Affordability tempers construction boom
As anyone who lives, works or even travels through downtown Portland and its surrounding neighborhoods knows, the urban core is experiencing a construction boom. Many new buildings are rising in the heart of town, Northwest Portland, the inner east side, and even blocks away. And a large number of existing buildings are being renovated, too.
In fact, according to a new report, there are a record number of active construction projects in the area officially designated as the Central City. Forty-five projects are currently under construction, according to the 2017 Development/Redevelopment Report released Wednesday by Downtown Clean & Safe, the Portland Business Alliance-affiliated organization that helps maintain downtown. That's up from 39 last year and is the highest number documented since the annual reports began 15 years ago.
"It's fantastic to see such strong investment and growth across the Central City. This report makes it clear that downtown Portland continues to be a vibrant, attractive place to live and do business," says Cindy Laurila, corporate real estate manager at Portland General Electric and board chair of Downtown Clean & Safe.
The report also makes it clear that the construction boom is not slowing down anytime soon. It lists 56 more projects that either are in the permitting process or on the drawing board for coming years.
But while the overall tone of the report is upbeat about the future of Portland, it notes the persistent housing affordability crisis that has been City Hall's top priority. Most of the new residential units are luxury apartments that many people who work in the Central City cannot afford.
"Alongside the good news in construction growth rates, the report also identified persistent housing affordability challenges within the Central City due to supply constraints," notes the news release that accompanied the report.
Hotel development has been particularly strong over the past year. In addition to three recently completed hotels, there are seven more under construction in the Central City, which will add roughly 1,250 rooms in the next two years. An additional eight are in the design phase that would add up to another 2,100 more rooms when completed. The largest of these projects is the 600-room Convention Center Hyatt Regency, which is slated to break ground later this year, the report says.
"The downtown core will see an unprecedented 40 percent growth in hotel rooms over the next few years. Outside of hotels, the developments in downtown and areas like the Lloyd District will enhance the Portland experience for leisure visitors and convention delegates alike, and we look forward to building these new assets into our marketing around Portland as a travel destination," says Jeff Miller, president and CEO of Travel Portland and a Downtown Clean & Safe board member.
The report was prepared by the Heritage Consulting Group to provide a five-year window on real estate development in the Central City, which includes the following sub-districts: Downtown, West End, University District, River District, South Waterfront on the west side of the Willamette River, the Central Eastside and Lloyd District on the east side of the river.
According to the report, as the largest city between Seattle and San Fransisco, Portland traditionally has been a very attractive second-tier real estate market. But it has exploded in recent years and now has a large number of projects across all sectors in nearly every geographic area of the city and region — creating both opportunities and challenges.
"With high demand and lesser supply, this has presented a challenge of affordability. Current projects providing notable additional supply may mitigate this challenge, while the city continues to explore strategies particularly in the housing sector. Nonetheless, this growth represents the solidification of Portland as an alternative preferred location in the Pacific Northwest," the report says.
The largest future project identified in the report is the redevelopment of the 13-acre U.S. Post Office site in Northwest Portland at the downtown end of the Steel Bridge. Proper Portland, the former Portland Development Commission, has completed the purchase of the site and is beginning a process to master plan it with public participation. Full redevelopment is expected to produce 3.8 million-square-feet of mixed-use development.
According to Downtown Clean & Safe, the annual development/redevelopment report is created to gauge economic vitality and activity in the Central City and to provide information for developers, real estate brokers, property managers and owners, prospective tenants, institutional investors and others who are interested in downtown Portland as a place to do business.
Highlights in the 2017 Development/Redevelopment Report released Wednesday by Downtown Clean & Safe include:
• Central City vacancy rates increased slightly for office space (10.5 percent) up from 6.7 percent last year, retail held steady (6 percent), and citywide residential properties (5.4 percent) up from 3.5 percent last year.
• Since 2010, more than 5,000 new residential units have been built, ranging from affordable, work force and luxury housing.
• Today, an additional 3,000 residential units in 18 projects are under construction and 2,400 units in another 14 projects are on the drawing board.
• Significant office projects include the Multnomah County Courthouse, and the Meier and Frank Building, which formerly housed Macy's, and a number of projects in South Waterfront associated with the expansion of Oregon Health & Science University.
You can read the full report at: cleanandsafepdx.com/assets/2017-Dev-Redev-Report.pdf.