FEBRUARY 2008: AROUND THE STATE
Will
commercial real estate be next to fall?
STATEWIDE Now
that the easy-money housing boom has fizzled, it is tricky to
predict what will happen next with commercial real estate in
Oregon.
Banks have tightened lending, and investors are watching
warily to see whether rumors of recession build into full-blown
realities of lost jobs and dwindling consumer confidence.
Still, vacancy rates are holding steady in most of
Oregon’s urban centers, construction employment hit an
all-time high last summer, rents generally are up and ambitious
projects are breaking ground all over the state, even in Bend
— Oregon’s capital of boom followed by bust —
where builders are cranking out new stores, offices and
corporate headquarters for Les Schwab Tire Centers.
How long can it last?
An extensive national report issued last November by
PricewaterhouseCoopers and the Land Institute warned of a
serious drop-off in commercial real estate investments and
cited major concerns from the 600 developers, service firms and
investors surveyed. That same report, however, mentioned
Portland as one of a handful of bright spots for investors to
consider. And two more recent reports, one by Grubb & Ellis
and the other by Norris, Beggs & Simpson, argue that
Portland’s commercial market appears solid. Central city
office vacancy rates have held steady at around 10%, while
industrial properties have reached 20-year lows in
vacancy and record highs in rent. Condos are cold, but
apartment buildings are hot.
“The fevered pitch of bidding on properties has gone
down, but there is still a lot of capital available,”
says Patricia Raicht, client services manager for Grubb &
Ellis. “There is no lack of investors interested in
commercial real estate.”
Nor is there a lack of construction. Bart Eberwein, vice
president of Portland-based Hoffman Construction Company, can
easily reel off a half-dozen multi-million-dollar
projects his firm is completing, such as OHSU’s $70
million Biomedical Research Building. “Health care
continues to be a big market for us,” he says, “and
I don’t see that changing.”
One thing that has changed is the level of scrutiny from
lenders. “Everyone is being more cautious about new deals
and how we underwrite them,” says Roberta Fuhr, senior
vice president for KeyBank Real Estate Capital, the largest
commercial lender in Oregon. That gives the edge to existing
clients and investors with cash, while sending highly leveraged
newcomers to the back of the line.
Most economists accept more stringent loan requirements as a
healthy part of the ongoing correction of a money-lending
system that had slid out of control. They don’t expect it
to bring down the commercial market, so long as tighter credit
doesn’t devolve into a lack of credit — and a
recession remains just
theoretical.
BEN JACKLET
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