The retail real estate market in Portland continues... Portland, Oregon is not immune to the economic meltdown of the rest of the country. While the state’s population increased by 1.2% over the past year to approximately 3.8 million, statewide employment is down 1.9% from October of last year to 1,729,400 employees resulting in an unemployment rate of 7.3%. In Portland, year to date housing sales are down 39.6%, and the median sale price is $275,000 compared to $280,000 last year at this time.

Fortunately, retail projects that have recently come online are leasing well. The 203,000 square foot Nyberg Woods in Tualatin, anchored by Best Buy, PetSmart and Office Max is 99% leased. With the opening of Petsmart at Cascade Station, the 800,000 square foot center anchored by Ikea, Best Buy, and Marshalls, is 90% leased. The 196,000 square foot Fred Meyer anchored Grand Central in Vancouver is 85% leased and the 71,000 square foot Tanasbourne Market Center in Hillsboro, anchored by Whole Foods, is 100% leased. Also, the 123,600 square foot expansion of Cascade Plaza in Beaverton anchored by Best Buy, Ross Stores and PetSmart, is 84% leased.

Portland’s urban area is also doing well. Safeway just opened a 40,000 square foot store on Lovejoy Street at 14th Avenue in the Pearl District and L.A. Fitness will soon open a 56,000 square foot club across the street. Northwest 23rd Avenue has new national retail stores including Free People (Urban Outfitters) and great new locals such as Manor and Two Tarts. Downtown, Juicy Couture, Betsey Johnson and Kate Spade have opened stores in Pioneer Place with other retailers examining the market for future openings. With this strength, owners of downtown buildings are planning to upgrade their retail space including The Morgan Building (Broadway & Washington), The Yeon Building (5th and Alder), The Mohawk Building (3rd and Morrison) and the former Greve Building (Park and Morrison). Collectively this will bring 62,000 square feet of upgraded space to the downtown retail market in the near future.

In the south end of downtown, Portland State is adding 22,000 square feet at the base of it’s Recreation Center at 6th and Harrison, and the Cyan (394 residential units) and the Ladd (332 residential units) will add over 12,000 square feet of retail space on the first floor of these mixed use projects.

This positive news is offset by disappointing sales reported by many of the most aggressive retailers of the past few years. Comparable store sales are down 4.8% at Target, 7.6% at Best Buy, 14% at Abercrombie and 20.5% at Cold Water Creek. Many other retailers are closing stores; there are currently eleven big boxes in the Portland area with 420,203 square feet available for lease.

Weak retail sales coupled with challenging financial markets will result in limited new retail inventory coming to market in the near future. Target will construct a 137,926 square foot store next to Cascade Station and Whole Foods should open its 37,851 square foot store on NE Sandy Boulevard. CenterCal should get underway with the 773,000 square foot Rivers at Oregon City and Gramor is proposing Progress Ridge, a 200,000 square foot center in Beaverton to be anchored by New Seasons and Cinetopia.

Next year, retailers will close additional stores and the vacancy rate will go up, perhaps as high as 8%. Lease rates at "Main and Main" in downtown will be $60 to $65 per square foot and in surrounding urban markets will range from $25 to $35 per square foot. In the suburban market, shop rents will be $20 to $30 per square foot and anchors will pay $14 to $16 per square foot. While these rates are down from the peak in 2006-2007, limited new retail product will enable us to absorb the existing inventory without reaching excessively high vacancy rates. So to sum up, the retail market in Portland Oregon continues...