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More evidence Portland's apartment market is back
South Waterfront development bodes well for the future
Portland Business Journal - May 18, 2007
by Wendy Culverwell
Business Journal staff writer
In the biggest sign yet that Portland's rental market is regaining its legs, Trammell Crow Residential has broken ground on a $90 million apartment tower in the South Waterfront District.
The 22-story tower will have 294 apartments and is slated to open in two years. It's located on the south side of the district's undeveloped park.
Trammell Crow is giving it the name it uses for its most luxurious properties, Alexan. The premier tag is expected to carry premier rents, anticipated at $2 or more a square foot. When it opens, Alexan South Waterfront will bring a novelty to an already novel district: the opportunity to rent a home in the region's latest emerging neighborhood. To date, the district has gained a medical facility in Oregon Health & Science University's new Center for Health and Healing, and a handful of condominium towers, most still being built.
Design-wise, Alexan South Waterfront echoes its condominium neighbors to a degree. It features a slender tower set atop a five-story podium.
But there is a major difference: The economics of apartments didn't support major excavation, so the parking garage is above ground, concealed behind units and many screens.
"We've spent a lot of time hiding the parking," said Thomas DiChiara, managing director for Trammell Crow Residential.
To DiChiara, the pool of potential renters interested in South Waterfront living is huge. The Portland Aerial Tram connects the waterfront and Marquam Hill, bringing South Waterfront into play for the estimated 12,000 people who work on the hill.
The Portland Streetcar, which will run past two sides of the apartment site when the latest extension opens this summer, provides links to downtown and Northwest Portland.
Trammell Crow is optimistic enough about South Waterfront that it is seeking a second site for another apartment project.
The Alexan South Waterfront is immediately south of the district's major park -- to be developed in 2009 -- in the block bordered by Southwest Moody and Bond avenues and by Southwest Gaines and Lane streets.
In addition to being the first apartment project at South Waterfront, it will be Trammell Crow Residential's first time to pursue the U.S. Green Building Council's Leadership in Energy and Environmental Design "Silver" certification for extensive use of energy and water-saving designs.
Trammell Crow's partners include Ankrom Moisan Architects, Walsh Construction, Green Building Services and North Macadam Partners, which sold it the site two years ago. U.S. Bank provided the loan for the project and Trammell Crow and Massachusetts Mutual are the equity investors.
Urban Works Real Estate is representing the 14,000 square feet of retail space designed into the podium base.
Alexan South Waterfront will not contain below-market units because Trammell Crow Residential failed to win property tax abatements for the project.
The tax breaks are given in exchange for cheaper rent on some units and are used by municipalities to compel builders to include subsidized or affordable units in their projects.
The Alexan South Waterfront is the first for-rent project at Portland's newest and tallest neighborhood and its start signals a resurgence in interest in apartment construction after a drought of several years, said DiChiara.
It's been four years since construction started on any new apartment project in the downtown Portland area.
The most recent addition, The Louisa, a 242-unit project by Gerding Edlen Development Co., opened in the Pearl District in 2005, with construction starting about two years prior to that. Trammell Crow's most recent downtown apartment was the 10th at Hoyt, which opened in the Pearl District in early 2004.
As buyers -- and bankers -- flocked to condominiums, apartment rents stagnated and vacancy rates climbed. To entice renters, landlords offered free rent and other concessions and had little room to raise rents.
All that changed around 2006. The housing market cooled but newcomers kept coming anyway, putting pressure on for-rent housing. Apartments that hadn't been converted to condominiums suddenly started to look good.
DiChiara said Trammell Crow Residential tallied an uptick in occupancy rates -- and rents -- about eight months ago.
"We've seen strong rent growth and expect it to continue," DiChiara said. "People keep moving here. All the fundamentals are in place."
The Metro Multifamily Housing Association, which tracks the apartment industry, reports a hot apartment market for landlords.
The overall vacancy rate for the Portland/Vancouver area sank to 3.23 percent in February, a 4 percent improvement from the previous survey conducted in fall 2006. Association members report that empty units re-rent faster and they are having an easier time boosting rents to keep up with rising costs, including taxes, staffing, equipment and utilities.
The new effort at South Waterfront is one of a handful of big projects that indicate Portland's apartment market is attracting interest from investors, said Greg Frick, of Hagerman Frick O'Brien Investment Real Estate LLC. His Portland firm specializes in multifamily brokerage.
Opus Northwest's decision to turn its Ladd Tower project in downtown into apartments, after originally conceiving it as a condominium project, is another good example.