Portland industrial developer Specht has gained a major tenant for its Vista Logistics Park in Gresham.

Medline Industries Inc. has agreed to take 297,501 square feet at the newly constructed, 37-acre industrial development. That will leave Vista with 435,731 square feet available, divisible down to approximately 37,000 square feet.

Medline is the nation’s largest privately held medical supplies manufacturer and distributor. The company’s move to Gresham gives Specht’s joint venture with New York Life Real Estate Investors, Madison-Specht Vista Logistics LLC, a key tenant.

The development was built on speculation as distributors have sought to snap up limited warehouse inventory.

Medline was represented in the transaction by Tyler Shiels of Jones Lang LaSalle and Michael Morgan of Colliers International. Madison-Specht Vista Logistics LLC was represented by Dave Ellis, Don Ossey and Tom Knecht of Capacity Commercial Group.

Demand for industrial space in Portland has been strong, with 2.2 million square feet leased during the second quarter, according to JLL. Leases of new construction have gone for 50 cents to 60 cents per square foot per month on a triple-net basis, with office surcharges of 90 cents to 95 cents per square foot, the research group reported.

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Allen C. Patterson has more than 35 years of real estate experience, but aviation is in his blood. His paternal grandparents were both pilots in the 1930s; his grandmother Clayton Patterson flew with legendary pilot Amelia Earhart, he said. His mother, at age 16, used her babysitting money to pay for flying lessons from a floatplane operator.

So it’s no surprise that flying became one of the biggest parts of Patterson’s life. Recently, the senior vice president of Capacity Commercial Group/CORFAC International received the Wright Brothers Master Pilot Award from the Federal Aviation Administration. The award is the FAA‘s most prestigious; it recognizes individuals who have exhibited professionalism, skill and aviation expertise for at least 50 years.

“I’m very honored,” Patterson said. “It’s a neat award and it’s a nice thank you from the FAA.”

Patterson grew up in Southern California and became fascinated with flying from an early age. He recalls riding his bicycle to the airport near the farm where he was raised to watch the planes.

Eventually, Patterson began using his money to take flying lessons at Machado Flying Service in Santa Maria, California. He received his FAA student certification at 16.

“Early on it was just a matter of fascination with flying and going out there to fly and watching airplanes and being able to earn money and be able to take some lessons,” he said.

Patterson received his private license in August 1962 and his commercial license in August 1966.

While attending the University of Colorado at Boulder, Patterson flew tail-wheel aircraft and joined the Army ROTC. He later transferred to UCLA, where he had the chance to mingle with people around Van Nuys Airport. From there, he flew charter flights part-time to Cabo San Lucas, Mexico.

Later, Patterson got a job ferrying new Piper aircraft from Piper’s factory in Vero Beach, Florida, to the Piper dealer in California. He made the cross-country trips both with a co-pilot and solo.

“It was a lot of fun and just a unique experience,” he said.

After graduating with a master’s in finance/business from the University of California at Northridge in 1966, Patterson qualified for the F-4 Phantom flight school for Vietnam. However, when he went to receive a physical exam, doctors discovered that a hunting accident had left him with hearing loss in the high frequency range.

Patterson landed a job in automobile sales and got married. He and his wife, Sherry, moved to Bellevue, Washington. Flying took a backseat.

“I got my floatplane rating on Lake Union,” he said. “But I didn’t really do any flying at that time because I had no money and no time with a new bride.”

The couple eventually moved to Portland. In the late 1970s, Patterson was asked to move to Dallas to become a regional sales manager there. But he and his wife had no desire to leave the West Coast.

“We’re West Coast people and we didn’t want to go to the humidity country,” he said. “As a result, I looked around for something that could keep us in either Portland or Seattle.”

One day in 1979, Patterson saw an ad for a commercial real estate job with Coldwell Bank. He was hired and worked for CBRE for 10 years, and met Don Ossey there. The two joined Norris & Stevens together, and left four years later to form Ossey & Patterson. That firm morphed into Capacity Commercial Group in 2004, with the addition of new partners.

Patterson specializes in industrial brokerage services, representing owners, investors, developers and tenants in the Portland area for over 30 years. He said that aviation and commercial real estate have similarities.

“A high level of expertise is needed to succeed in both,” he said. “In flying you have to get it right the first time. In commercial real estate, dealing with your clients and trying to be the best you can be, that (need to get it right the first time) carries through. It really makes a difference in trying to put the deals together.”

While flying never became Patterson’s career, it has remained an enormous part of his life. He and his wife have owned several airplanes. He still flies commercially as a tow pilot for the Willamette Valley Soaring Club in North Plains, launching gliders up to soaring levels. He also is a member of the Columbia Aviation Association.

As much as Patterson adores flying, he enjoys the people the most.

“In aviation, there’s a certain group of people who are a little more outgoing and more adventurous,” he said. “After the flying is done and the logbook is filled out, it’s the joy of mixing with the people associated with aviation.”

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Continued in-migration, a strong lending forecast and decreasing vacancy rates in the Portland area mean new office and industrial construction could ramp up in 2015, while multifamily construction could begin to cool off.

Several real estate industry professionals earlier this month participated in a group discussion about 2015 during a breakfast event held by the Oregon-Columbia chapter of the Institute of Real Estate Management at the Oregon Convention Center.

“In the overall market cycle, I feel like we’re in about the sixth inning,” said Chris Nelson, co-founder of Capstone Partners. “Will we get extra innings? I’m not sure. In multifamily, it might be nearly time to sell, but I feel we still have growth potential.”

The metro area is on track to have 7,000 permits issued for new multifamily projects by the end of 2014, and Clay Newton, a vice president at Kidder Mathews, is predicting that 7,500 permits will be issued in 2015, with construction increasing in the suburban markets.

“I’m seeing urban, mixed-use developments under way in the suburbs,” he said. “I think that’s a trend that’s going to continue to grow.”

Newton said mixed-use developments help create a “sense of place” for tenants.

George Macoubray, a partner at Commercial Realty Advisors Northwest, said Portland’s increasing population of well-educated young people want to live in “20-minute neighborhoods.”

“They don’t want to buy a car, but they’re willing to spend money on craft beer and coffee,” he said. “They want the focus on local – both retail and restaurant – and they want all these things within a 20-minute walk from their house.”

At its lowest, Portland’s vacancy rate was at 3.7 percent. Newton predicts that will increase to 4.3 percent by the end of 2015, but said developers have “the green light to build” until vacancy rates exceed 5 percent.

“Jobs drive pretty much everything,” Nelson said. “And with continued job growth … in-migration will help increase the demand.”

Eric Haskins, managing director at Jones Lang LaSalle, said Portland’s booming high-tech industry will continue to create demand for office space, pushing the vacancy rate in the city’s Central Business District to below 7 percent by the end of next year. The suburbs, too, are seeing record-low vacancy rates, Haskins said.

“Next year we will have our sixth straight year of positive net absorption in the city,” Haskins said. “Low vacancy rates will push more development and more adaptive reuse and redevelopment.”

Haskins predicts space constraints in the CBD will increase asking rents for office space to $30 per square foot and spur development in the suburbs.

“I think we’ll see a significant increase in sales volume in 2015 and the price per square foot will be above its pre-recession peak,” Haskins said. “Five years from now I think we’re going to look back and realize we were part of a fundamental shift in Portland from a second- to a top-tier city.”

Haskins and several other panel members said they expect 2015 will be an active and “exciting” year.

In September, Jones Lang LaSalle ranked Portland as the nation’s No. 8 high-tech hub.

“Investors are being told to invest here,” Nelson said.

Investors want in on Portland’s market, so financing is available for speculative development of office and industrial space.

“On spec development there’s financing happening; there’s plenty of capital out there,” said Ken Griggs, president of Norris, Beggs & Simpson Financial. “Banks are expecting an expanded supply of capital for the next few years.”

Recent college graduates want to live in Portland, Newton said, and continued job growth in the area will continue to fuel construction of industrial and office space.

Dave Ellis, a principal at Capacity Commercial Group, predicts industrial vacancy rates will dip to below 5 percent by the end of 2015.

“Not only are we building new product, but it’s being leased,” Ellis said. “I predict 1.5 to 2.5 million square feet of net absorption by the end of 2015.”

Ellis said if fuel prices stay low, he expects to see construction of distribution centers for online retailers like Amazon. E-trade distribution centers can have footprints of up to 1.2 million square feet.

Macoubray said e-commerce is creating construction opportunities for retail as well. He cited Cabela’s, which started as a catalog-only retailer, but now has stores often built close to a highway or freeway.

“Any online company that doesn’t have a brick-and-mortar store I predict will be out of business in 10 years,” Macoubray said. “People want to buy online and be able to go to the store if they want to pick it up or need to return it.”

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Brian Owendoff arrived in Portland in 2008. He left a real estate career in Cleveland, where, in his words, he was beating the green drum and no one was listening.

He has since participated in major projects such as Park 19 and Ladd Tower, as well as community efforts including the redevelopment of the Rose Quarter properties and the annexation of West Hayden Island.

Owendoff held the reins of local offices of both Opus Northwest and CB Richard Ellis, but in February was relieved from his duties at the latter firm after he was outed as a critical commenter on local websites.

But he later became a vice president at Capacity Commercial Group. The 91��Ƶ recently asked Owendoff about his new job, the Portland market and what he has learned during the economic downturn.

91��Ƶ: You had started your own firm before going to Capacity. What made you decide to join Capacity rather than do your own thing or go somewhere else?

Brian Owendoff: After 19 years of creating wealth for other real estate companies, I decided to venture out on my own and start a firm focused on real estate consulting and development of urban infill apartments. After a few months, I soon realized that I am not a lone wolf but very much a pack animal. Through my prior experience of leading teams that ranged from 28 to 100 associates, I found I missed the daily interaction and creativity of being surrounded by other professionals.

I had been approached by other national brokerage firms about leading a new Portland office. Due to the fact that Greater Portland only has two Fortune 500 companies and few private firms with sales over one billion dollars, there is not enough demand in marketplace for another large brokerage firm. My view is the brokerage world is bifurcating into two to three mega firms that look to be all things to all Fortune 500 companies in all places.

The other end of the spectrum will be high-quality boutique firms that service local and regional clients on a more personal basis. Those firms stuck in the middle may struggle. Real estate has been and will continue to be a local business. I was attracted to Capacity Commercial because they have deep bench strength of seasoned office and industrial professionals and an entrepreneurial environment. With 28 associates they are big enough to service large institutional owners but small enough to provide superior customer service to a Portland-based client.

91��Ƶ: You’re going to focus on multifamily and student housing at Capacity, a firm focused primarily on industrial. Why are those appealing market sectors for both you and the company?

Owendoff: The Portland apartment market is one of the tightest in the nation. The overall Greater Portland market has an occupancy rate of 97 percent, with some submarkets at 100 percent occupancy. Portland has one of the lowest vacancy rates in the country.

Over the past 20 years, Portland has averaged approximately 4,000 new apartment units a year. 2010 saw the delivery of less than 600 units. Approximately 1,500 units will be delivered in 2011. There is currently a shortfall of 10,000 to 12,000 units.

Portland’s high occupancy has three main causes: Oregon’s land-use laws, and costly and time-consuming entitlement for new construction restricts supply and increases cost for construction; increases in renter demand from demographics and challenges associated with securing a home mortgage; and rate of new construction at its lowest levels due to challenges in securing construction loans.

Greater Portland continues to attract a high number of generation ‘Y’ that wants to rent apartments in the urban core. Almost 10,000 continue to move in each year.

Additionally, 10,000 (baby) boomers are turning 65 years old every day in the U.S. Many boomers are downsizing and selling homes to move into smaller living spaces. Portland is attracting retirees that also want to live in an urban core. Many are choosing the flexibility of renting an apartment vs. the risk of ownership of a condominium.

The same holds true for student housing. 2011 marked the third year in a row of record freshman matriculation at U.S. colleges and university. For the first time Oregon is expected to have over 100,000 students, in 2011. Locally, PSU will still be short over 3,000 beds even with the delivery of American Campus Communities’ 900-bed facility in the fall of 2012.

Portland is the pretty girl at the dance, and there is tremendous institutional ownership interest in newly constructed apartment and student housing projects. Due to the lack of supply, several newer apartment projects have recently sold at all-time low cap rates.

91��Ƶ: Talk to me about potential projects you guys are looking into. Is there anything in the near future?

Owendoff: Ninety percent of the Portland apartment market is in sales below $10 million. My focus will be on the brokerage of existing apartments. I will also leverage my development experience to tee up new urban infill projects of minimum half-block sites that will range from 100 to 150 units. I am working with both existing local and new regional companies as the point for market entry into the Greater Portland market.

91��Ƶ: You’ve been a devout preacher in the areas of job creation and having enough land to do so. What needs to happen in Oregon, and more specifically Portland, to create jobs? How do real estate professionals help?

Owendoff: Jobs can only be created when there is market demand for products and services, adequate capital and entrepreneurial culture. Land is the raw material needed to accommodate the built environment.   In my opinion, large bulk distribution and manufacturing facilities will be the next market segment to need new construction.  Few blocks of space over 150,000 square feet exist in Greater Portland.  Unfortunately, there are few shovel ready land parcels available to meet market demand.

In 2010, I completed a survey of shovel ready industrial land of less than 25 acres.  Based on historic absorption rates over the past twenty years, we have less than a 5 year supply of land to accommodate growth of existing Oregon companies.  The Portland Business Alliance and NAIOP are conducting a similar survey for large parcel, greater than 25 acres, which will be released later this year.  I expect similar outcome that will factually show we have less than a five year supply of large parcel land to accommodate the next Intel, Solopower or Subaru.

On a regular basis, I work with large office and industrial users on site searches from a local, regional and national basis. Many times Greater Portland is eliminated early from consideration due to lack of immediately available office and warehouse space and immediately buildable land. Portland needs to grow its supply of industrial land, not reduce it.

With respect to the apartment market, even if 10,000 new units broke ground in the spring of 2012, this new product would not be delivered until 2013-2014.  There are currently nine urban and three suburban projects that have broken ground or are in the planning process that will deliver just 2,200 units in 2012 and 2013.

Over the next three years, rents will increase from 10 to 20 percent. Free rent and free underground parking will be non-existent. Landlords will not spend any money on marketing, as the demand will far outpace supply. Landlords will be shooting fish in a barrel.

Moving forward, cities that can expedite the approval process for new construction, waive and/or reduce system development charges and potentially think out of the box with approving new construction methods that could result in lower construction costs that could better meet market demand and be more cost effective. Less costs for developers will result in lower rent for apartment residents and finally make new warehouse construction pencil out economically for developers and tenants.

Ninety percent of life is just showing up.  Real estate professionals can help by showing up to City Council and community meetings to show support for the business community.  Many times the business community is not represented at planning meetings because no one takes the time to show up.  We cannot change the anti-business culture without greater participation by the real estate community.

91��Ƶ: You’re involved heavily in the planning of both West Hayden Island and the Rose Quarter Properties. Where do those projects sit currently? Any thoughts on them moving forward?

Owendoff: West Hayden Island was brought into the Urban Growth Boundary in 1983 to serve marine industrial needs. The west side of Hayden Island is not currently included in the City of Portland boundaries. Annexation by the city is a requirement in order for urban services to be provided to the site.

The city of Portland is conducting a public process to explore annexation and creation of a long-range land use plan for West Hayden Island. It is an undeveloped 800+ acre site, located west of the BNSF Railroad.

In February 2009, Mayor Adams convened a Community Working Group to advise Portland City Council on the best mix of uses for West Hayden Island.  I am a member of it.

Over the past 18 months, the group reviewed consultant work and discussed their charge, which is to advise City Council on how marine industrial, habitat and recreational uses might be reconciled; and if the group determines that a mix of uses is possible, to recommend a preferred concept plan.

This collaborative planning is a good way to coordinate with efforts currently underway to plan for the Columbia River Crossing project and the east side of Hayden Island. It is also the best way to ensure that the island can be improved for open space and natural resource enhancement, while also providing a designated area for future marine related development. Reaching regional agreement on a balanced approach will allow planning, management and enhancement efforts to proceed.

Based on the work of the group, the decision to annex or not annex West Hayden Island will occur in 2012.  One out of 10 jobs in our region is tied to the port.  I believe that Mayor Adams will be the first mayor in a quarter century to succeed in bringing West Hayden Island into the city.  This will be a great accomplishment, and be one of his legacies to Greater Portland.

The Memorial Coliseum will receive an upgrade of exterior landscaping and improvements to the existing war memorials.  Additionally, the city is close to securing a long term commitment from the Winterhawks to be a tenant in the Veterans Memorial Coliseum.  The VMC will be renovated with money from both the city and the Winterhawks.  This is a great first step to make capital improvement to a facility that is utilized over 150 times a year by Greater Portlanders.

91��Ƶ: Your time in Portland has been filled with ups and downs. What keeps you out here? Have you thought about leaving? How does it differ from anywhere else you’ve been?

Owendoff: The recession has seen approximately one-third of the area’s developers either leave the region or go out of business. I see great potential in the need for real estate development and consulting expertise once the market recovers. While I have had several opportunities to move back east, I chose to remain in Portland because of the quality of life and potential our region has to become a world leader in sustainable development and construction practices, manufacturing and information technology.  I have also been blessed with some great friends and business associates that went out of their way to say ‘please stay in Portland.’

Being located north of the seventh largest economy in the world, California, Oregon should be positioned well to capitalize on companies wanting to flee high cost of living, tax and congestion to relocate to a place like Portland. Portland’s great restaurants and Oregon’s world-class natural beauty are also reasons we remain.

Portland differs from other parts of the country from its stringent land-use laws. These land-use laws have done more good than harm; however, it is hindering Oregon’s ability to respond to market demand for the built environment due in large part to lack of available land. Anything in life that is to an extreme is not healthy. We need a balance and also need to remember that the ‘D’ in LCDC is ‘development.’ Many in our state have been focused for 30 years on only the ‘C,’ which is ‘conservation.’

91��Ƶ: The markets have been challenging, to say the least, over the past few years. What have you learned over the last year about yourself and about real estate?

Owendoff: The old rule of thumb was to have six months of living expenses in savings and always have a good plan B. Today you need 24 months of living expenses and have plans C, D and E. I have learned that we are all human and we make mistakes. Those that can learn from their mistakes will grow. Those that cannot let go will not move forward.

Real estate professionals have been sucking from the firehouse of humility for the past three years. Unfortunately, it will be a few more years before the hose is turned off. The old saying in real estate was ‘location, location, location.’ Now it is ‘location, leverage and market timing.”

Personally, I have learned that you can gain wisdom and accelerate self-improvement from learning from your mistakes. No one is perfect. We are all human and make mistakes. Most people believe the opposite of success is failure. To me, the opposite of success is mediocrity. Failure is part of the journey towards success.

The important thing is to view mistakes as a useful stepping stone to a higher reality and better outlook on life. This has caused me to focus on the most important aspect of my life: being the best husband I can be to my wife, best father to my children and best friend to those I have been blessed to become close to in Portland.

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A longtime owner-tenant of an industrial space in Southeast Portland is looking for an opportunity to unload the property.

The property at 4617 S.E. Milwaukie Ave. is owned and occupied by Barbo Machinery. The company is looking for a buyer for the building and will start looking for new space once a deal is worked out.

Barbo Machinery is a retail seller of woodworking equipment – such as power saws and boring machinery. The company has operated in the Northwest since 1922. It moved into the building in 1982.

The property, developed in 1927, was previously home to construction firm Babler Brothers Inc., which completed a lot of highway work in Alaska during the 1950s.

Barbo Machinery is looking to relocate because it wants to downsize. The building industry is struggling to recover from recession, and Barbo and other suppliers for woodworkers are having trouble finding business.

“Basically we’re just kind of backing up and trying to survive,” said Rand Robinson, president of the company.

A likely new tenant would be one in the service industry with a need for some retail display, said broker John Fettig of Capacity Commercial Group. But a commercial tenant wouldn’t be out of the question. The property’s neighbors include 24 Hour Fitness, Portland Marble Works and La Carreta Mexican, all enclosed by Southeast Milwaukie Avenue and Holgate and McLoughlin boulevards.

“I believe there could be a redevelopment play,” Fettig said. “The neighborhood is transitioning, no question. That little triangle of land is a very successful commercial pocket.”

The property’s 18,677 total square feet include a showroom, a warehouse, storage space and second-floor office space. It has off-street and fenced parking.

The property is listed for $1.73 million, or $92.35 per square foot.

For details on purchasing this property, contact Fettig at johnfettig@capacitycommercial.com or 503-517-9870.

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One large lease has significantly helped net absorption within Portland’s industrial space submarket.

United Stationers Supply Co., a subsidiary of United Stationers Inc., has leased 195,510 square feet at Building A of the Rivergate Corporate Center III, located in the Rivergate Industrial Park near the Port of Portland’s T-6 terminal.

The long-term lease marks the largest industrial lease of the past 24 months in Portland, said Evan Bernstein, associate broker with Capacity Commercial Group, the firm representing the property owner, Multi-Employer Property Trust. The lease brings the occupancy in the 573,420 square foot warehouse and distribution center to 60 percent, as well as 11 percent within the entire Rivergate Corporate Center, he said.

United Stationers Inc. is an international wholesale distributor of business products headquartered in Chicago. The company leased the space to consolidate three of its subsidiaries into a single warehouse. The new location will serve as the regional distribution hub for United Stationers Supply Co., Lagassee Inc. and ORS Nasco. While United Stationers Supply and Lagassee will be relocating within the region, the move will mark the Northwest expansion of ORS Nasco.

“Not only does this lease help 2010 net absorption market-wide, but it also solidifies Portland as a west coast regional distribution hub,” said Bernstein. “If you look at the fourth quarter of 2009, it was the first quarter in years that we have had positive net absorption. So, I don’t think this lease was a fluke, but rather an indicator that things are starting to pick up.”

The move will bring 65 employees to the space within the warehouse that is certified with a LEED Silver designation. The facility developer, Trammell Crow Company, is in the process of retrofitting the space for United Stationers.

United Stationers Supply Co. was represented by Brad Fletcher of Grubb & Ellis.

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