Portland development has slowed ALOT

[subterranean]

No new office building construction in Portland, report says - Portland Business Journal
Jonathan Bach

A new report from real estate Cushman & Wakefield says zero square feet of office space is under construction in Portland and its suburbs. Sam Gehrke

Source: https://www.bizjournals.com/portland...dOHxsODqh_vObU

[PhillyPDX]

Originally Posted by subterranean

Source: https://www.bizjournals.com/portland...dOHxsODqh_vObU

That is pretty sad. Zero?!?!

[maccoinnich]

The last thing Portland needs right now is more supply of office space, so I’d say this is good.

[jaxg8r1]

Originally Posted by maccoinnich

The last thing Portland needs right now is more supply of office space, so I’d say this is good.

I think the city doesn't need more space but Beaverton (and likely other submarkets) are still net absorbing and need more construction (vacancy in the single digits overall, really low single digits for Class-A)

[urbanlife]

Originally Posted by subterranean

Source: https://www.bizjournals.com/portland...dOHxsODqh_vObU

That's to be expected anywhere in this new business climate. Less office space is needed if less employees are working in the office. We need to move away from this idea of urban areas being dominated by office buildings and shift towards focusing on residential towers and buildings with amenities that cater to residents and day travelers.

[PhillyPDX]

Originally Posted by urbanlife

That's to be expected anywhere in this new business climate. Less office space is needed if less employees are working in the office. We need to move away from this idea of urban areas being dominated by office buildings and shift towards focusing on residential towers and buildings with amenities that cater to residents and day travelers.

I would say yes, but I was in DC last week, tower cranes and active construction all over, some office space included. Everywhere I go I see major development in cities, but not here. Something is clearly broken here.

[downtownpdx]

Originally Posted by PhillyPDX

I would say yes, but I was in DC last week, tower cranes and active construction all over, some office space included. Everywhere I go I see major development in cities, but not here. Something is clearly broken here.

I'm curious what cities you're talking about besides DC (and Nashville I think?), but I agree with your Portland assessment. Just hard to imagine many cities booming with office construction these days, but residential/mixed use in some of the Sunbelt-y cities I could see for sure.

Don't know how long you've lived here, but Portland has had such a cluster of things all happen at once. We went from the #3 commercial real estate market in 2017 to like #62 out of 65 in 2022.

We passed inclusionary zoning a like 6 years ago and all the developers rushed through lots of projects to avoid having to comply with the affordable housing requirements. So development ever since has slowed down, and our population growth has also stalled post - Covid.

We passed a few tax increases right at the onset of Covid, which combined with the disarray in the streets in the last few years drove away many high-income earners.

And I'm no expert in the field but I know we have a very cumbersome permitting process that certainly stifles much-needed development.

On the positive side, the city is reducing some taxes and regulations to encourage development and office-to-housing conversions.

I see downtown as perhaps the next 'it' neighbohood, one day -- if we can keep a lid on the homeless street camping, drug use etc. Things are certainly not great right now although on my recent trips it didn't feel unsafe, just way too quiet. There is so much good infrastructure, mass transit, parks, plazas, proximity to everything... things will turn around if the city continues to push safety, relax housing regulations etc.

[PhillyPDX]

Originally Posted by downtownpdx

I'm curious what cities you're talking about besides DC (and Nashville I think?), but I agree with your Portland assessment. Just hard to imagine many cities booming with office construction these days, but residential/mixed use in some of the Sunbelt-y cities I could see for sure.

Don't know how long you've lived here, but Portland has had such a cluster of things all happen at once. We went from the #3 commercial real estate market in 2017 to like #62 out of 65 in 2022.

We passed inclusionary zoning a like 6 years ago and all the developers rushed through lots of projects to avoid having to comply with the affordable housing requirements. So development ever since has slowed down, and our population growth has also stalled post - Covid.

We passed a few tax increases right at the onset of Covid, which combined with the disarray in the streets in the last few years drove away many high-income earners.

And I'm no expert in the field but I know we have a very cumbersome permitting process that certainly stifles much-needed development.

On the positive side, the city is reducing some taxes and regulations to encourage development and office-to-housing conversions.

I see downtown as perhaps the next 'it' neighbohood, one day -- if we can keep a lid on the homeless street camping, drug use etc. Things are certainly not great right now although on my recent trips it didn't feel unsafe, just way too quiet. There is so much good infrastructure, mass transit, parks, plazas, proximity to everything... things will turn around if the city continues to push safety, relax housing regulations etc.

In last year Philly, DC, Nashville, Seattle. They are just anecdotes, but all 4 are at least optically doing better on some level as far as development/construction goes.

[downtownpdx]

Originally Posted by PhillyPDX

In last year Philly, DC, Nashville, Seattle. They are just anecdotes, but all 4 are at least optically doing better on some level as far as development/construction goes.

Yeah I was in Seattle recently and it sure feels more lively in that respect, but then again Portland has always sat in its shadow economically. Seattle has a major corporate hq presence and always ranks as one of the nation’s top tech towns along with SF, SJ, Boston… But a recent report curiously showed a larger percentage decrease in Seattle’s MSA population than here in 2023. And I don’t think Philly is booming like Austin or Phoenix, so what drives all the construction? Is it simply easier permitting?

[PhillyPDX]

Originally Posted by downtownpdx

Yeah I was in Seattle recently and it sure feels more lively in that respect, but then again Portland has always sat in its shadow economically. Seattle has a major corporate hq presence and always ranks as one of the nation’s top tech towns along with SF, SJ, Boston… But a recent report curiously showed a larger percentage decrease in Seattle’s MSA population than here in 2023. And I don’t think Philly is booming like Austin or Phoenix, so what drives all the construction? Is it simply easier permitting?

Philly has the Eds and Meds. Penn, Drexel, Temple, Thomas Jefferson U (Hospital); maybe the largest concentration of elite research medical/research in the world between TJU/Penn/CHOP. University City (adjacent downtown) is booming, still, with biomedical research labs/offices popping up left and right. Part of why I push that I wish PSU had more research like Penn/UW, et al. Philly has an extremely active skyscraperpage site if you have any interest to see what's going on.

One thing of note after being in DC, then driving around Portland. As cool as DC is, man those avenues are wide and take forever to cross. Portland downtown is very pedestrian scale like Philly. So much damn potential for a cool urban landscape, but there needs to be way more jobs/residential. Come on Portland!

[urbanlife]

Originally Posted by PhillyPDX

Philly has the Eds and Meds. Penn, Drexel, Temple, Thomas Jefferson U (Hospital); maybe the largest concentration of elite research medical/research in the world between TJU/Penn/CHOP. University City (adjacent downtown) is booming, still, with biomedical research labs/offices popping up left and right. Part of why I push that I wish PSU had more research like Penn/UW, et al. Philly has an extremely active skyscraperpage site if you have any interest to see what's going on.

One thing of note after being in DC, then driving around Portland. As cool as DC is, man those avenues are wide and take forever to cross. Portland downtown is very pedestrian scale like Philly. So much damn potential for a cool urban landscape, but there needs to be way more jobs/residential. Come on Portland!

It goes in waves, I have been in Portland for a couple of these uppers and a lot gets built and there are cranes everywhere. I fully expect to see that happening again in the next few years.

[MarkDaMan]

Just adding some perspective. Paywalled and am pulling just pieces of the article.

https://www.nytimes.com/2024/02/08/b...-industry.html

‘Zombie Offices’ Spell Trouble for Some Banks
Bank tremors serve as a reminder: Just because a crisis hasn’t hit immediately doesn’t mean commercial real estate pain isn’t coming.
By Jeanna Smialek
Feb. 8, 2024
Updated 2:32 p.m. ET

Graceful Art Deco buildings towering above Chicago’s key business district report occupancy rates as low as 17 percent.

A set of gleaming office towers in Denver that were full of tenants and worth $176 million in 2013 now sit largely empty and were last appraised at just $82 million

...

Even famous Los Angeles buildings are fetching roughly half their prepandemic prices.

From San Francisco to Washington, D.C., the story is the same. Office buildings remain stuck in a slow-burning crisis. Employees sent to work from home at the start of the pandemic have not fully returned, a situation that, combined with high interest rates, is wiping out value in a major class of commercial real estate. Prices on even higher-quality office properties have tumbled 35 percent from their early-2022 peak, based on data from Green Street, a real estate analytics firm.

...

Prices on even higher-quality office properties have tumbled 35 percent from their early-2022 peak

...

About 14 percent of all commercial real estate loans and 44 percent of office loans are underwater — which means that the properties are worth less than the debt behind them

...(continues)

[subterranean]

As a planner keenly interested in the expansion of my organization’s footprint, I am salivating.

[sopdx]

This is an interesting link. Not sure of the methodology but Portland isn't the worst on the list by far except for construction.

I think it is interesting that Seattle has a pretty high vacancy rate but also a lot of construction.

https://www.commercialedge.com/blog/...office-report/

[Rob Nob]

Originally Posted by sopdx

This is an interesting link. Not sure of the methodology but Portland isn't the worst on the list by far except for construction.

I think it is interesting that Seattle has a pretty high vacancy rate but also a lot of construction.

https://www.commercialedge.com/blog/...office-report/

Looks like at 15.6% Portland has the lowest total vacancy rate in the West. Below the national average even. That's good news.
Seattle is near the top NATIONALLY at 22.5% total vacancy. Eek

[aquaticko]

^^True, but then Seattle prices are a lot higher than other markets of similar vacancy rates, suggesting that prices will drop and construction is probably ready for a dramatic slowdown in the next few years; not inherently a bad thing if the recent boom was just a catch-up.

[subterranean]

Originally Posted by subterranean

When people aren’t willing to pay for the government they need through taxes, you get a fee-base system. If only you knew how painful those cycles are, not only to the county in terms of laying people off and then finally getting staffed up just in time for another crash, but also to development itself. Governments in this area are having a hard enough time filling vacancies with qualified staff.

Developers beg for more staff at development forums. The increased fees were to fund baseline operations and brought the County into closer parity with other jurisdictions. It is tiny compared to the overall budget of most developments and the fees are still low for one-off jobs for homeowners. The biggest fees are System Development Charges, which except for TDT aren’t even going to the County, but service districts.

Originally Posted by PhillyPDX

Yes, "Developers beg for more staff at development forums" is something I was wondering about. Seems to be we need more staff already, and then when fee based structure dries up, we lose staff instead of just providing a faster development process. So IF development picks up soon, BDS won't be near ready enough. I'm hoping (at least for BDS sake), they only let people go after hearing that developers are not planning on a pickup anytime soon. Of course, that would not be a good sign overall for development picking up anytime soon.

Interesting article after our conversation here not too far back.

After Dozens of Layoffs in Portland’s Permitting Bureau, Industry Groups Try to Strike Bargain With City


By Sophie Peel
March 21, 2024 at 4:01 pm PDT

In recent months, the Portland Bureau of Development Services laid off 72 permitting employees in an effort to slow down how quickly the bureau was burning through its dwindling financial reserves. The bureau had to tap into those reserves because it couldn’t cover its operating expenses as revenues plunged due to slowing development activity. Permit fees make up about 98% of the bureau’s budget.

Now, the city’s most powerful industry and business groups are trying to strike a bargain with the city of Portland to stabilize the bureau’s staffing, as developers voice concerns that future layoffs could further slow the city’s permitting process.

“We propose a plan of action that will ensure a stable and predictable permitting agency in Portland—one that doesn’t experience volatile swings in its own solvency with every change to interest rates,” nine groups wrote in a March 20 letter to the Portland City Council. “We are confident that if both builders and city officials are willing to stretch themselves to accomplish shared policy and process objectives, then we will see stronger housing production in Portland.”

Source: https://www.wweek.com/news/city/2024...ain-with-city/

[PhillyPDX]

Interesting analysis showing the huge surge in Portland migration to Clark county since start of pandemic. Doing a little searching the author looks to be an Oregon State economist, so likely a legitimate source.

Most noteworthy is the massive numbers of moderate-high income. It’s not just the rich. The forgotten middle that make too much for “affordable” housing but also can’t afford the high taxes and house prices in Portland, and also probably can’t afford private school.

https://oregoneconomicanalysis.com/

[subterranean]

I have no doubt it's those additional taxes, but remote work has also enabled people to start reducing their Oregon tax liability. You only pay state taxes for the days you actually work in Oregon. To be honest, it sounds pretty appealing getting almost 10% back after deductions. My wife and I would've had an additional $15,000 last year. Having an extra $1250 per month would make a big difference on our budget, particularly the housing we could comfortably afford.

[PhillyPDX]

Originally Posted by subterranean

I have no doubt it's those additional taxes, but remote work has also enabled people to start reducing their Oregon tax liability. You only pay state taxes for the days you actually work in Oregon. To be honest, it sounds pretty appealing getting almost 10% back after deductions. My wife and I would've had an additional $15,000 last year. Having an extra $1250 per month would make a big difference on our budget, particularly the housing we could comfortably afford.

And it reduced the need to cross the bridge. And you can also shop sales tax free (I’m sure no one ever claims their purchases, aside maybe a car or something big).

Go to the Costco by PDX…it’s all WA plates. I recently saw a guy with 2 large tvs get into his WA car. If I was a a suburban guy, no doubt I would think of moving there. Win-win, as the article states, this might be the biggest tax difference in a single metro are, allowing an easy way to pay no income tax and no sales tax if you want.