Portland’s Low Vacancy Rate Points Towards More Development to Come

Portland Unemployment and Vacancy by Year. From the PSU Center for Real Estate Quarterly-2011

According to an article in Friday’s Oregonian Portland is tied with Minneapolis for the second lowest apartment vacancy in the nation, behind only New York. This data comes from a National Association of Realtors Survey that puts the vacancy in Portland at a shockingly low 2.5%, well below the national average of 4.7%. This is backed up by similar, if slightly differing numbers from other real estate reports from groups such as the PSU Center for Real Estate or Norris, Beggs, and Simpson’s market reports. This is clear to anyone who has looked for an apartment lately as the competition is noticeable. An example of this is the Move the House Apartment in Southeast Portland. Completed in July 2011 by the Urban Development Partners it was fully leased almost immediately while asking Northwest/Pearl rents for its humble Division Street location.

Move The House at 3810 SE Division by Urban Development Partners. Image from UDP website

The Portland unemployment rate has fallen to 8.7%, which while too high is the lowest it has been in three year. The economy both nationally and locally seem to be heading in a positive direction but the area has seen low levels for new apartment construction. According to the Barry Apartment Report permits where issues for only 1,559 units for the year ending in October 2011, up from 1,000 units for the same period a year earlier. For comparison, 4,700 permits were issued per year on average between 2004 and 2009. The Barry report estimates permits wil be issued for 2,000 to 2,500 units next year, substantially more than we have seen since the onset of the great recession, if a lot fewer than before.

This all lead to the prospects of many of the projects we have seen proposed recently actually materializing and being joined by others. More development, especially housing, could help invigorate parts of the city in need of life. Portland as a whole is still relatively un-dense. In 2010 the city had a density of 4,346.8 people/square mile which puts us just ahead of Las Vegas (4,298.6) and well behind such cities as Seattle (7,254.6), Minneapolis (7,084.8) and Los Angeles (8,091.8). This would not be bad in and of itself, but when I look around the city I see numerous neighborhood that could benefit greatly from increased residential density. Areas such as Lloyd Center/Rose Quarter, parts of Downtown, Gateway, and many of the neighborhood commercial strips such as Interstate, East Burnside, Broadway and Sandy could be aided in their revitalization by having more residents. This in addition to part of the city that are on-going development projects such as South Waterfront, the North Pearl and Conway that have yet to be fully built out. In addition, the city has already laid the foundation for long term growth by spending billions on transit and other infrastructure to support more residents and has plans to spend billions more.

Portland Streetcar System Concept Plan. From The City of Portland.

But what about the potential for over-building? The issue was recently raised in the DJC by Creston Homes project manager David Mullens. The article points out that many of the new projects are relatively small and that demand is high. So while the risk always exists, and past real estate practice has been to always over build, the trend now seems sustainable. It is also worth reiterating the current permit trend versus past permit trends discussed above in light of population growth. According to the US Census, from 2000 to 2010 the population of Portland proper grew by 10.3 % or about 54,000 (the equivalent of adding all of Corvalis, Sherwood of Tigard to the city). All of those people need places to live. Presumably the city with its growing national prominence and reputation, west coast location and affordability will continue to experience growth in the next ten years like we have in the previous ten. Barring the unexpected, I don’t see Portland loosing its appeal to migrants any time soon.

The Pied Piper of Portland?

What do you think about the future of development in Portland? Comment with any thoughts about where we have been and where we are going.

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Change Comes to the Corner of Sandy and 24th

Tres Shannon’s Portland P Palace. From the website.

Change is coming to the quiet corner of NE Sandy Boulevard and 24th starting with a new concept from Portland’s donut King, Tres Shannon. This will soon be joined by Portland’s developer/rockstar Kevin Cavenaugh’s latest project, the Ocean, and the Glee Apartments from developer Mark Madden and Young Design Studio. This leads me to speculate as to whether this will be enough to start changing people’s perception of Sandy from simple an arterial to drive on to street worthy of driving to.

A recent profile of Tres Shannon in the Willamette Week discussed his new venture, Portland P Palace. In the shell of a former auto service center Tres is creating a fun house of all things P: putt-putt, ping-pong, pool, pizza, perogies, etc. His Voodoo donuts has turned a humble and economical pastry into a thing worthy of a pilgrimage to Portland. I go to school near the original and every day there are people lined up to buy donuts. In a way it can be credited with helping to put Ankeny Alley on Portland’s map. He seems to have a knack for creating excitement and hype going back to the X-Ray Cafe. I expect his latest venture to be nothing less due to the fact that like Voodoo it promises to be truly unique.

The Ocean. Plan from permit application.

Kevin Cavenaugh’s project on the same block, The Ocean, was detailed in a recent article by the DCJ. He is transforming a former auto dealership into space for several micro-restaurants, a bakery and a residence that I believe is for him and his family. The permit application to the city can be found here. In the book, Cartopia: Portland’s Foodcart Revolution, Kevin discusses with the authors the “ocean” of space that exists between conventional restaurants and foodcarts and how that is where he wants to swim.  I am glad to see he is making that vision a reality. In Portland commercial development the concept of micro-retail has not been explored. With the economy what it is and the explosion of food carts it is not surprising that someone is seeking to exploit this niche. He also seems to be doing what many successful place-making developers, such as Adaptive on Williams  Avenue and Project^ in the Black Box Building have done and been very intentional in the selection of tenants. According to eaterpdx.com the project will feature a burger only concept from the people behind Slow Bar, a storefront version of the food cart Pie Spot, and a meat ball based concept from the owner of Tabla on NE 28th. All restaurants worth a special trip to check out.

Glee Apartment. From the permit application.

The other project taking shape is the Glee apartment as covered in the DJC’s Daily Blog. The project is slated for the southwest corner of NE 24th and Glisan. It is a 3 story 32 unit apartment building with one 500 square foot commercial space and no automobile parking. The permit application can be viewed here. The project is designed by Young Design Studio. The developer is Mark Madden, a rather prolific actor in Portland as of late being behind projects in various stages throughout the city including Overton Building (completed) and Freedom Center apartments (under construction) in the Pearl and the new Miss apartment proposed for Mississippi, all by Fosler Architects.

The interesting thing about these project and what makes them worth writing about is that they all seem to share a similar independent spirit and collectively could create a node of activity from which urban life can grow. New destination restaurants, a bar/spectacle and new residents can alter the perception of an area. As we saw on Alberta, Williams and other evolving areas in Portland, all it took was two or three buildings in close proximity being adaptively reused by thoughtful developers and carefully stocked with a good mix tenants to create a place worthy of visiting. From this small node growth can spread in multiple directions creating a larger mass of activity and spurring a virtuous cycle of redevelopment. Sandy, like Interstate should be a great street due to its role as a key connector in the city, linking the central city to many of the neighborhoods in Northeast. Like other areas in the city, inner Sandy has geography as an advantage: it is close to downtown, it is close to numerous thriving neighborhood and areas such as 28th and lower Burnside that have already been experiencing a renaissance. I have also notice a lot of under the radar activity in the industrial zone north of Sandy in the form of warehouses like the Bison Building that once house machine shops and now house media and design firms. All this could add together to create a Sandy that is very different form the one we know today.

What next for Sandy?

UPDATE: Sadly Portland P Palace is not to be due to unanticipated complications. Too bad.

Back from the Grave: The Return of Transit Oriented Development on North Interstate Avenue

Killingsworth Station. Image courtesy of the Oregonian

Two project along Interstate Avenue long thought dead, Jarrett Street Lofts and Prescott Station, have come back to life and a third, Killingsworth Station, that had been on life support for years was recently completed. Both of which fullfil the intentions of the city and regions investments in light rail to spur transit oriented development in inner Portland rather than greenfield development on the periphery.

According to the Portland Development Commission, the Interstate light rail line and Urban Renewal Area (URA) was designed to:

  • Spur mixed-use development along the light rail corridor and station areas while distributing public investment fairly and evenly among other impacted areas within the district.
  • Create new jobs and housing opportunities for a range of incomes as well as for existing residents.
  • Develop new housing that is transit supportive, compatible with the existing neighborhood, maximizes infrastructure improvements, reuses vacant and underutilized property, and strikes a balance between homeownership, rental, and displacement of existing residents.
  • Create wealth through expansion of existing businesses, fostering a healthy business environment, and generate family wage jobs.
  • Improve transportation corridors to encourage the use of alternative modes of travel, maintain and improve access, create a pedestrian-friendly environment, and mitigate traffic impacts associated with new growth.
  • Promote community livability through strategic improvements to parks, open space, trails, historic and cultural resources, and community facilities.

The rail line cost $350 million and was completed in 2004. Unfortunately, while it was completed in the midst of the condo boom, by the time developers began proposing projects the steam was running out of the real estate market. While a few projects managed to get built, several large projects that were proposed faded with economy. In the years since, the City has adopted the North Interstate Corridor Plan to encourage dense development along the light rail corridor and which allows for buildings up to 125′ tall (about 11 stories) in station areas with design review and special conditions. This creates great opportunity for transforming the relatively sleep and small scale street into a major urban avenue that will help define the area.

What could have been: The Montanas, Proposed at one time for near the Lombard Max station. Image from Myhre Group Architects.

Prior to the real estate crash, only a few projects of any significance to the character of Interstate Avenue got build. They include the Patton Park Apartments (2009) developed by REACH, an affordable housing group, and designed by SERA Architects. The 54 unit mixed-use project was built on land provided by Trimet. The transit agency bought the land to support the development of affordable transit oriented development. Details about the project from REACH can be found here. The other development of note is the Overlook (2008), another mixed-use project consisting of 24 condos over a bit of retail. For more information Brian Libby did a good story on it when it was build that can be found here.

Patton Park Apartments. Image source unknown.

Since the onset of the Great Recession very little building has occurred anywhere, let alone North Interstate, and what has has largely been heavily subsidized. A example of this is Killingsworth Station (pictured at the start of this article) at the corner of Killingsworth and Interstate. It is a four story mixed-use project developed by Winkler Development in partnership with the PDC and designed by Vallaster Corl Architects. The project contains 57 ownership housing units above retails condo space. It only managed to get built due to a very high level of subsidy form the PDC, Trimet  and Metro. I often question the use of taxpayer subsidies for projects that in the end are still not that cheap and do not serve those who might otherwise be displaced. That being said the project is a strong urban addition to the area. It creates a substantial street wall at a key intersection in contrast to the two single-story buildings and a gas station that occupy the other corners. It also brings housing and eyes to the street and, assuming the retail space is ever leased, provides an active and engaging edge to the sidewalk.

Just three blocks to the north the Lofts at Jarrett streets is back from the dead and well underway at the northeast corner of Jarrett and Interstate after many years of promise. The project consists of 30 apartment over almost 2000 square feet of retail in four stories. Like Killingsworth Station it will help to activate the street and reenforce Interstate as a important avenue.

The Lofts at Jarrett Street. Image from the project website.

The second revived project is the Prescott Station at the corner of Skidmore and Interstate. It is of a truly different scale than anything built thus far on Interstate. It is to have 155 market rate apartments over 9,500 sf commercial spaces and underground parking. That would be more housing units that all the other projects mentioned combined and at 6 stories it would be the tallest thing built of the street yet. According the DJC it is permitted and has financing so should break ground in March. The development group is connected to Sierra Construction, which is also behind the proposed New Seasons at Williams and Fremont. The architect is the Myhre Group, who are also designing a number of small infill projects around town, most notable the apartment building under construction next to Hollywood Theater. Prescott Station would be a major milestone fo Interstate and hopefully a symbol of things to come.

Prescott Station. Rendering from the Myhre Group Architects.

Despite all of the investment by the PDC and other agencies in Interstate Avenue, in many ways the street is a failure as an urban corridor. For containing some of the highest capacity transit in the metro region it lack any sort of density – most of the area around the stations are comprised of single family houses or very small scale apartment complexes of two stories or less. It also lacks activity or sense of place that would make it an attractive location to area residents or to visit from outside the neighborhood. Walking the Avenue the experience is lack luster as you pass sad low-slung buildings and single family houses. The street use to be a major corridor into the city as the route for highway 99 through Portland. Now, as a major transit corridor it needs to embrace its role as an important avenue once again. The projects discussed above represent steps in the right direction. Each project fills in a little piece in making a great street. Unfortunately, for the foreseeable future these will be isolated incidents of dense urbanism in an otherwise small scale street. Hopefully these island of urbanism will soon be joined by other projects and gain the critical mass of residents and activity needed to start to feel like cohesive places. Only then will Interstate live up to the aspirations of the Portland Development Commission and its potential as one of the great avenues of Portland.

UPDATE: Another apartment project has been proposed at 5118 N. Interstate, just south of Patton Park Apartments. The details are vague as the information comes from the city of Portland land use intakes. An early assistance request was submitted on February 23rd by Ankrom Moisan Architects, the same folk who designed the Milano Apartments currently under construction down the hill at NE 1st and Multnomah, for a four story apartment building on a site that currently occupied by single family homes.

Boise Elliott Growth Continues With New Proposed Developments

Proposed Payne Apartment. Image from Boise Neighborhood Association via the Oregonian

Boise Elliott seems to be the hot spot in Portland right now. As reported previously there are several large projects in the pipeline including two apartment/retail projects and the New Seasons previously mentioned. Today on the Oregonian’s website I found this article, “Boise building boom has North Portland neighborhood edgy, developers moving cautiously.” It details several other projects working their way through the system. The most interesting is the Payne Apartments pictured above: a five story building with 19-21 apartments over 1000 square feet of retail at the northeast corner of Williams and Beech. They mention GBD as the architects. I searched Portlandmaps and found that the property was bough in August 2011and the owner listed as Payne LLC and Heather Guthrie, a lawyer at Dunn Carney Dunn law firm.  The other project is the Miss at 3807 N. Mississippi next to Pistils nursery. It is a four story building with 25 units over one retail and one live/work space with no parking planned. The developer is WDC with Fosler Architects as the designer.

Miss building site at 3708 N. Mississippi. Image from Google Maps.

The Oregonian article is largely about change in the neighborhood and residents’ response to it. I am all for change and believe that if cities do not evolve and grow they stagnate and die. I also believe that while new development is a driver of demographic change and gentrification, stopping development just leads to greater gentrification as people bid up the cost of an artificially constrained supply of housing and commercial space. That being said it is important to understand the reasons behind the feeling of people in the area. On that note, the Sarah Mink just put a post, “By the Numbers: Charting Change on North Williams,” Avenue on the Mercury’s Blogtown recapping some of the radical demographic change that has transpired in the area. A more in-depth analysis can be found in Karen Gibson’s fascinating research paper on the area’s tragic relations with city government () : “Bleeding Albina: A History of Community Disinvestment, 1940-2000.” It documents the role that North/Northeast Portland has played in the city, particularly for the Black community and the arrogance and disregard for community shown by the city for much of its history. For Albina, when the city mentioned “planning” it usually ended up bad for area residents. Another interesting historical look at the neighborhood I came across was at the Skanner,  “Portland Gentrification: The North Williams Avenue That Was – 1956“. As part of their investigations into neighborhood change they created a Google map of all the businesses that existed on Williams in 1956… and it is not anything like the list you would make for 2012.

North Williams and Russell Street Circa 1962. Image from the Skanner.

More Apartments for Belmont

West (Property Line) Elevation. From City of Portland Public Notice.

Another small infill project has been proposed for Southeast Portland. The current trend in development seems to be small projects throughout the city in solid to emerging neighborhoods with good bike/pedestrian/transit options. This latest one at the northwest corner of Belmont and 38th fits the pattern. It is to contain 18 apartment over 11 parking space and one small retail space fronting Belmont. The team behind it is the same one responsible for the NuMiss on Mississippi Avenue: the owner/developer is BCMC Properties and the architect is Surround Architecture. The NuMiss was a small office/retail project that turned out quite nice in my opinion, especially compared to some of the other project built on Mississippi around the same time. I hope this project is as nicely scaled as that. If so it will be a solid addition to the neighborhood and at the very least vastly superior to the parking lot that currently occupies the site.

NuMiss on Mississippi Avenue. Image from Surround Architecture, Inc.

Zidell Is Moving Forward with South Waterfront Redevelopment

Proposed Development at the corner of SW Moody and Grove. From the City of Portland Pre-Application Conference Notice.

As a follow up to last weeks post on Zidell’s near term plans for their South Waterfront property, yes they are moving forward. It was reported in the Portland Business Journal (full text can be found on Skyscraper Pages here) last week that Jay Zidell confirmed that his company intends to develop the 30 acres it own in South Waterfront into a mix of office, residential and retail that will complement the existing development and take advantage of the coming light rail line. They wasted no time getting started, scheduling a pre-application conference with the city for February 21st to discuss a proposal for a 7-story residential building with ground floor retail/restaurant space designed by ZGF.

As an interesting twist, the project includes no car parking, just space for 152 bikes. It is a real test of the trend towards no parking/low parking buildings. Perhaps it is an indication that the project is to be more strongly marketed more towards students being how it is conveniently located so near OHSU and just a short street car or bike ride from PSU. Project, the developer mentioned before as associated with this proposal, has been carving out a niche in student housing with two very nice projects completed in Eugene and possible one in the works in Corvalis. It would only be natural that they would bring their successful format to their home market at some point.

Regardless of what form the building ultimately take,  it is good to learn (especially from the guy who actually makes the decisions) that things are going to start happening on the Zidell land as the economy heals. I am also glad to hear that barges will continue to slide into the Willamette from the Zidell yards for a while to come – I want Portland to be a growing, new economy city but also maintain its industrial heritage. I look forward to seeing what arises.

The Zidell Property in South Waterfront. Image from Googlemaps.

New Ideas From Old Buildings: The Rise of Class B Office Space

Olympic Mills Commerce Center by Beam Development/Works Partnership Architecture

In the new normal in which we find ourselves the old ways of real estate development might not work and new approaches are needed. In the housing market this is seen in the switch from high end ownership housing to mid-range rental housing. This can also be seen in other sectors such as the office space. In the Kidder Mathews 2011 4th Quarter Real Estate Market Review there was an interesting note about the Portland office market:

“Tech companies are booming with venture capital gobbling up any creative space left in the Northwest or close-in Eastside submarkets. Rental rates for well-located Class “B” space can meet or exceed levels obtained by higher quality, less well located Class “A” suites. Creative workspace is highly desirable in close-in Portland, and space is limited.”

This is reiterated in the Portland State University’s Center for Real Estate Quarterly Report:

“Creative and historic office spaces, often the result of industrial renovation, have seen high levels of demand. Characterized by large windows, exposed structures and high ceilings, these creative spaces are seen as more casual, collaborative environments. Industries most prevalent in these spaces are creative class firms in architecture, software development and consulting. Particularly in a time when
Class A space is under pressure in the central business district with little new delivery, creative spaces have become a refuge for some firms. Grubb & Ellis report that some Class B creative spaces have been able to draw higher rents than older Class A space.”

Kidder Mathews’ and PSU’s analysis of the desirability of Class B creative space in inner Portland just confirms what we see going on all around us. Over the last several years I have watched quiet old warehouses transform into hives of economic activity as developer rehab them into creative workspace. This represents the convergence of the new development reality and the new economy. In tough economic times firms do not have the money to lease expensive new class A space and developers cannot get the loans to build it anyway. Rehabs offer an affordable and safe alternative to new construction. New creative economy firms are as a an aesthetic and financial choice opting to locate in relatively affordable space in buildings of character in the inner city instead of newer, draber buildings in the suburbs. This trend seems most prominent on the periphery of downtown in areas such as the Central East Side including north as far as Broadway, Oldtown/Chinatown, the industrial lands north of between the Pearl and NW Nicolai Street (known to some as the Squish.)

This type of redevelopment is perhaps best exemplified by the work of Brad Malsin and his firm, Beam Development in the Central Eastside. Beam has rehabbed several buildings into bustling commerce centers that provide affordable space for a diversity of scrappy firms that don’t need a marble clad lobby and an acre of parking. They are currently working with Works Partnership Architects on converting the 97,000 square foot Convention Plaza near the corner of East Burnside and Martin Luther King Boulevard into yet another affordable commerce center.  The Convention Plaza rehab is supposed to be just the catalytic first project in the new Burnside Bridgehead redevelopment. This development is occurring under a new plan developed by noted Arizona based architect Will Bruder along with Beam Development and Works Partnership Architects that seek to match the scale and grain of the existing neighborhood as well as build on the existing culture rather than supplant it. Other projects in the area in this same vein include the Ford Building rehab on SE Division at 12th by Intrinsic Ventures and the Left Bank Project on North Broadway by Alora Development. In each case a beautiful old building was brought back to life giving it a viable future, affordable space was created for businesses, and life was added to the adjacent street.

Olympic Mills Commerce Center Directory

Closer to Downtown there is a growing collection of young growing software and mobile application firms like Puppet Labs (The General Automotive Building on the North Park Blocks), Urban Airship (Pearl), Jive (The Federal Reserve Building in the West End) and others that are occupying space in rehabbed buildings and warehouses. The city has shown a growing strength in attracting venture capital. As reported in the Oregonian 2010 saw $173 million in V.C. flow into the city only to have that number increase by 25% in 2011 to $238 million. The 2011 number is the highest since 2007 and the second highest since 2001. This capital is fueling hiring by firms and thus necessitating more space. This desire for new creative space downtown has recently lead a team to begin the renovation of the 48,000 square foot Commerce Building at 225 SW Broadway into the newly named Broadway Commons. In a reflection of the new reality it will have such creative economy friendly features as operable windows, exposed ducts, 75 bike parking stalls and showers. Another recent project mentioned in a previous post is the Black Box by Project Development and Skylab Architects in the West End. They did a beautiful remodel of a sad old warehouse into a hub of creative firms (their own) and indie retailing.

Broadway Commerce Building Before and After Rendering. From the DJC

Farther north Brian Libby at Portland Architecture recently wrote about the conversion of an 100,000 square foot old steel warehouse at 2181 NW Nicolai into the home of businesses such as School House Electric, Ristretto Coffee Roasters and Egg press among many. Also in the Squish I have notices several other similar, if less hefty projects quietly repopulating old buildings and enlivening quiet streets. Included among the tenants of a low slung converted warehouse were the headquarters of Keen and Icebreaker, two small outdoor clothing design firms that are key parts of Portlands activewear economic cluster. While not Nike or Addias they are two small stars on Portland’s team.

2181 NW Nicolai. Image from the DJC

In many way this trend is just as much a reflection of Portland’s underlying strengths as it is the larger economy’s weakness. Perhaps the growth of creative businesses is due to all the talent that Portland has managed to attract over the last decade with its nationally lauded quality of life and indie culture. The city is full of smart, inspired people with a strong entrepreneurial drive and a D.I.Y. spirit. This includes people making pickles the old way and people designing the way we will interact online in the future. In the last few years many people have wrote about the rising importance in attracting and retaining the “creative class” – educated young people who will be the ones to build the next economy. People who have expressed this idea clearly include Richard Florida nationally and Joe Cartwright from Impresa Consulting here in town. It has in many ways been an underlying principle of Portland’s vision: create a culture that allows creativity to flourish and we’ll reap the rewards down the road when all the young, educated kids who came for the biking and music decide to start businesses and want to be near that amenities that make this town special.  The adaptive reuse of old warehouses into space for these businesses is not just an outgrowth of the a poor economy that cannot support new class A space, but also a conscious decision on the part of Portland’s new entrepreneurial class on the kind of space they in which they want to work: high ceiling and natural light over drop ceilings and fluorescents, good biking and access to transit over acres of free parking, Bunk Sandwiches over Quiznos.

The redevelopment of old warehouses for new businesses has begun to transform neighborhoods. When I first moved to Portland the only thing in the Central Eastside was Le Bistro Montage and a punk show or two. I just read the other day about the opening of Abonnay, a champagne bar at SE 1st and Washington. It is hard to imagine that working ten years ago. The Olmpic Mill Commerce Center was once a vacant hulk and now is filled with people at all hours and the same can be said about many of these projects. As I walk around the central city I look up and can see so many empty upstairs just crying out to be filled with activity. I think about how the life of the street would change with the addition of those new employees, what business could be supported at the street level, and what a virtuous cycle or neighborhood revitalization projects like this can create.

When will this building get its' chance to shine? Corner of NW 4th and Hoyt.