Portland-Area Industrial Market OK, Considering

A few dot-gones with industrial needs have disappeared or been swallowed by consolidation or reorganization, leaving behind large sublease space, according to the report, but land values remain extremely strong and prices continue to rise. "Developers and users continue to review any available industrial land for future development with the expectation that this current economic downturn will be short-lived," states the report, "and that by the end of this year the high-tech manufacturing sector will be back into a growth mode."

In addition, finds the report, industrial buildings have maintained their value. The report cites a recent study by Integra Realty Resources ranking Portland in the top ten markets in the country for industrial investment with an anticipated growth in value of 8% through 2003.

Looking at specific markets, Grubb & Ellis says the southeast industrial market is gaining momentum thanks to the impending opening of the Airport light-rail line and increased development activity east of I-205 to Gresham. "Land prices remain firm at $4.75 per sf with some new deals currently in play rumored to be at $5.75 per sf," finds the report. "This has kept speculative development to a minimum and led to an increase in user deals."

The most significant activity in the corridor is occurring on the eastern edge of the Columbia Corridor at Southshore Corporate Park, which has seen significant build to suit and leasing activity. Next door, Panattoni Development has cut a deal with the Portland Development Commission that will lead to Riverside Parkway Corporate Center, for which the Sacramento-based developer reportedly has a 250,000-sf commitment from an unnamed assembly-manufacturing plant. Also, Boyd Coffee is breaking ground on a 132,000-sf distribution and warehousing facility in Gresham, according to the report.

Closer in, Columbia Sportswear has announced plans to expand its warehouse facility in Rivergate and Fort James recently renewed its lease on 500,000 sf at Kelley Point. In Wood Village, Merix announced a delay in the opening of its new manufacturing plant until early next year.

South of Portland, Tualatin is losing its second-tier status and gaining serious consideration from users and developers as a prime business location, according to the report. "As the last frontier along I-5 with any developable land left, it follows that Tualatin has quickly emerged as a hotspot for high-tech manufacturing and development," states the report. "The catalyst may be the recent announcement by Novellus to locate its new headquarters facility on the former Oki Semiconductor site."

Novellus' development could reach 1.4 million sf of office and industrial and will attract a number of vendors and suppliers to the area, the report predicts. "Tualatin boasts the majority of the remaining developable land along the I-5 Corridor, proximity to an excellent workforce, residential communities and commercial services and no existing building moratoriums," the report states. "Look for continued increasing interest in Tualatin from both developers and users."

To the west of Portland in the Sunset Corridor, despite posting the strongest absorption numbers in the region, activity has slowed considerably and vacancy has gone up almost a full point to 8.8%. Much of the absorption can be attributed to Intel's delivery of Jones Farm 5, and two build-to-suit projects at Cornelius Pass Corporate Center.

Fifteen projects are currently under construction in the corridor and will deliver over 730,000 sf before the end of 2001. "Of this space, close to 450,000 sf has already been leased," finds the report, "but add the 280,000 sf of new space to the 1.6 million sf of vacant space and the close to 400,000 sf of sublease space in the corridor, and we will see an increase in the vacancy rate before the end of the year."