Portland Retail Sales Top the US Level
Hefty retail demand leads to strong investor interest in well-located assets such as Oswego Village, a 102,809-square-foot Whole Foods 365-anchored retail center in suburban Lake Oswego, OR.
LAKE OSWEGO, OR—An influx of new residents and visitors to Portland is boosting demand for retail. Approximately 21,000 individuals are expected to migrate to the metro this year, drawn by the market’s strong job creation, according to a second-half 2018 retail report by Marcus & Millichap.
Tourism has also increased for eight straight years. The growing consumer base is contributing to a 7.7% jump in retail sales, well above the US level of 5.4%. As revenue improves, retailers are on the lookout for quality space.
Total completions for 2018 will surpass last year’s deliveries but are still below the annual average for the cycle. Construction is taking place largely outside the urban core, with almost 80% of arrivals going to the submarkets of southwest Portland, the Interstate 5 Corridor and Clark County.
One recent example of retail’s appeal is the sale of Oswego Village, a 102,809-square-foot Whole Foods 365-anchored retail center in the affluent suburban Portland community of Lake Oswego. Asana Partners purchased the asset at an undisclosed price, free and clear of existing debt.
In addition to the Whole Foods 365 anchor, the 84.5%-leased Oswego Village is anchored by Ace Hardware and home to Tuesday Morning, North Lake Physical Therapy, Banfield Pet Hospital, Great Clips and Subway. The five-building center has limited competition in the area with only five other grocers in the submarket and the nearest accessible hardware store is more than five miles away.
The Holliday Fenoglio Fowler LP team marketed the property on behalf of the institutional seller. The HFF investment advisory team included senior director Nick Kassab and managing director Bryan Ley.
“Oswego Village is a generational piece of real estate,” Kassab said. “Asana Partners will make significant enhancements, including aesthetic upgrades and attracting retailers that complement and connect with the surrounding community. As a resident of Lake Oswego, I am personally very excited to see this center reach its full potential.”
Situated on 7.7 acres at 11 State St., the center is positioned along State Highway 43, the main thoroughfare that connects downtown Portland to the southern suburbs, which exposes the center to more than 31,800 vehicles per day. Lake Oswego has approximately 40,000 residents and an average annual household income of $158,761.
“Opportunities to buy top-tier and well-located grocery-anchored centers with NOI growth potential are rare in the Pacific Northwest and to a greater extent the entire West Coast,” Kassab tells GlobeSt.com. “There’s been a large amount of capital raised this year to acquire these types of centers and we’re now seeing it deployed, particularly into the coastal markets. The high demand for Oswego Village is another great example.”
In addition, the extremely low vacancy is supporting healthy retail rent gains, says the Marcus & Millichap report. Favorable demographics and below-average construction activity have enabled vacancy to decline steadily during the past seven years to a rate of 3.3% in 2018. Several areas of the market have minimal availability of sub-2%, with almost no vacancy for multi-tenant space in the centrally located CBD and Lloyd District submarkets. As availability falls, rents are improving. Acute vacancy and minimal completions are driving above-market growth rates in Northwest Portland and on the Westside.