Building Oregon 2007: Feature
A rendering of the Willamette Marketplace in West
Linn.
Image courtesy of
Venture Corp.
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Going condo
The office condominium comes into favor for small businesses.
By Jon Bell
It’s not been easy over the past few years for small
Oregon businesses to buy their own work space.
Consider that the value of commercial land in Bend has
skyrocketed — from $7 a square foot in 1996 to $22 a
square foot last year — or that no one seems to be
parting with their buildings on Portland’s bustling inner
east side, and it’s easy to see why.
“We know several small businesses that’ve been
looking for that proverbial 5,000- or 10,000-square-foot
building, but you just can’t touch them down here,”
says Bill Neburka, a principal with Works Partnership
Architecture LLC, whose office sits in Portland’s Central
Eastside Industrial District. “People can’t buy the
workspace that they want to buy.”
Enter the office condominium.
The Yamhill Industrial Workspace Building in
Portland.
Image courtesy of Works
Partnership Architecture.
The Venture Commerce Center in Hillsboro. All will offer
commercial condominium space.
Image courtesy of
Venture Corp.
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While not entirely new to the Oregon market, office
condominiums are finding a more welcome home here thanks to
impossibly high land prices, demand for ownership and a paucity
of small commercial properties available for purchase.
Several planned mixed-use developments in Bend will include
office condominiums, and both Corvallis and Ashland have
commercial condominiums for sale. Offices in downtown Portland
are being converted into condo spaces, and more than a few
brand-new office condo buildings are in the works for Portland
and the metro-region suburbs.
“There’s definitely an increase in activity for
developers starting to build commercial condos,” says
Patricia Raicht, senior West Coast research manager for Grubb
& Ellis. “There are a number of projects planned for
office condos, which makes a lot of sense for the right
business. Builders are building them and selling
them.”
OTHER FORCES DRIVING THE RISE of the commercial condominium in
Oregon include continued low-interest rates and the fact that
the model has found success in other markets such as Phoenix,
Seattle and San Francisco. As the economy has turned around,
office leasing rates have increased and created new demand for
all kinds of office space, including for-sale properties.
Raicht says that for companies that need to reinvest capital
into their business and not in real estate, commercial
condominiums aren’t the way to go. But for small, usually
professional firms looking for the long-term benefits of
ownership, condos have mass appeal.
“They make a whole lot of sense for small-business
owners who want to create some wealth or build up some equity
for an exit strategy for their business,” Raicht says.
Instead of paying rent for 10 years, they’ll buy a condo,
and when they’re ready to sell the business,
they’ve built up equity in not only their business, but
also in their real estate.”
Condominiums do cost more up front for businesses, association
fees tack on extra expenses and the threat of class action
lawsuits by owner associations for construction defects are
often enough to scare away some developers. At the same time,
condos also eliminate landlords and fluctuations in rental
rates. New buildings are usually located in prime commercial
areas, and often the spaces for sale are left in a fairly raw
form so new owners can finish them off as they choose.
 The Mt. Bachelor Center, on
the west side of Bend, designed by Pinnacle Architecture.
The high land prices in Bend have made commercial condos an
attractive option for businesses in the area.
Images courtesy of
Pinnacle Architecture.
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“Theoretically it sells itself,” says Todd
Berryhill, vice president of development for Venture
Corporation, a real estate development company in Larkspur,
Calif. Since 2001, the firm has built some 35 commercial
condominium developments along the West Coast. Market
conditions in Oregon, including a drop in office vacancy rates,
have finally aligned enough to turn Venture’s eyes to the
Beaver State.
“It’s the next logical extension for us,”
Berryhill said. “We’ve wanted to be in Portland for
a long time, and this is something that hasn’t been done
a lot here, which is great for us.”
Venture has two commercial condominium projects planned for
Portland suburbs. The first will be five buildings on 10 acres
in Hillsboro near the Tanasbourne Town Center. Condominium
spaces will be office and flex space and will range in size
from 1,000 to 3,200 square feet. The second will be an office
and retail condominium center off Interstate 205 in West
Linn.
COMMERCIAL CONDOS ARE FINDING HOMES in more unlikely markets,
as well, such as Portland’s Central Eastside Industrial
District.
Over the past few years, the district has seen resurgence as
new businesses and creative services have moved into an area
that was once filled primarily with urban industry. Expanded
interpretations of industrial zoning code and renovated
buildings from the likes of Beam Construction and Management
LLC have made the area popular for small firms seeking office,
warehouse and flex space.
So far, however, there haven’t been many opportunities
for businesses to buy these spaces. That’s one of the
primary motivators behind the proposed Yamhill Industrial
Workspace building, a seven-story, 72,000-square-foot building
in the district that will be offered as commercial
condominiums.
“There’s such a demand for workspace down
here,” says Works Partnership’s Neburka, whose firm
designed the building. “And it’s not just a demand
to have quality space, but to be able to own it too.
“The nature of this district is small businesses and
small businesses working together, so there’s also a real
interest and emphasis on having owner-occupied space
here.”
The commercial condominium has started to catch on in the Bend
area as well. There, soaring land prices and a lack of
developable land within the urban growth boundary have made it
nearly impossible for some small businesses to even consider
owning their own work space.
“Say you wanted an office building and you needed 3,000
square feet,” says Peter Baer, principal at Pinnacle
Architecture. “By the time you bought the land and built
the building, you could easily be $2 million into it. A lot of
people just don’t have the wherewithal.”
Baer has teamed up with developers, real- estate agents and
bankers on a commercial condo project known as Mt. Bachelor
Center, which is to break ground on Bend’s west side July
1.
The three-building development likely will offer 100,000
square feet of office and retail condominium spaces, though
Baer says future market forces may lead to residential condos
in the third building whenever it is built.
The target owner for condos in Mt. Bachelor Center, according
to Baer, will be the same kind of professionals and small
businesses that in Bend, Portland and elsewhere are looking for
ways to buy their own workspace without breaking the bank.
“It provides a way for office and retail professionals
to get some equity position,” he says. “It gives
them a start in the market.”
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