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Over the past two decades, one third of all industrially zoned parcels in the Portland-metro region have been converted to a different use, according to the Port of Portland.

Lower returns on investments, expensive cleanups and zoning restraints have deterred developers and from buying and developing industrially zoned land, leading to limited availability of shovel-ready sites. But an Oregon business group and commercial real estate professionals believe this could change if the state government were to become an industrial land developer.

The Oregon Business Council is asking legislators to create a state-run industrial land development department. It would buy industrially zoned parcels and guide them through processes needed before development could take place.

The state requires each urban growth boundary to maintain a 20-year supply of industrial land. But according to Brian Owendoff, managing director of CB Richard Ellis, the Portland-metro area has available only 141 smaller (25 acres or fewer) industrial sites – and only half of those are considered shovel ready, he said.

“On a very conservative basis, you can factually argue we have less than a five-year supply of smaller parcel land in Portland,” Owendoff said while speaking before the Oregon House sustainability and economic development subcommittee last month. “The problem is, if we are successful at growing existing businesses or recruiting new companies to our state, there is not land that is immediately available to accommodate these jobs.

“Therefore, the jobs go elsewhere and Oregon’s economic recovery is stymied.”

The problem, according to Karen Homolac, a brownfield specialist with Business Oregon, is that industrial developments on average aren’t as profitable as other commercial endeavors. Developers often seek a zoning change after learning the cost and time needed to clean up contamination or provide public utilities, she said.

Bend is one city with little industrial land available. It has fewer than 10 acres of shovel-ready land within its current urban growth boundary. There is a 350-acre industrially zoned site within the urban growth boundary, but services can’t be provided to it. The city sought an urban growth boundary expansion, but was unsuccessful.

If the state were to purchase industrial parcels that needed services or cleanup, it could ensure the properties weren’t converted to other uses, Homolac said. The department also could assess sites and prioritize their importance to receive funding.

“The agency could buy the land, address all the issues and hold onto it until a company is looking,” Homolac said. And because the state wouldn’t need to turn a profit, but rather just break even, there wouldn’t be a risk of a zoning change, she said.

Owendoff said that many industrial companies want parcels 50 acres or larger. But they can be difficult to find, especially in the metro region. However, the state could buy one lot and then gradually acquire others nearby to create a large one, he said.

It’s not known if any legislators during the upcoming session will push for creation of a state industrial land development department. But John DiLorenzo Jr., an attorney with Davis Wright Tremaine and a lobbyist to the Oregon Legislature, said lawmakers are emphasizing the need to improve the economy.

“If the goal of the state is creating jobs and tax revenues, then making changes to the current land-use system is a big part of it,” said Mark Clemons, director of project development with Group Mackenzie. “If there’s a political will to improve the economy, there are a bunch of regulations that can be improved.”