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.

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One thought on “New Ideas From Old Buildings: The Rise of Class B Office Space

  1. Pingback: Preservation Round-Up: Jane Jacobs Edition - PreservationNation

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