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PORTLAND, OR-Shorenstein Properties of San Francisco this week broke ground for this city’s next Downtown office building. Names for the intersection it will occupy one block from Tom McCall Waterfront Park, First & Main will be a 16-story, 355,500-sf (net rentable) building.

The rentable space breaks down to 346,500 sf of office space 20,000 sf of ground-floor retail. In addition to the retail, which will include restaurants, amenities will include a large lobby with casual seating and wireless Internet access and bike storage and shower facilities. Delivery is scheduled for early 2010.

Shorenstein has retained Gerding Edlen Development, GBD Architects and Hoffman Construction as the local development team, which will construct the building with LEED certification from the US Green Building Council in mind. Norris, Beggs & Simpson and Urban Works Real Estate are the third-party office and retail listing agents, respectively. The annualized full service asking lease rate is expected to in the low to mid $30s per sf.

When GlobeSt.com wrote about the project in February, Shorenstein EVP Charlie Malet told GlobeSt.com that Shorenstein is moving ahead without an anchor tenant because vacancy is in the single digits and shrinking and no other speculative Downtown office projects are under construction. Preliminary third quarter data from Grubb & Ellis suggest that the CBD class A office vacancy will drop again this quarter by approximately 50 basis points to 5.1%, while the weighted average asking rental rate rose $0.45 to $25.15 per sf.

While there are no other speculative Downtown office projects under construction in the Downtown core, there are two adjacent office projects under construction at the north end of the CBD, aka the Pearl District, which are scheduled to be delivered in the second half of 2008. The larger of the two is the Lovejoy, which will have 88,000 sf of office space. The other, known as Machineworks, will have 66,000 sf of office space. Triple-net asking rates for each are in the mid $20s per sf per year.

While not your classic Downtown high rises, several Downtown professional firms have relocated to the Pearl District, a former warehouse district that is now a mix of low- to mid-rise offices, condos, high-end retail, restaurants and a few remaining industrial uses. G&E research director Patricia Raicht tells GlobeSt.com that the new buildings there will be attractive to larger users because “there are literally only one or two other options in the entire CBD for a block of space larger than 20,000 sf.”

The 4.2-million-sf portfolio includes 42 buildings and three development parcels, one Downtown, that could support an additional 550,000 sf of development. The purchase price was approximately $1 billion.

The First & Main site was one of three development parcels included in Shorenstein’s $1-billion acquisition of Equity office Properties’ Portland portfolio, which included 46 buildings. The transaction was the largest in Portland’s history and Shorenstein’s history.

The portfolio includes two Downtown office buildings (the 23-story, 363,000-sf Congress Center and the 19-story, 270,000-sf Umpqua Bank Plaza); Lincoln Center, a seven-building, 735,000-sf class A office park across Interstate 5 from Kruse Way in Tigard; Nimbus Corporate Center, a 17-building, 690,000-sf flex-office campus in Beaverton; four buildings in the John’s Landing submarket immediately south of Downtown Portland, including River Forum I & II and RiverSide Center; and a huge concentration in the Kruse Way submarket, which is approximately 10 miles south of Downtown Portland in Lake Oswego.

The Kruse Way submarket has historically been one of the tightest in the region and also boasts the highest rental rates. Shorenstein’s 17-building, one-million-sf portfolio there gives it at least a 75% share of the submarket, local sources tell GlobeSt.com. The two other development parcels in the portfolio are in the Kruse Way submarket. One of the sites is pre-approved for a five-story, 110,000-sf office building called Kruse Oaks III and the other is pre-approved for a four-story, 90,000-sf building called Kruse Oaks IV. As of earlier this year, the plan was to start construction this year and complete the buildings 18 months later.

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