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T.J. Sullivan couldn’t be happier with the market reaction to the office building he’s developing in downtown Salem.

With eight months to go before construction is completed, the 30,000-square-foot building is 100 percent leased at $2.40 per square foot. In addition to his own insurance company taking the ground floor, two stockbrokers and a legal practice have taken space in the four-story structure rising on an industrial lot.

The market was hungry for new office product, Sullivan said.

鈥淚t was underbuilt, underpriced and the market corrected,鈥� he said. 鈥淚 just got in before everybody else did.鈥�

The development is on a former Boise Cascade site at 235 Front St. S.E. The new building replaces a vacant concrete structure that was demolished.

鈥淚t was a home to pigeons,鈥� Sullivan said.

Office tenants are looking for quality spaces, he said.

鈥淚f you do something right and make it nice, you’ll find tenants,鈥� Sullivan said. 鈥淚f you try to make something cheap, you’ll have a tough time.鈥�

The office building is part of a raft of developments coming to downtown Salem as Oregon’s capital finally sees the benefits of the state’s long economic expansion.

Historic homes are being snapped up, and more restaurants and boutique shops are cropping up.

鈥淲e do for the first time have a lot going on for us,鈥� said Sheri Wahrgren, downtown revitalization manager for the city of Salem.

Salem is Oregon’s second-largest city, with a population of 161,637. It has long been a company town, with many jobs connected to state government or services such as the state hospital and prison. The downtown core can be quiet on nights and weekends, when offices are closed.

The dominance of state government in Salem has long capped the city’s tax rolls. Government property is exempt from local property taxes.

鈥淲e do have a lot of land in our central and core area that’s used for office and government uses that don’t generate any tax for the city,鈥� said Lisa Anderson-Ogilvie, director of Salem’s Community Development Department.

But now more people who work in Salem are choosing to live there. Fewer state workers seem to be commuting in from bedroom communities such as Dallas and Woodburn.

鈥淭here’s vibrancy downtown, so that’s attracting more people,鈥� Anderson-Ogilvie said.

Pacific Office Automation is moving from Beaverton to Salem. The firm will occupy an existing office building at 260 Liberty Street N.E., where renovations are under way.

The building is undergoing a $1.3 million makeover funded in part by urban renewal dollars, according to the Strategic Economic Development Corporation. The project involves seismic upgrades, a new elevator, fa莽ade improvements, electrical upgrades and a sprinkler system.

The downtown building has been vacant for more than eight years.

Doug Pitassi, president of Pacific Office Automation, did not return phone calls seeking comment.

In downtown Salem, several owners have added housing units to historic properties. Employers such as Marquis Companies, a home health-care business; and the Salem-Keizer Education Foundation are investing in new downtown offices.

The foundation purchased the Starkey-McCully Building, a two-story brick structure dating to 1865, for $480,000. The nonprofit plans to invest $2.5 million into modernizing the building at 223 Commercial St. N.E.

鈥淚t was left in disrepair,鈥� said Krina Lee, the foundation’s executive director.

The building will be occupied by a regional college and career center named for Mike McLaran, who died in 2013 after leading the Salem Area Chamber of Commerce for 16 years.

Most of the foundation’s employees work in school buildings, but 20 to 30 administrative employees will move into the building, Lee said.

Downtown Salem is blessed with historic buildings, a central location and increasing numbers of restaurants and shops, Lee said.

Approval has been issued for construction of two new buildings on Front Street: a medical rehabilitation center and an office building.

Salem issued a request for proposals in May for a downtown streetscape project. The RFP closes Friday, July 14. The city of Salem plans to gather input on the streetscape project this fall.

A community group, Salem Community Vision, is pushing an idea to remove a lane of automobile traffic through downtown Salem in favor of wider sidewalks and bike lanes. In this scenario, Riverfront Park would connect to the Capital Mall and Willamette University in one linear park. The city has not endorsed that plan.

Like Oregon’s other population centers, Salem has a thriving and increasingly expensive multifamily housing market. Salem had a 3.78 percent vacancy rate, according to the Multifamily NW Spring 2017 Apartment Report, which surveyed Salem-area properties totaling nearly 6,000 units.

Rents averaged $1.19 per square foot. That was 4 percent higher than in fall 2016, but still cheaper than averages for Portland, Bend-Redmond and Eugene-Springfield. Portland rents averaged $1.50 per square foot, according to the survey.

鈥淐ompared to Portland, it’s cheap to live in Salem,鈥� Sullivan said. 鈥淧eople are looking at Salem as a viable alternative.鈥�

Sullivan also owns apartment complexes totaling 240 units. The properties have no vacancies, he said.

鈥淵ou can’t charge enough,鈥� he said. 鈥淩ight now, we’re at 100 percent occupancy.鈥�

The new growth has started to put pressure on the residential real-estate market.

The average price of Salem homes jumped 9 percent to $239,500 during the 12 months ending in February, according to a U.S. Department of Housing and Urban Development report. That was still the most affordable price point among metro areas in the Northwest.

Home sales in Salem grew 5 percent, according to the report.

Attention is turning to the mid-Willamette Valley as costs soar in the Portland area.

鈥淧eople are being priced out of other markets,鈥� Wahrgren said.