The objective for a well-publicized and distributed study conducted in 2012 by Metro and other stakeholders was to determine whether the region has adequate industrial land to meet projected population and growth demands. Results confirmed that the region is and will continue to be relatively short of industrial land for development.

The region’s 24 jurisdictions each have their own wants, needs and actual supply today, as well as a projected future supply once various infrastructure, annexations and other factors are considered. A number of jurisdictions are addressing this shortage and beginning to make plans to determine viable options for creating or redesigning land currently undeveloped or underdeveloped in the appropriate zones.

The Metro study reviewed only those parcels (combined, in some cases) 25 acres or larger within the urban growth boundary (UGB), and assumed the boundary would not significantly change within the projected time frame. Parcels with 25 acres or fewer were not considered. It’s my opinion that there should be a determination of smaller parcels – say five to 25 acres. Such a study would also show that the region is in short supply for this size range.

Therefore, what’s a reasonable solution (or partial solution) that could begin to meet this shortfall?

One idea that’s been discussed is to provide a limited tax and/or fee deferral program directly related to brownfield sites, or those properties that require contaminated soil to be cleaned up prior to development.

As an example, within the city of Portland, there is an estimated shortfall of about 600 acres of industrial land available to meet projected needs. Approximately 150 to 200 acres are currently considered brownfield sites, which for the most part remain undeveloped because the cleanup cost exceeds the value or far exceeds the net value after these costs. This means, for instance, that if land is worth $6 per square foot and the cleanup cost is $4 per square foot, the ultimate sale price would be about $2 per square foot. In many cases, estimated cleanup costs actually exceed $6 per square foot.

In many situations, owners of these properties, while responsible for the ultimate cleanup, elect to do nothing until the potential value increases enough to justify the up-front cost of cleanup. That time frame may be several years. Note that property owners don’t have to do anything today, so long as the contamination does not adversely affect the environment, adjacent properties or any adjacent body of water.

Another major factor that would come into play would be the development charges associated with new development. In today’s marketplace, when properties are developed, there are many “soft” costs – such as system development charges (SDCs), permitting fees and other taxes and/or fees – that oftentimes make the proposed project uncompetitive from an economically. Coupled with up-front environmental costs, this is why many brownfields, if not most, remain undeveloped.

The basic idea of this plan would be to defer a portion of the normal, beginning fees to a later date after the property is developed and occupied, with new jobs and jurisdictional revenues. Deferred fees may not be repaid for 10 to 15 years. The benefit to the community and current landowner would be that cleanup could occur earlier and the dormant properties could be redeveloped and become tax-generating entities. As the revenue stream materialized, the deferred fees and/or taxes would be due.

The alternative, in today’s system, would be that the land sits idle for those 10 to 15 years, with only the cleanup costs increasing over time. These would not necessarily be related directly to potential land value in the future.

Basically there’s very little incentive for owners to spend enormous, up-front cost when there isn’t enough benefit to justify those costs. The marketplace typically helps the investor decide whether it’s worth spending huge amounts of costs up front. A new incentive program as described would allow development earlier, thus helping to reduce the shortfall of available industrial land in the years ahead, while still not “breaking the bank” regarding initial cleanup costs.

A recent bus tour of part of the region, attended by individuals involved in industrial brokerage, development and related industries, highlighted a few industrial sites available for development. The group was well-intentioned, and several of the properties toured were also on the Metro study list. However, there were several properties within the region that were properly zoned, but not in demand for development in the foreseeable future. The reason is that the sites were too far from primary infrastructure (mostly transportation roads and sewer), and lacked an adequate population base to provide labor.

When industrial users view sites, there are basically two major functions to consider: logistics for distribution, and labor (and related infrastructure services) for manufacturing. In this region, the vast majority of users rely on a combination of the two.

Consequently, it’s important to not only have an adequate amount of industrial land, but also land that is competitive in price and services that will meet demand today and in the future. An adequate supply that doesn’t meet demand doesn’t mean much. Those companies looking to locate in the region or expand will look at other regions.

The concept of potentially deferred (not eliminated) fees/taxes would not be a simple procedure. It would require people representing several governmental bodies – such as state legislators, county commissioners and city elected officials – and a rather complex set of criteria to be equitably enacted. However, as is the case with most beneficial programs, the most important first steps are to explain the logic and work out the benefits and compare it to the status quo of doing nothing. The region and its economy could reap great benefits if such a concept were implemented.

Tom Dechenne is an associate vice president who specializes in industrial leasing and sales at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nai-nbs.com.

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Senate Bill 273 could provide Oregon school districts with as much as $200 million for construction projects. The money would be offered as a state match for districts able to gain voters’ approval for bond measures.

However, Morgan Allen, the legislative services specialist for the Oregon School Boards Association, said Tuesday that school officials should hold off on drawing up blueprints.

“The bill has quite a journey ahead of it,” he told members of the Senate Education and Workforce Development Committee. “That’s probably an understatement.”

However, the bill took its first step on Tuesday. It was sent with committee members’ blessing to the Joint Ways and Means Committee.

It has picked up some amendments along the way. They were hammered out by education committee members with Allen’s help.

“We improved what was a pretty solid bill,” he said.

He added that the amendments are intended to make clear that large school districts wouldn’t receive most of the construction money.

Also, the word “security” was tacked onto references to health and safety projects. Some projects may deal with student and staff security, Allen said, but not fit clearly in the safety category.

There are six categories in the bill, specifying the kinds of projects that would get first dibs on money. Priority would be given to projects that:

• Build kindergarten facilities;

• Retrofit space for physical education;

• Retrofit buildings to make them better able to endure earthquakes and tsunamis;

• Increase student health, safety and security;

• Create facilities to boost student achievement.

“The (work) group had a consensus, but we just wanted to make a few small changes to the bill,” Allen told committee members.

The bill has not yet been scheduled for a hearing before Ways and Means.

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The recent industrial land inventory study confirmed that Portland and the region will have a significant shortfall of industrial land over the next 25 to 30 years. The development of 300 acres on West Hayden Island would help diminish this shortfall and provide the leverage needed via a multimodal heavy industrial use, and would let other industrial sites be used for more intense jobs for manufacturing or distribution transfer throughout the region.

Policy dictates that a certain percentage of land within the city remain open habitat space, and one of the main controversies over the project has been how much acreage should be kept as natural wildlife habitat. After years of debate, the current plan is to maintain 500 acres of open space on the west end and 300 acres of industrial on the easterly portion.

Also, note that most of the 300 acres is not open space, but rather a dirt/gravel area for storage of channel deepening material and a sewage treatment plant. There would not be a loss of green habitat. The 500 acres of present open space should be preserved for all habitat species to continue to flourish and for the region to maintain optimum balance.

In the 1980s, the Port of Portland purchased the West Hayden Island land from PGE with the intent that the city of Portland would eventually annex it to provide a land parcel for heavy industrial development able to accommodate road, rail and marine uses.

The idea was to provide adequate land for future growth just as had been done over the past several decades in areas along the Columbia and the Willamette rivers, in areas such as Mock’s Landing, Rivergate and the former Reynolds’ aluminum smelter site in Troutdale. To remain consistent with state land use policy of limiting outward growth and developing within a defined area, part of that policy includes providing an adequate supply of undeveloped land for residential housing, commercial and institutional development, and both light and heavy industrial uses.

A major part of the Portland regional economy revolves around distribution. From the time ships first called on Portland, railroad lines passed through and eventually the confluence of two major freeways. Highway, rail, marine (and then air) have made Portland unique on the West Coast. Distribution of wood products and later manufactured goods, as well as transfer of imports and exports to and from foreign markets to and from the nation’s interior, gave Portland a distinct advantage.

If West Hayden Island were allowed to develop, this unique leverage could let Portland continue to expand in exports and imports, a major growth area. While other economic drivers, such as high-tech, manufacturing and service-oriented business are important, the reality is that rail and truck freight, with marine access to include the shipping of containers and bulk goods, translates to family-wage job growth in the future.

It is essential to possess the infrastructure to accommodate this sector. Without adequate facilities for growth, Portland will not be able to stay competitive and firms may not be attracted to the region.

After many studies took place during the 1990s and early 2000s, the most recent ones from both the public and private sectors revealed that the Portland-metro area lacks industrial land. The city of Portland is updating its comprehensive plan and has determined there is a shortfall in the range of 600 to 900 acres, given reasonable job growth projections.

In this case, a multimodal marine, rail and freeway-served land parcel of 300 acres will help provide the infrastructure. Other industrial lands will be able to provide more intense manufacturing, distribution or goods transfer through this multimodal facility, thus better leveraging the shortfall of industrial land.

Do not forget that one in nine jobs in the Portland region are dependent on the movement of freight – i.e., goods either produced here or moving through the region. The Portland Export Initiative, headed by the Port of Portland and the city of Portland, is also making a big push for more of these types of jobs.

Timing is a consideration with all the requirements of getting proper zoning and permitting for a marine terminal and potential rail infrastructure, so it will likely be at least five to 10 years before development on West Hayden Island occurs. Fortunately, the Port of Portland, the landowner, has the capital base to carry the financial cost of this large public asset.

The up-front infrastructure costs and holding period translates to a land cost approximately double that of today’s industrial land values. Private users and/or developers will not invest at these costs today. Only after it is available, and market demand warrants it, will the pricing and cost match the marketplace. Over time, the marketplace and these costs will converge, making it a much needed and valuable investment.

This same concept has been used by the Port of Portland when buying land, using it and/or selling it to the private sector over the last hundred years (consider the inner harbor area, Mock’s Landing and Rivergate areas). Such forward-thinking and past investments have allowed the Portland region to be competitive. Projects such as West Hayden Island enhance the region’s ability to attract future monies due to the leverage of these infrastructure costs.

It is imperative that policy makers deal with all aspects and support the balance of 500 open space acres and 300 heavy industrial acres to maintain the region’s balance of unparalleled quality of life, including human, environmental and economic ecosystems. The West Hayden Island development will provide leverage for the entire region, and pave the way for greater industrial family-wage job growth in the region.

Tom Dechenne specializes in industrial leasing and sales at NAI Norris, Beggs & Simpson. He is a member of the Portland Freight Committee and Portland’s Industrial Land and Watershed Health Working Group. Contact him at 503-223-7181 or tdechenne@nai-nbs.com.

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Is Portland short of industrial land for future growth? The answer is an emphatic yes. By nearly all standards, the metro area does not have an adequate supply of industrial land that can be economically developed to achieve the job growth needed today.

Since the inception of urban growth boundaries in the late 1970s, various methods have been used to inventory the amount of available land for future growth. Each of the major use categories – industrial, commercial, residential and institutional – are supposed to maintain a supply for at least 20 years. Theoretically, as available land is developed, periodic expansions occur to maintain appropriate supply. This concept controls growth while allowing for planned expansion.

The difficult execution of this policy has not effectively allowed enough available, competitively priced parcels of land in certain categories. Of course, this is constantly being debated within the Portland-metro region because of competing interests coupled with the complexity of determining the actual amount of available land.

Since the 1990s, metro-area jurisdictions have been charged with determining inventories. The challenge is to determine an approximate amount that is either available for development, or could be. The major points to consider are ownership, topography and infrastructure availability. Current ownership may or may not have plans to develop it, and a vacant parcel is not necessarily available, either in the short or long term.

Typical industrial development occurs only on relatively flat ground, to accommodate manufacturing, production or distribution uses. In some instances, property has been zoned industrial without consideration of the physical functionality. Likewise, in today’s environmental and political landscape, usable land may differ substantially from gross area amounts.

The two primary infrastructure needs for industrial development are roads and sewer. Most industrial uses need reasonably good road access to primary and secondary arterials and the freeway system. Also, rail and marine access are critical for certain industrial uses. If adequate roads and/or sewer are not immediately available, a determination must be made as to when these can actually be built. Because these are community improvements, funding must be addressed in both the short and long terms.

Until recently, the reasonable, deliverable amount of available industrial land was difficult to determine. Each survey study has gotten a little more sophisticated. The most recent one, prepared by a group commissioned by Metro, NAIOP and others, revealed a lack of available industrial land, particularly in parcels with at least 25 acres. It did not specifically address the accumulation or inventory of parcels smaller than 25 acres.

Although the demand for land during the recession has been soft, anticipated population growth over the next 20-30 years suggests increasing demand with diminishing supply. Eventually, there will be demand for parcels with at least 25 acres, but more importantly there is existing demand for parcels of two to 25 acres. Within this size range, there is an extremely short supply for immediate delivery.

What are reasonable solutions? After numerous studies, policy makers appear to agree there is not an adequate supply of industrial land. The city of Portland is engaged in an analysis of how to address this shortage. Considering that the city is surrounded by areas already developed, and/or physical or state barriers, ideas to increase availability revolve around:

• Promoting and allowing reasonable redevelopment of brownfield areas. The costs of making most of these sites “available” are uneconomical from a market standpoint. Various methods of funding these costs or delaying related development fees have been discussed.

• Preserving industrial sanctuaries. That is, to maintain zoned land that is getting market pressure to change to other uses. Such areas include the Central Eastside Industrial District and those zoned industrial along the Willamette River. In some instances, an upgrade to a higher and better use in inner Southeast Portland may have merit, but the riverfront areas of Northwest Portland must preserve direct access to the river. Proposed greenway areas separating these lands from riverfront access would defeat the purpose of maintaining existing industrial lands dependent on direct river access.

• Bringing land into production. This is crucial. A primary example is the proposal to bring approximately 300 acres of West Hayden Island’s open space into industrial land served by an unparalleled marine, rail and arterial/freeway road system. If developed, this parcel would leverage the area’s distribution of exports. The recent cleanup of the former Reynolds Aluminum site in Troutdale is a great example of adding strategically located industrial land.

• Discussing the conversion of other zoned properties in strategic locations to industrial. Examples include land adjacent to rail yards or with marine terminal access, where these infrastructures, primarily rail and river access, cannot be reasonably moved or eliminated.

These examples are within the city of Portland, but all land-use municipalities in the metro area must participate in solving this shortage problem. The city has taken the initiative to plan for adequate supplies, but the marketplace is the entire metropolitan area.

Firms make decisions whether to expand or relocate by considering accessibility, availability of competitive parcels, and state or county lines (regarding taxes, etc.). The availability issue must be viewed from the overall metro region, not just specific jurisdictions within.

It’s up to all facets of business in the metro area to voice concerns over the shortfall of an economically viable industrial land supply. Jobs are at the political forefront.

Mayors, council members, representatives, other elected officials and economic development groups are all promoting needed expansion of living-wage jobs. Generally speaking, the highest paying ones are in firms located on industrial zoned land, as recently evidenced by a similar Portland land-use inventory study.

The business voice is an advocate for increased competitiveness with other regions when it comes to business retention as well as new recruitment. It’s critical that enough business voices be heard to balance other, competing land-use interests.

Tom Dechenne specializes in industrial leases and sales as an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nai-nbs.com.

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A children’s museum in Salem may use a downtown Woodburn building, left dormant since an earthquake in 1993, to establish a second location.

Directors of have started talking about the idea with city officials. But Matthew Craigie, Woodburn’s economic development manager, said more discussion is needed.

“There’s a lot of interest in doing this, but it is very much in the exploratory phase,” he said.

The two-story Association Building on Front Street in Woodburn never recovered from the “Spring Break Quake” that struck on March 25, 1993. Damage forced Salud Medical Center, the migrant farmworker clinic that occupied the building, to relocate.

The property was condemned, and city workers gutted the 10,000-square-foot building.

“The building has been stripped down to its shell,” Craigie said.

Joanna Engle, interim director of A.C. Gilbert’s Discovery Village, stressed that the idea of a children’s museum in Woodburn in still in its infancy.

“This is very much still in the talking phase,” she said.

The idea came from Woodburn resident Kay McEwen, who was inspired after taking her grandchildren to OMSI and Discovery Village.

“With all the talent and skills that we have in Woodburn, we could put something together like that for the schoolkids – a kinesthetic approach to science, engineering, etc.,” she said. “I’m long on ideas and short on implementation skills.”

When the idea was brought to Discovery Village, board members decided to look into it.

“It’s not like we were looking to expand,” Engle said.

Nick Harville, business retention and expansion manager of , has helped board members evaluate project feasibility and the dollar figures involved.

The figures are formidable, Craigie said. The cost to renovate the building could be upwards of $1.5 million, he said, without accounting for the museum’s specific needs.

“It’s going to take considerable effort to bring it up to snuff,” he said.

The city has owned the property since 1996. Workers installed a new facade, but officials for 16 years have struggled to figure out what to do about the building’s interior. Finding a use for it is a high priority for city councilors, Craigie said; they are considering the possibility of paying for a remodel with urban renewal money.

Meanwhile, downtown Woodburn has gone through a kind of minor renaissance. Until 2005, a parking lot on the west side of the building had a notorious reputation for gang fights, drugs and prostitution. But then the lot was transformed into a Mexican-style plaza that attracted children and families.

Craigie said it would be an ideal location for a children’s museum.

“It would be wonderful, considering how Woodburn has a lot of young families,” he said.

A.C. Gilbert’s Discovery Village, near the banks of the Willamette River in Salem, started in 1989 with the renovation and relocation of the Victorian house that was the early childhood home of Alfred Carlton Gilbert (1884–1961). He was born in Salem and achieved fame as the inventor of the Erector Set.

The private, nonprofit museum began as the Gilbert House, but was renamed as other renovated historic Salem buildings (including the Parrish, Rockenfield and Wilson-Durbin family homes as well as the Little Gem Grocery) were added. Interactive scientific and recreational activities are geared toward children and families.

Woodburn’s population is 58 percent Hispanic. And museum officials, McEwen said, were “looking forward to a Hispanic outreach program.”

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In this era of high-tech computerization, information overload and growth in personal services, we sometimes forget about the most basic needs of our region. In the industrial real estate market, the movement of goods is what moves business.

It’s true that location is everything – whether leasing a warehouse, selling a production or storage facility, or finding space for a service provider. Now, on a day-to-day basis, the demand for rail service to the standard industrial facility is relatively low. But access to the rail network is vital for the businesses that rely on it to move goods in and out of the area.

It’s not a question of comparing properties with or without rail service; it’s a question of availability. Is the property served with rail or not? If not, the list of potential sites is narrowed down quickly.

For instance, a major distributor in Portland recently expanded from a rail-served site in Tigard to a 50,000-square-foot, rail-served warehouse in Clackamas. While there were 12 to 15 possibilities, the field quickly narrowed to two because of the rail requirement. Many available properties simply would not work.

Prior to recent years, relatively lower fuel prices, the speed of truck delivery, the ability to serve industrial areas not served by rail, and the seemingly huge availability of industrial land all discounted the perceived need for additional rail lines or service.

Lately, however, rising fuel costs, the change in shipping dynamics and the speed of delivery have become paramount. Moving freight by rail is about three times more fuel efficient than moving it on roads, and rail service is becoming increasingly important – particularly as an alternative mode for long-haul trips.

Factors such as containerization of many goods have given shippers competitive, cost-effective alternatives. And as the economy improves and larger volumes are being shipped, rail providers are looking at potential expansion capabilities. The ability of our region to accommodate those needs will have a direct bearing on how effectively those sectors can grow.

Traditionally and today, the primary goods being shipped by rail have been bulk commodities such as grain, fertilizer, aggregate rock, lumber products and liquid products (oil, chemicals, etc.).

Our region has two Class I railroads – Union Pacific and BNSF – and a small number of regional railroads called “short lines,” including the Portland and Western and the Portland Terminal Railroad. Plans to double track, or build an additional track adjacent to an existing track where possible, provide substantial time savings and flexibility when routing various train sections. It also allows for additional inventory storage, albeit for a short time period.

The Connect Oregon program has helped Oregon businesses, ports and class I and short-line railroads pay for additional rail infrastructure. This program, now in its fourth version, uses Oregon Lottery money specifically for projects related to rail, marine, aviation, transit and other non-highway modes.

The recent extension of rail service in Portland’s Rivergate industrial district, the upcoming expansion of the Banks “turnaround curve” and various “spurs” around the state have allowed expansion of businesses underserved or not served at all by rail.

Because the vast majority of railroad right-of-way is owned privately, it is up to those private entities to pay for most infrastructure improvements. The highway system is owned publicly, and therefore funded from a wide variety of very scarce public sources and managed at the federal, state, regional, county and city levels.

The ability to substantially increase rail service for businesses would require additional, rail-served industrial land. The Portland region has an extremely short supply of heavy industrial land that could accommodate such needs. Therefore, any land that can be brought online or redeveloped with rail service is extremely important.

Projects such as the proposed West Hayden Island annexation (300-400 acres) could accommodate efficient rail service for unit trains – those with 100 or more rail cars that typically carry the same commodity. This region has limited capacity to meet those needs, and if there is little to no expansion to serve that need, businesses will choose to locate in other metro areas.

Access to marine docks for the transfer of containerized goods and commodities is essential. A marine industrial development on a portion of West Hayden Island is an important project for Portland to effectively compete as a West Coast distribution center. Approximately one in nine jobs in the metro area is related to goods moving through the ports of Portland and Vancouver, Wash.

This is a great opportunity for regional policy makers to accelerate job creation and economic growth. This also applies to the northwest harbor district.

Any incentives, such as the Portland Development Commission funding base, reduced time for the permitting process, less public access through the heavy industrial zone to the waterfront and public/private funding partnerships will help spur redevelopment of these brownfields. Because of their location, they could become prime, rail-served industrial sites.

The primary point is to remember the importance of our heavy-load transportation system. Railroads have traditionally moved goods and commodities at economical rates, making the region competitive when considering trucking, marine, air and rail. In today’s economy, given ever-rising fuel costs, increased congestion and time-sensitive transfer of goods, traditional rail service is becoming even more important.

Now, more than ever, railroad systems relate directly to the health of our region’s economic vitality. Let’s help make it possible for them to remain and expand.

Tom Dechenne specializes in leases and sales of industrial and land properties as an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nai-nbs.com.

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While the recession has reduced the demand for available, developable industrial properties in the Portland-metropolitan area, this is only a short-term phenomenon. In the past few years, Metro was charged with determining future expansion of the urban growth boundary. After months of debate, lines were drawn to outline urban reserves as well as rural reserves.

The long-term outcome of these decisions will be limited to expansion development, which will undoubtedly occur only as money becomes available to build infrastructure to support such growth (namely, sewer and transportation systems). Therefore, the potential supply of industrial land is basically stagnant. It appears that as the recession subsides and demand increases for industrial uses, pressure will again mount.

What can be done?

Because land-use policy has been set, it becomes even more imperative that policy makers, planners, community citizens and, in particular, business leaders, work together to help solve the issue of a lack of developable land. Incentives to redevelop brownfields should be revisited. Programs are needed to relax the extensive restrictions and costs of redeveloping properties within industrial districts. An example is the recent River Plan, which was amended and basically tabled until a workable plan would allow industrial redevelopment (expansion), or at least retention of industrial firms that provide family-wage jobs.

Other programs, such as the enterprise zone (at least within the city of Portland), the e-commerce zone and urban renewal districts, as spearheaded by the Portland Development Commission, are examples of attempts to foster growth in specific areas. Such programs aim to stimulate economic relief, which may have the potential to spur development, at least in the short run.

Transportation decisions also need policymakers’ attention for the effective use of industrial properties. The industrial real estate sector has two primary functions: warehousing and distributing goods, and manufacturing or assembling goods and related services. In Portland, a secondary market, these functions overlap; however, in most cases they are not compatible with other uses like retail and office.

Recent improvements in the Rivergate area (both highways and rail) have been beneficial for continued growth in that area. Other minor steps are being taken in the “management systems” of existing arterials, but the need to streamline freight movement still exists.

Distribution of goods covers a wide variety of needs, from large warehouse distribution centers to air freight delivery, small package delivery and delivery of perishable food items. These all can add to congestion.

Another question that often arises: How do we create land parcels for industrial users in need of 20-acre, 50-acre or even 100-acre parcels? Basically, it is not in the cards economically to assemble such parcels at competitive prices if our only choices are redevelopment of existing parcels.

However, the metropolitan community has at least one opportunity in the near future, and that is West Hayden Island. The Port of Portland purchased the roughly 800-acre property in the early 1980s and has another opportunity to provide a large industrial land parcel if the city and Metro allow the use to occur.

The plan is to create 350 acres of industrial land. This location has the distinct opportunity to achieve three primary purposes: enhance marine terminal use; provide rail service with an area large enough to load and unload large unit trains; and offer easy truck access to Interstate 5.

The land also could provide significant overall leverage to enhance the region’s growth. While the density and number of family-wage jobs would not be as great for this type of use as manufacturing, it would allow the greater metro area to continue to grow as a distribution hub serving not only the West Coast, but also Pacific Rim growth countries.

The Port of Portland also recently purchased the 700-acre former Reynolds Aluminum site in Troutdale. After extensive environmental cleanup, it is now in the beginning stages of development, as evidenced by the recent 70-acre FedEx project.

As an industrial real estate broker, it is becoming increasingly difficult to help firms move here or stay here. It’s more important now than ever to help planners and policy makers understand today’s market dynamics. Last year, there were 36 land sales in the metro area, and 34 were two acres or smaller.

While some parcels are available, gains in demand will leave supply extremely short. It is critical to ensure that “available industrial properties” live up to their description or can become available at competitive prices, at least with other regional markets such as Seattle and Salt Lake City.

The business voice must continue to reach cities, counties and Metro, as well as the two states directly affecting this metropolitan area, if our land-use plan is to be effective and allow controlled, and continued, growth.

Tom Dechenne specializes in leases and sales of industrial and land properties as an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nai-nbs.com.

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Bills that would change – slightly – the way Oregon landscape contractors do business sailed through the state House Business and Labor Committee this week and are on their way to the House floor.

would divide the required test for landscape construction licenses. One section of the test measures a person’s ability to own or manage a landscape contracting business. But Michael Snyder, administrator of the Oregon Landscape Contractors Board, told committee members that many contractors are not inclined to be managers.

“Not every landscape construction professional needs to or desires to own or manage a landscape contracting business,” he said. “They are content to be employees providing the technical expertise and to directly supervise unlicensed employees.”

So the bill would allow the state to give licenses to people who know the technical side of landscaping but not all management aspects.

“For those who want to own or manage a landscape contracting business, a 16-hour course and an examination relating the laws, rules and business practices of running a landscape contracting business would be required,” Snyder added.

That was good enough for committee members. They sent the bill to the floor without debate, recommending its approval by the full House.

would require landscape contractors to provide workers’ compensation insurance.

Committee members greeted this idea with equal enthusiasm. Chairman Mike Schaufler, D-Happy Valley, said it is “worth its weight in gold.”

Landscape contractors with employees already pay workers’ compensation once they reach a certain level of income. The problem is that current state law is vague, Snyder told committee members.

“The current workers’ compensation law does not use the term ’employee’ but uses the term ‘subject worker,’ which, though the individual may be an employee, workers’ compensation is not required if the business does not meet the threshold of wages set by the workers’ compensation board,” he said.

House Bill 2157 would clean up existing law.

All landscape contractors would have to register as exempt or nonexempt. Exempt contractors would have to prove they have no workers – or that any laborers brought on for a project are covered by workers’ compensation.

Nonexempt contractors would have regular employees and be required to provide compensation.

“When workers are not covered by workers’ compensation on a jobsite, there is an unknown liability to the consumer and for those who play by the rules and pay the overhead associated with workers’ compensation and do not pay cash, fair competition is not promoted,” Snyder said.

Committee members breezed through their Wednesday agenda in less than a half hour. However, the co-chairman, Bill Kennemer, R-Oregon City, warned his colleagues and audience members to expect a busy session.

“The next time you visit this committee, expect to spend the whole day with us,” he said.

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When a business looks for land to expand, or considers leasing or buying an existing facility, two questions arise. First, are affordable properties available? And second, will one of them work? Decisions we make today will irrevocably affect the answers.

About 40 years ago, Oregon revised its land-use laws. The goal was to manage growth while avoiding congestion and urban sprawl, and to enhance Portland’s famous livability. Through 2000, plenty of land was available to accommodate industrial growth, as well as commercial and residential development. As growth has continued, available and affordable land has dwindled, driving prices beyond the balancing point. While the concept of “growing up, not out” has merit, there are distinct differences between uses and what will physically work. Residential, retail and office mixed-use developments can coexist effectively. Recent examples include the Pearl District and other neighborhoods, as well as Beaverton, the Gateway District, the Clackamas Town Center area and others.

Industrial uses, however, don’t mix well with retail, office, residential or institutional uses. As such, industrial areas must be distinct and separate. While the planning effort acknowledges this concept, the execution often is disjointed. Zoning in parts of the Columbia Corridor industrial area, for instance, makes provisions for dense residential and commercial development to “serve the area.” These are not compatible uses in this district. And light industrial campus zoning in Happy Valley will adversely affect adjacent schools and the planned medical campus.

The metro area has traditionally been a distribution center due to its favorable geographic location. It’s on the river, offers access to the ocean, sits at the convergence of major railroad lines and two major freeways, and has an international airport. This has meant easy distribution of goods and services not only locally and regionally, but globally.

Today, the ability to provide multimodal distribution services is a competitive advantage; but are Portland firms effectively providing this service? It’s hard to say, as companies like container shippers gradually retract, the two major railroads spend less on infrastructure in secondary markets like Portland, and local distributors’ alternatives shrink due to congestion, higher occupancy costs and lack of available land. A recent example is the reduction of goods being moved through the Port of Portland in favor of the more economical Puget Sound or California ports. The other primary industrial use is manufacturing, which is decreasing here. Production of goods such as footwear, outdoor wear, food and many others have gradually moved to other regions.

Until recently, the original use/growth plan seemed to work pretty well, and Portland’s implementation of new, innovative growth plans has caused it to become a “planner’s mecca.” The challenge is that as it becomes denser, there’s more pressure to meld different uses into a compact area. That basic concept radically affects the area’s ability to compete with others on the West Coast.

During the last 30-40 years, industrial land and buildings in Portland typically have cost less than comparable property in Puget Sound, the Bay Area and Los Angeles; Portland prices have been comparable to secondary markets like Salt Lake City, Denver, Phoenix and San Diego. But in recent years, land and building prices have increased more relative to these markets to the point where pricing matches larger markets.

Consequently, we’re losing our competitive advantage for industrial business growth for the short and long term. Today, Portland and Seattle have similar rental rates and land values, due in part to this region’s lack of available, developable properties.

With studies showing specific limited amounts of land available for different uses, and present decisions being made about long-term land availability, it doesn’t appear the area will compete. That factor, coupled with the cost of primary and secondary road infrastructure costs specific to movement of goods and freight, paints a dim picture. The area’s population is expected to increase by about a third over the next 25 years. Many studies project a shortfall of several hundred acres to meet the potential industrial-use needs (this assumes several hundred acres of brownfields and redevelopment of underutilized properties takes place). With approximately 15 to 20 percent of the workforce employed in distribution, manufacturing and other traded-sector jobs, this region is jeopardizing its ability to effectively compete and grow.

The city of Portland and Metro recently completed master freight plans for the respective areas. The plans, while separate, attempt to address the same challenges of providing a system of smooth movement of freight throughout the area. One of the major problems is finding consensus in identifying the major bottlenecks (or choke points), and prioritizing where limited transportation dollars are spent. The present transportation system, the potential funding sources and the ongoing decisions are very complex. It is essential that Portland doesn’t become an even less affordable area for large and small companies and family-wage jobs.

The balance of competitively priced industrial real estate, a good functioning freight movement system, and an effective land-use system is presently out of balance and could become more so if not adapted to changing market conditions. It’s important to promote the “greatest place to live,” but the business community has to step up and participate, even more than it has in the past, in regard to land-use decisions, road improvement decisions and decisions affecting living-wage jobs.

There has been great work done on projects like the River Plan, freight plans and on Metro’s zoning change recommendations, but overall, the business community has had a weak voice when it comes to votes that count. The Joint Policy Advisory Committee on Transportation, the Metro Council, and the many city, county and state bodies that influence and determine the region’s future need your voice.

Tom Dechenne specializes in leases and sales of industrial and land properties as an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nbsrealtors.com.

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Many industrial land users face a quandary when searching for developable land in the Interstate 205 Corridor. Land is in short supply and various factors impact how it can be developed, leading to a crowded outlook at present and in the future.

The I-205 Industrial Corridor is generally considered to be the area along the I-205 freeway from the Columbia River south to Oregon City. The primary areas of most dense industrial development are the Airport Way/ Columbia Boulevard area, and the Clackamas/Milwaukie area.

Supply and demand

The age-old economic axiom of supply versus demand plays a central role in price determination, particularly as available land supply continues to diminish. When the Urban Growth Boundary was first enacted in the 1970s, industrial land was abundant. Through the economic downturn of the 1980s, the Portland Metropolitan area still had plenty available.

However, beginning in the 1990s, ready-to-develop parcels have become exceedingly difficult to find, particularly 5 to 10 acres or larger, not only in the I-205 Corridor, but throughout the Portland Metropolitan region.

Numerous vacant land inventory studies have been performed over the past several years. The major challenge in trying to determine inventory is to determine what is, and/or what could be, available for development. Only recently has the estimated amount of vacant developable land become somewhat closer to the actual amount. Major land-use decisions have often missed the realistic calculation of inventory supply. Just because a parcel of land is unimproved without buildings does not mean the present owner, or a future owner, will develop or sell it.

Another aspect of potential available land is its development potential. Major factors such as topography, wetlands, and access to major and secondary freight corridors greatly affect whether a parcel can be developed at an economical cost. For instance, a 5-acre parcel might be identified as available. However, if any of the above factors limit or realistically prevent it from being developed, that parcel is, for all practical purposes, not available.

In today’s market, continuing strong demand over the past several years far outstrips the supply. For example, within two miles of I-205 (west or east), about 200 acres of privately held land appear to be available. While the majority of that land is currently not available, less than half is realistically developable due to wetlands, steep slopes or other limiting factors. The one significant land area that could be available for industrial development is the Port of Portland-owned property on the west side of I-205, near Airport Way.

As a result of these factors, it is difficult for an industrial user to find a vacant parcel. If found, development costs – such as dealing with slopes, wetlands mitigation and access roads – are prohibitive. For those few properties available, the limited supply drives up the price of the land. Due to short supply and continuing strong demand, prices range from $8 to $15 per square foot – in essence, double the value from a few years ago.

Future growth area

Areas of future growth exist where industrial land will be serviced with infrastructure, namely sewer, water and roads, but these are farther from I-205. Most notably, the Happy Valley/Damascus area is anticipated to add 200 to 300 acres of industrial land. It will be some years before the majority of these lands are ready for development. The present value of such land is discounted due to unknown time frames and lack of infrastructure, yet it is selling for $5 to $6 per square foot.

Type of industrial use

Another factor affecting industrial land is the type of use. Industrial buildings and property designed for warehouse distribution is much more sensitive to transportation infrastructure. Major distributors will not consider properties too far (i.e., four to five miles) from the I-205 freeway or its major feeders. Manufacturing users, while less dependent on highway infrastructure, require proportionately more land for parking, outside assembly, outside storage and related uses. Within the marketplace, the average user is in the 10,000- to 20,000-square-foot range, with a combination of distribution and manufacturing/assembly uses.

Future trends

Given this limited supply, more in-fill redevelopment will likely occur. Of course, the cost of demolishing slightly dysfunctional buildings (i.e., those with low ceilings, unusable configuration, and multistory warehouses) has traditionally exceeded the cost of purchasing raw land. As available parcels become fewer and redevelopment is the only possibility, the net land cost will continue spiraling upward, despite the perception of today’s “softness” in the land market.

Perhaps the biggest challenges for future industrial growth and development along the I-205 Corridor will be funding for transportation infrastructure. This is no more evident than the future Sunrise Corridor plans to open the area east of I-205 in Clackamas. The plans call for an extension of Highway 224 north of Highway 212 and east of I-205. The other challenge will be to maintain present industrial areas as sanctuaries.

Compatibility

A less noticeable factor is the compatibility issue. Distribution centers and manufacturing facilities with noise from machinery, trucks, and railroads, such as those in Clackamas, Milwaukie and the Columbia corridor areas near I-205, are absolutely incompatible with residential neighborhoods.

Maintaining present uses, whether heavier industrial or more compatible light industrial/service uses, within mixed-use residential neighborhoods is critical. Therefore, it becomes imperative to maintain these industrial areas if, as a region, we expect growth to be in balance with a variety of employment within each of the various submarkets.

Tom Dechenne is an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company. Contact him at 503-223-7181 or tdechenne@nbsrealtors.com.

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