Portland’s retail market is the second strongest in the country with retail sales growth of 1.6% (APT Index).
Statewide employment is 1,787,100, above pre-recession levels, with current unemployment of 6.0%. Oregon’s population passed the 4-million mark this year and employment in the Portland MSA is 1,127,100 with unemployment of 5.3% (October 2015).
Portland experienced a record 6,868 new single-family housing units and 6,484 new multifamily housing units over the past 12 months (U.S. Census BPS). Year-to- date home sales increased 20.6% and housing prices increased 6.1% (October 2015, RMLS). The Case Shiller Index for the Portland Metro area has surpassed 2007s pre-recession high, reaching 187.96 in September.
Portland’s apartment market has continued to reach new milestones with annualized rent increases of 14% and a vacancy rate of less than 3% (Multifamily NW) despite 11,000 new apartments hitting the market since 2013 (Oregonian). In October, American Assets Trust completed the 657-unit Hassalo on Eighth in the Lloyd District, featuring one of the nation’s largest bicycle parking facilities, and was 51% leased as of December 10. Work will soon begin on 1,030 additional units at the site along with 980 more units three blocks east.
Portland’s office market has the 3rd lowest vacancy rate in the country (9.1%) despite 270,000 square foot of new space coming online in the 3rd quarter. Office rents have risen 9.8% year-over-year, with a 6.4% increase in the central city in the 3rd quarter alone (Jones Lang LaSalle). TMT Development’s Park Avenue West will open early next year with 211 luxury apartments, 16,480 square feet of retail space, and 220,889 square feet of fully-leased office space in Downtown Portland.
While not surpassing the million square-foot pre-recession years, the retail market is strong, constrained only by the lack of available land for new construction. The retail vacancy rate in the Portland is just 6.08% (Q3 ‘15, NAI/NBS).
Earlier this year, Gramor finished the 90,000 square foot Timberland Town Center, anchored by Market of Choice, and the center is now 92.25% leased.
In Tualatin, CenterCal completed Nyberg Rivers, anchored by Cabela’s, New Seasons, and HomeGoods, and is now 97% leased with Red Robin recently open and Mud Bay and Cracker Barrel opening in 2016.
In Clackamas County, Gramor Development broke ground on Happy Valley Crossroads, a 198,000 square foot shopping center anchored by Fred Meyer with over 80% of shop space leased or in negotiations. Future tenants include Hop Jack’s, Gentle Dental, Pizza Factory, The Barbers, Brow Betty, and Great Clips. The center will open in Fall 2016.
In the Parkrose neighborhood of Northeast Portland, construction is underway with a 22,300 square foot Grocery Outlet and Dollar Tree next to Parkrose Hardware. This development will eliminate one of Portland’s remaining food deserts, providing easy access to groceries for area residents.
Downstate, Phase II of Regency Centers’ Northgate Marketplace in Medford, Oregon will break ground this spring with construction of 178,990 square feet of retail, restaurant, and shop space, bringing the square footage of the center to 259,890 square feet. Phase II is expected to open in Fall 2016.
The only negative news in the market comes from potential store closures due to bankruptcy or mergers. Haggen’s acquisition of 146 former Albertsons and Safeway stores, which included 20 in Oregon, resulted in 11 stores in Oregon now shuttered, one original Haggen closed, and all remaining Oregon & Washington stores up for sale.
Walgreens announced plans to acquire Rite-Aid to create a nearly 13,000-store chain, although “there could be a movement to close old, larger Rite Aid stores as leases expire” or to address FTC concerns. Staples also announced plans to purchase the combined Office Depot & OfficeMax company for $6.3 billion. Still pending antitrust approval, the deal will result in numerous closures.
The Oregon retail market is strong with limited future inventory coming to market. With
proposed closures due to consolidation, additional inventory will be welcomed to the market and enable existing retailers to continue to expand.