With a humming economy, significant in-migration and a skyline filled with cranes, 2017 made for an eventful year in Portland’s commercial real estate sector. Take a look at the most noteworthy deals from 2017: https://adobe.ly/2EHE1YF
On a per capita basis, Portland has 75,780 residents per crane; the third most in Rider Levett Bucknall’s Crane Index after Toronto and Calgary and the most in the United States. With 32 cranes dotting the skyline, Portland has the 6th most cranes in North America. With 88 cranes, Toronto tops the list followed by Seattle with 45 cranes.
The majority of Portland’s cranes are above new multifamily developments, a sector that has delivered over 12,000 units to the metro in the past 3 years. There are currently 7,713 units under construction. However the current pipeline consists largely of projects submitted before the city’s new Inclusionary Housing policy went into effect on February 1 2017. Roughly 19,000 new multifamily units were in the pipeline ahead of Inclusionary Housing’s start date, that represents 4 years’ worth of development activity. And while new supply should remain solid for the next few years, there is a risk that by 2020 demand will once again surpass supply.
Yet again Oregon ranked in the top 3 of United Van Lines Movers Study. After 3 years in a row of Oregon being the ‘Top Moving Destination’, Oregon dropped to #3 in 2016 losing out to South Dakota and Vermont. In 2017, the number one spot went to Vermont where 68 percent of movers were inbound movers and Oregon inched up.
The study tracks United Van Lines customers’ state-to-state migration patterns over the past year and Oregon came in at #2 with 65 percent of movers coming into Oregon and 35 percent leaving.
Reasons for moving to Oregon? Almost half of movers (49 percent) listed a job as the primary reason for making the move, while another 24 percent listed family as the reason for moving. The study confirms long-term migration trends of Americans moving from the Northeast and Midwest to the Mountain and Pacific West. For Oregon in particular, a large percentage of movers remains young professionals and retirees leaving California for Oregon where housing costs are relatively lower, climates are more temperate and job growth has been above the national average.
Portland’s flexible office, or coworking, inventory has grown exponentially in the past 5 years, and grew by more than 50 percent in the past 2 years alone. The city now boasts more than 30 locals offering more than 460,000 square feet of flexible office space that caters to large corporations, startups and individuals alike.
There are a number of coworking companies that are currently looking for new locations within Portland’s urban submarkets. These spaces are expected to add a further 169,000 square feet to the existing flexible office inventory, an increase of 37 percent. Average transaction size among flexible space operators continues to grow, with the average size space sought by coworking companies in 2018 being 42,250 square feet.
Office construction has ramped up significantly in 2016 and 2017, reaching a cyclical high of nearly 2 million square feet in Q2 of 2017, prompting a surge in employment within the construction sector. This increased demand led to a 11.7 percent increase in hard construction costs for prime office between 2015 and 2016. Overall costs experienced by tenants has increased markedly. As a result, Landlords have increased TI allowances 21.3 percent since 2015 in order to stay competitive.
Overall costs experienced by tenants has increased markedly. As a result, Landlords have increased TI allowances 21.3 percent since 2015 in order to stay competitive. Landlords looking for a reprieve from high construction costs can find comfort in the movement towards creative office space. As JLL’s Tech Office Trends 2017 points out, fit out costs for creative office are on average 15 percent less than traditional office build outs. Not only is creative office cheaper to build out, second generation tenant improvements for creative office space costs just one quarter of what Class A traditional office costs.