$326M Data Center Sale Demonstrates Investor Demand for Digital Infrastructure
As one of only a handful of Internet Exchanges in the country, the Pittock Block benefits from a regional locational advantage as well as the fact that 16 individual fiber carriers service the building.
PORTLAND, OR—The $326 million sale of the Pittock Block, a 302,262-square-foot mixed-use asset in Portland’s central business district, represents the highest priced single-asset sale in Oregon since 2015. The buyer is a joint venture between Harrison Street and 1547 Critical Systems Realty, and the seller was Alco Investment Company.
The Pittock Block is named after Portland publishing magnate Henry L. Pittock, whose house was located on the property until construction. The building was developed by a subsidiary of the Northwestern Electric Company and several other investors primarily as an office building with an electrical and steam generation plant in the three-story sub-basement.
In 1986, Alco Investment Company purchased the property as a distressed asset with investment advisor Leavitt Shay as the developer. Shortly thereafter, several long-distance companies expressed interest in leasing space at the building due to its proximity to one of the major telecom companies that had a regional switching hub located near the building. This made the Pittock Block the primary neutral cross-connection point in the Portland metro.
“About the same time, the Internet became more widely adopted and Internet Service Providers that were also interested in gaining access to the neutral telecommunications infrastructure built data centers in the building,” said Doug Rosen, Alco chief investment officer. “As a result, we oversaw a major retrofit of the building in 1999 that set the building up to take on these types of tenants.”
The Pittock Block now provides a combination of data center space, office suites, telecommunication and retail space. It is one of only two primary Internet exchanges for the entire Pacific Northwest, hosting cloud-based and e-commerce companies, and is one of only 10 such exchanges nationally. In addition, the property contains 16 fiber-optic carriers and 179 other service providers exchanging data in its self-managed carrier-neutral Meet-Me Room.
JLL capital markets represented the seller and procured the buyer. The JLL seller rep team was led by managing director Buzz Ellis, managing director Conan Lee and director Adam Taylor.
“The data center segment of the market has performed extremely well during the pandemic, if not better than pre-COVID levels,” Ellis said. “We anticipate investor interest to remain strong in alternative investment asset classes such as data centers, which will continue to drive record pricing.”
The asset is strategically located within a Qualified Opportunity Zone at 921 SW Washington St. in Portland’s West End neighborhood. Boasting a Walk Score of 100 and a Transit Score of 94, the property is just a short walk from Pioneer Courthouse Square, numerous retail stores, dining options and Portland’s mass transit system. Portland’s central business district is home to many of the world’s largest technology firms, which fuels the local demand for data center and cloud space.
Regionally, Portland has become a strategic data center location between San Francisco and Seattle, and globally, Portland offers low latency to the Midwest, East Coast, Asia Pacific, EMEA and Latin America. Additionally, Hillsboro, located 18 miles west of the property, is one of the fastest growing data center submarkets in the world.
“Portland is a favorable data center market due to its connectivity to Asia via numerous trans-Pacific fiber-optic cables,” Taylor tells GlobeSt.com. “As one of only a handful of Internet Exchanges in the country, the Pittock Block benefits from this regional locational advantage as well as the fact that 16 individual fiber carriers service the building. The low latency that tenants at the Pittock Block experience as a result of this connectivity has historically driven demand from tenants and with select investments in the asset, the new owners will have the opportunity to increase the property’s data center infrastructure and capacity in the years to come, capitalizing on forecasted growth in that segment of the economy and market.”
The perseverance and strength of data centers/cloud storage during COVID-19 has been demonstrated by the increased use of seamless technology in the work-from-home model, according to a report by JLL. While the pandemic slowed activity, pent-up demand for leasing is expected to take off in early 2021, the report indicates.