial space to the Portland metro region; in the same timeframe, the market absorbed 3.3 million square feet of space.
“The absorption is far outpacing the new construction,” said Sean McNamara, a senior associate broker with Capacity Commercial Group, “and we are expecting that to continue this year.”
The discrepancy comes largely from a lag in supply and a boost in demand in recent years. During the recession, what had been delivered to the market annually all but dried up, especially in the speculative and large space market. Then, as the economy picked up in 2014 and 2015, companies needed more space — and quick. But new construction takes time.
The result: a market-wide vacancy rate of 3.9 percent, rents up 16 percent year-over-year in 2016 and vacated space that gets snatched up before it even has a chance to hit the market.
Massive new leases
Throw in some massive new leases – Amazon took 303,000 square feet on the west side and will take another 855,000 square feet in Troutdale in 2018, while CTDI signed for 210,000 square feet — and the market is a tight one.
Demand not expected to decrease in 2017
Demand isn’t expected to let up this year, despite the fact that well over two million square feet of new industrial space are set to deliver this year. A big chunk of that space will come in the eastside submarkets, which includes areas like Troutdale and Gresham. Last summer, the Port of Portland sold 29 acres in the Gresham Vista Business Park to Trammell Crow Company for $7.8 million. The developer is building three buildings ranging from 155,000 square feet to 190,000 square feet.
The port also sold 37 acres in the park to Specht Development Inc. for $9.3 million. On those acres, Specht and its partner, New York Life Real Estate, is well on its way to completing the three-building Vista Logistics Park, which upon its planned Sept. 1 delivery will offer up three buildings totaling more than 733,000 square feet. McNamara, who is on a team with Don Ossey and Dave Ellis to lease the project, said is the largest single phase speculative development in Portland’s history.
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Karen Schaaf ACP, GRI
RE/MAX equity group
Lackman Commercial Group
Licensed in Oregon