WESTERN SNAPSHOT, APRIL 2009

Portland, Oregon, Retail Market

While large swaths of the country have suffered from the economic downturn, Portland’s retail market has remained relatively stable. Overall vacancy rates rose 0.5 percent from third quarter 2008 to 5.3 percent, and the overall average asking rate has remained steady at $18.48 per square foot NNN. Despite these facts, tenants are being successful in using the current economic conditions to gain greater concessions as landlords face an uncertain future.

On the development front, activity remains strong in the central business district. Mixed-use projects include Park Avenue West, a 22-story development by TMT Development that will be delivered during first quarter 2010, and 12th & Washington, another 22-story project by Gerding/Edlin that will be delivered during second quarter 2009. Traditional office projects include Shorenstein’s 16-story First & Main (first quarter 2010 delivery) and uniquely designed, nine-story The Weave (second quarter 2010). These projects will provide more than 70,000 square feet of retail space when they are completed.

Another bright spot is the continuing redevelopment of Portland’s inner eastside. Local developers have found success in rehab and infill projects that are tenanted with talented local and regional companies that provide goods and service to the neighborhoods. Portlanders are loyal to their local businesses, and these businesses are reporting good activity albeit at a decreased level from previous years.

The story of suburban projects is decidedly different. Both The Rivers, a 650,000-square-foot power/lifestyle hybrid center planned for the south end of the metro area, and The Landing At Evergreen, a 340,000-square-foot project located in the Vancouver submarket, have both been delayed due to the lack of activity from anchor tenants.

For the retail investor, cap rates remained unchanged at 7.81 percent for 2008. It is expected that cap rates will rise in 2009 as national retailers continue to close stores.

Dean Wier is a senior associate, retail properties, for Norris & Stevens Inc./TCN Worldwide in Portland.

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