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Portland CRE Trends and Regional Market Overview
Why Portland?
Portland – Why all the hype?
#1 #1
#1
#1 #1
#1 #1
#3Overall real estate
prospects – ULI
Emerging Trends
in Real Estate 2017
#1
Healthiest EconomyBloomberg - Economic Evaluation of
States 2016
Top Moving
DestinationUnited Van Lines
National Movers Study
2013-2015
Destination for migrating
workers from SFLinkedIn 2017
Food & Drink Capital of AmericaThe telegraph 2016
Best Place to Live in USMoney magazine 2015
US City for Quality of
LifeMonocle 2015
Best Food City
in America Washington Post - 2016
Best AirportTravel + Leisure – America’s Best Airports
2013-2016
-2%-2%
0%0%
0%1%1%1%1%
1%2%2%
2%3%
3%3%
3%3%3%4%
4%4%4%4%
5%5%5%5%5%5%5%5%
5%5%6%
6%6%6%
7%7%
7%7%
8%8%8%
8%9%
9%
14%
Detroit
San Jose
Cleveland
Baltimore
Oklahoma City
Pittsburgh
Albuquerque
Columbus
Memphis
Tucson
Omaha
Kansas City
Fort Worth
Louisville
Indianapolis
Honolulu
Tulsa
St. Louis
Irvine
San Antonio
Nashville
Orlando
Las Vegas
Milwaukee
Charlotte
Philadelphia
Houston
New York
Tampa
Chicago
Washington DC
Los Angeles
Denver
Salt Lake City
Dallas
El Paso
Minneapolis
Paradise, NV
Jacksonville
Seattle
Sacramento
San Diego
Austin
Atlanta
Phoenix
Raleigh
Boston
San Francisco
Portland
Miami
Portland job growth stands out
The Portland economy is among the fastest growing in the US
10%job growth
America’s fastest-growing cities 2017 – ForbesGMP growth 2016
#2
#1
#4#6
#5
#9 #3
#10#7
#8
Employment growth by US City2013-2015
A point in time
Sustained growth
Source: BLSSource: Forbes, Axiometrics
1%4%
5%6%
9%10%
11%11%12%12%12%12%12%13%13%
13%14%14%15%
15%16%16%16%17%17%
18%18%
20%20%21%21%21%21%
22%22%22%23%23%23%23%24%
26%27%
28%28%28%29%
34%34%
37%
AlbuquerquePlano
Virginia BeachMemphisLouisville
Long BeachSacramentoSan AntonioJersey City
IndianapolisArlington
Kansas CityScottsdale
Los AngelesChicagoOmaha
MinneapolisMilwaukee
PhoenixFort Worth
Colorado SpringsOakland
Las VegasNew York
San FranciscoOklahoma City
HoustonRaleighBoston
San DiegoDallas
AtlantaEl Paso
CharlotteColumbusSan Jose
TampaNashville
SeattleFremont
New OrleansJacksonville
PortlandBaltimore
IrvinePhiladelphia
Washington DCDenver
MiamiAustin
-5%0%
1%1%1%
2%2%2%
2%3%3%3%3%3%3%
4%4%5%5%5%
5%5%
6%7%7%7%7%7%7%7%7%8%8%8%8%8%8%9%9%
10%10%10%
11%11%
12%12%12%12%
13%14%
DetroitBaltimoreMemphis
MilwaukeeChicagoWichitaTucson
AlbuquerqueLong BeachPhiladelphia
OmahaTulsa
LouisvilleVirginia Beach
Kansas CityIndianapolis
New YorkEl Paso
Los AngelesFresno
SacramentoJacksonville
ArlingtonLas VegasSan Diego
OaklandMesa
MinneapolisSan Francisco
San JoseBoston
ColumbusPhoenixPortland
NashvilleDallas
Oklahoma CityColorado Springs
HoustonAtlantaMiami
San AntonioRaleigh
Washington DCFort Worth
CharlotteNew Orleans
SeattleDenverAustin
Portland demographics are enviable
27%job growth
Population growth by US City2010-2015
Growth of college graduates of working age by US City2013-2015
Sustained growthSought-sfter demo
8%population growth
US Avg
Source: BLSSource: BLS
Median HH income growth by US City2010-2015
Workers moving where income buys more
Portland is a net attractor of talent
Where SF workers are moving - PortlandLinkedIn 2017
-10%-8%
-7%-6%
-5%-4%-4%
-3%-3%
-2%-1%
0%1%1%1%
2%2%
3%3%
3%4%4%4%4%4%5%5%5%5%5%6%6%
7%7%
8%8%8%
9%10%10%10%10%
11%11%
14%18%18%19%
21%23%
Las VegasMemphis
DetroitAlbuquerqueNew Orleans
TucsonVirginia Beach
FresnoJacksonvilleLong BeachIndianapolis
CharlotteWichita
MiamiMesa
Los AngelesCleveland
SacramentoSan Antonio
Colorado SpringsDallas
San DiegoChicago
TulsaHouston
MilwaukeeRaleigh
New YorkColumbus
PhoenixBaltimore
Oklahoma CityFort Worth
BostonOmaha
MinneapolisKansas City
LouisvilleSan JoseOakland
PhiladelphiaNashville
AtlantaEl Paso
Washington DCSan Francisco
DenverPortland
AustinSeattle
19%Income growth
7 times US growth
Source: US Census
Affordability keeps Portland a winner for net migration
Portland has what millenials want…
-4%
Portland 3%
Seattle
22%
Boston
24%
20%
San Diego
7%
LosAngeles
23%
61%
San Jose San Francisco New York
Cost of Doing Business
The cost of doing business in Portland is 4% lower
than the national average.
Low cost of living
Cost of living index, national
average = 100.0
164.0San Francisco
156.1San Jose
132.3San Diego
132.5Boston
185.8New York
121.4Seattle
111.3Portland
136.4Los Angeles
Relative affordability
Source: US CensusSource: 2016 data, ULI, Bureau of Economic Analysis
Multifamily fundamentals among strongest in US
Portland has what millenials want…
2.2
Housing permits have not kept up with population growth
4.0
SSC1,029
units
CBD1,241
units
East1,981
units
NW1,013
units
MF construction activity concentrated in urban areas
Source: Housing Bureau Source: Housing Bureau
Strong rent growth - maintaining comparative affordability
Portland has what millenials want…
Vacancy remains low, rent growth among highest in US
10%43.5%
29.9%
37.2%
35.5%
23.2%
22.7%
32.0%
10%
15%
20%
25%
30%
35%
40%
45%
50%
4Q96
4Q97
4Q98
4Q99
4Q00
4Q01
4Q02
4Q03
4Q04
4Q05
4Q06
4Q07
4Q08
4Q09
4Q10
4Q11
4Q12
4Q13
4Q14
4Q15
4Q16
Los Angeles Oakland Silicon Valley San FranciscoSeattle Portland San Diego
Despite rising costs, Portland remains affordable
Source: AxiometricsSource: YARDI
Portland has the most diverse economy on the West Coast
Portland economic clusters drive growth
Software
Clean Tech
Athletic & Outdoor Industry
Advanced Manufacturing
Diversity of regional economy
Index measures how closely a region’s economy resembles
that of the whole U.S., with a score of 1.0 representing an
exact match to the U.S. economy
Source: JLL Research, Moody’s Analytics
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Source: JLL Research
Portland’s office market observations
Portland has what millenials want…
1
2
3
Tech firms have been driving
demand in the office market Tech makes up between 25-30% of all leasing
13.6% 19.3% 30.6% 26.7% 27.4% 26.4%0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2011 2012 2013 2014 2015 2016
Tho
usan
ds
Tech Other Finance Govt Health Care
Insurance Law Mfg Other Svcs PBS
Construction has surged with
virtually all activity in urban core 2016 marked 1st year in 6 where supply exceeded demand
Rents far exceed previous
cyclical peaksOverall rents were up 13% in 2016
Tech leasing has doubled since 2011, now stable
Source: JLL Research
Portland office market one of tightest on West Coast
Still remains one of the most affordable
Portland has what millenials want…
$23.76 $27.13 $27.56 $31.44 $32.12 $32.51 $34.90 $38.27 $41.62 $47.88 $58.02 $73.65
13.2%
15.1%
9.4%
12.9%
11.3%
12.5%
9.2%
14.6%
7.3%
12.4%
10.7%
8.2%
$0
$10
$20
$30
$40
$50
$60
$70
$80
0%
2%
4%
6%
8%
10%
12%
14%
16%
Ave asking rents Vacancy
Source: JLL Research
Construction concentrated in Urban markets – mixed-use
Top Leases of 2016 show increasing size
AR
K
P
Field Office
299,056 s.f.
$29.00-$32.00 NNN p.s.f.
Macy’s Building
158,500 s.f.
$35.00-$37.000 NNN p.s.f.
Broadway Tower
171,067 s.f.
$31.50-$35.50 NNN p.s.f.
Towne Storage
108,750 s.f.
$31.00-$33.00 NNN p.s.f.
Major urban development underway
101,400
82,140
78,000
58,000
53,793
50,000
47,788
45,617
45,313 Source: JLL Research
Office sales – volumes elevated, cap rates all-time low
Increased liquidity
Relative value
Core Assets
Value-add Assets
$377
$142 $123$50
$364
$601
$702
$1,826
$518
$180 $200$282
$247
$437
$638
$1,076 $928
$257
9.5%
8.3%
7.4%
6.9%6.6%
5.9%
6.8%
7.2%
8.7%
6.5%
7.7%
7.0%6.6%
5.6%
4.8%
5.4%
0%
2%
4%
6%
8%
10%
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 17
Mill
ions Volume in $M
CBD Core Cap Rates
High water mark and avg price per SF – CBD Core assets
Recent notable saleCBD - Class A
1320 Broadway
Buyer: Credit Suisse
Seller: URG/Clarion
Price p.s.f.: $541
Price: $95,000,000
Cap rate: 4.9%
Portland’s industrial market observations
1
2
3
Development takes center stage,
both BTS and specBigger projects in more remote locations to accommodate larger tenants
Portland population growth
driving demand for distributionIncrease in same day/last mile distribution has pushed demand to new areas
Rents far exceed previous
cyclical peaksRents are up 11.8% YOY reaching new high-water mark for Portland
24,854 21,706 24,748 23,095 25,761 35,146 38,227
11
7
1213
12
20
18
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2010 2011 2012 2013 2014 2015 2016
5
10
15
20
Avg Size Lease # of leases > 100K
Industrial tenants getting bigger and more of them
Portland Industrial market vacancy at a 25-year low
Despite surging construction pipeline, vacancy remains at cyclical low
Portland has what millenials want…
6.7%
8.1%
10.0%
11.6%
8.8% 8.6%
6.8%5.9%
6.7%
9.1% 9.2%8.6%
7.4%
5.6%4.8%
3.8%3.4%
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
0%
2%
4%
6%
8%
10%
12%
14%
Construction Vacancy
Source: JLL Research
Construction moving farther afield, bigger projects
Top leases of 2016 show increasing size
Majestic Brookwood
441,280 s.f.
Amazon
Subaru
600,000 s.f.
BTS for Subaru
I-5 Logistics Center
1,676,800 s.f.
Vista Logistics Park
733,232 s.f.
NORTH
Industrial development getting larger and in new locales
303,360
234,960
210,000
205,303
190,600
175,100
162,240
157,038
154,648
Portland CBD
Hillsboro
Beaverton
Gresham
Wilsonville
Vancouver WA
Industrial sales – cap rates all-time low
Portfolio Sales
Limited availability
Owner/users lose
$172 $199
$454
$377
$84
$40 $28 $32
$173
$103
$320
$732
$591
$28
8.9%
7.7%7.9%
6.8%7.0%
9.5%9.2%
10.7%
7.1%6.8%
7.1%6.2% 6.1%
4%
5%
6%
7%
8%
9%
10%
11%
12%
$-
$100
$200
$300
$400
$500
$600
$700
$800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 17
Volume in $M
Avg Cap Rate
Diversity of population –
need more diverse for
tech hiring
Future of Portland…
1
2
3
Housing affordability –
can’t lose that advantage
Regulatory issues –
inclusionary zoning and
other costs
Buzz Ellis – JLL
Patricia Raicht – JLL
Twitter @PatriciaRaicht
Thank you
Projects
Urban Development + Partners Slate – 75 residential units
39,795 SF commercial space
Delivered Oct 2016
SpechtICDC
492,554 SF warehouse & distribution space
Delivered 2015
Capstone PartnersGrant Park Village – 378 residential units
48,000 SF commercial space
Delivered Oct 2016 – Phase II May 2018
