Market researchers and local economists note that Portland, like cities all over the country, is substantially under building commercial space as a result of the credit crunch, following a few years of below-average commercial construction during the last period of growth. All of that will lead to heavy demand for new space in the coming years and a “mini-boom” in construction, Portland economist Bill Conerly wrote recently in his blog.
By the end of this year, the office vacancy rate in downtown Portland is projected to be 9.3%, the lowest of any major U.S. business district besides Manhattan’s midtown south, according to commercial real estate brokers Cushman & Wakefield. Some market reports for the first quarter of 2011 listed the luxury Class A vacancy rate in Portland as low as 6.3%. Just a handful of multi-floor spaces are left in existing high-end towers in Portland’s core. When the next big client, such as Iberdrola Renewables or a city department, decides to move, “They basically require a new building,” says Tom Usher, Cushman-Wakefield’s senior director in Portland.
The pent-up demand for Class A space meant gold for Shorenstein Properties, which recently sold its building at First and Main for $129 million or $350 per square foot.
And that now means lenders are opening up to new commercial construction deals in Portland.
“I know a number of lenders are open to a deal. They are just looking for the right deal,” says John Petersen, a mortgage banker who heads Melvin Mark Capital. But Petersen also says that potential creditors and tenants have to overcome lingering doubts about the overall state of the economy before a new building becomes a reality. “It takes a turn of psychology,” he says.
In the meantime, Vanessa Sturgeon and TMT wait, and she tries to look at the moment through Tom Moyer’s 92-year-old eyes.
“He’s seen the economy go through cycles like this many times, including the Depression, so two or three years don’t make a big difference to him.” she says. “This is just one more cycle.”