Downtown Portland Clean & Safe recently released its 2018 Development/Redevelopment Report, and it shows that a record construction boom is still under way in the city.

Currently, 48 construction projects are active in the Central City – an enhanced services district defined as downtown Portland, the West End, the University District, the River District, the South Waterfront District, the Central Eastside Industrial District and the Lloyd District. The 2017 report tallied 45 active projects.

The annual report presents construction and development patterns over the past five years. Highlights this year include the revelation that Central City office vacancy rates increased slightly from 10.5 percent a year ago to 12.8 percent. Citywide, the office vacancy rate is just 9.5 percent. According to Colliers, rental rates in the Central City average $31, with Class A rates at $35 and Class C at $25.

“At the core, these rates reflect the fundamental stability of downtown’s finance, insurance and real estate sectors,” the report states.

Meanwhile, the citywide residential vacancy rate fell from 5.4 percent to 4.3 percent over the same time period. Correspondingly, since 2011 more than 5,000 residential units have been built in the Central City, with 3,300 additional residential units coming in 19 projects now under construction. Also, 2,000 more units in four projects are in some phase of development.

Hotels are another growth area, with more than 3,000 new rooms expected to come online by the end of 2019, said Jeff Miller, CEO of Travel Portland and a Downtown Portland Clean & Safe board member.

“These additional rooms not only help meet business and tourist visitor demand,” he said, “but, for the local market, they directly expand on the more than 35,000 tourism-related jobs the industry already supports in Portland.”

In light of the rapid pace of ongoing construction, Portland developer Jordan Menashe believes there is potential for more growth. But he also cautioned against over-optimism, particularly when considering the ups and downs of the typical real estate cycle.

“From somebody that works downtown and lives downtown and knows downtown, I’ll tell you that I think there’s more space on the market from an office standpoint than we think,” he said. “And with interest rates ticking up, I think that we need to be cautiously optimistic, with a little bit more emphasis on the cautious portion. Nobody has a crystal ball, but nobody knows how tough it can (be) until it really gets tough.”

Mike Salsgiver, executive director of the Associated General Contractors Oregon-Columbia chapter, had a similar takeaway.

“The only concern I have as someone who’s watched the economy a long time is that this is a long-in-the-tooth recovery,” he said. “I know that it’s a part of a cycle and at some point the cycle will crest and head down. But right now we’re not seeing an immediate danger.”

For the time being, Salsgiver added, contractors’ biggest problem still is finding enough skilled trades workers.

“Everybody that I talk to in the industry is telling me that their project pipeline is full,” he said. “The two biggest challenges remain that they cannot find enough skilled workers to do the work, and they can’t find the subcontractors they need.”

The report also touches on the housing crisis that continues to envelop Portland. Just 10 percent of the new residential units built in recent years are considered “affordable,” according to the report, while the city’s 2017 inclusionary housing rules have almost completely halted development applications.

The medium- and long-term implications are somewhat mixed. Prior to the program beginning in February 2017, developers submitted permits for more than 19,000 housing units across the city, mainly to ensure profitability. During the first year of the program, however, only 17 new residential permits were filed. That is likely to have a substantial ripple effect on the local construction industry in coming years.

“It’s huge,” Menashe said. “We don’t develop multifamily, but I do know the spigot has turned off. The numbers don’t lie. Especially with rising interest rates, it cannot pencil for multifamily developers to have to do this. The city would get more with honey than they have with vinegar, which is inclusionary zoning.”

The Downtown Portland Clean & Safe District covers a 213-square-block area. Businesses in this area pay for services that include cleaning, security, community justice services, market research and retail advocacy.

The complete report, including a full list of current Central City projects, is available at: .

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Portland’s 2035 Comprehensive Plan is one step closer to taking effect after a favorable ruling last week from the Oregon Land Conservation and Development Commission.

The state commission turned down appeals from the Multnomah Neighborhood Association objecting to the city’s “middle housing” policy and other rules intended to increase density.

“We’re pleased with the decision,” Eric Engstrom, principal planner at the Portland Bureau of Planning and Sustainability, stated in an email message.

“Among other things, it brings new mixed-use zoning to transit corridors and centers outside the Central City. This new zoning will facilitate private investment in needed housing,” Engstrom stated.

The Comprehensive Plan is the city’s wide-ranging document that will govern development within city limits as Portland grows to incorporate more than 100,000 new residents that are expected by 2035. The Comprehensive Plan is set to go into effect on May 24.

An appeal to the Oregon Court of Appeals is likely, Multnomah Neighborhood Association Chairwoman Martie Sucec said.

“That’s our plan,” she said.

Neighborhoods such as Multnomah Village have adapted uneasily to developers building apartments near single-family homes, often with little or no new parking.

In Multnomah Village, Urban Asset Advisors has constructed Multnomah Village Apartments and is planning a second mixed-use building, Multnomah Station, along Southwest Capitol Highway. The buildings have similar designs, with three stories of apartments over ground-floor retail space.

The neighborhood association has fought the developments.

“It’s going to be like a canyon on Capitol Highway,” Sucec said.

Other objections from the Multnomah Neighborhood Association centered on designating Multnomah Village a “neighborhood center” rather than a “neighborhood corridor,” which allows for building up to four stories. The neighborhood association has advocated for a three-story height limit.

“It’s not that we object to density,” Sucec said. “We object to having no role, no assurance, in where those things go.”

A written order will follow the commission’s March 15 decision. If the neighborhood association does not appeal, the comprehensive plan will be considered “acknowledged” by the state, clearing the way for implementation.

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Portland’s Bureau of Planning and Sustainability is getting significant pushback to a proposed rule that would require developers to register to pursue an environmental certification.

The Central City 2035 Plan, as proposed, would require registration for a Leadership in Energy and Environmental Design gold rating for some projects. The rule proposed by BPS also would require a detailed checklist showing which LEED credits project backers will pursue.

Some stakeholders in the development community say the U.S. Green Building Council’s LEED certification process is expensive, and that money can be better spent elsewhere.

“I’ve talked to some developers who are essentially choosing not to get LEED, unless their clients require that,” said Timm Locke, director of forest products for the Oregon Forest Resources Institute. “They find the value of the plaque isn’t necessarily worth it. They want to invest the dollars in areas that will actually have a positive impact on the environmental performance of the building.”

The proposed rule would apply only in the Central City, and only to new buildings or additions of at least 50,000 square feet.

The proposed rule would not actually require developers to obtain a LEED gold rating, because state law bars municipalities from demanding better performance than the state building code. However, BPS officials hope to encourage follow-through for a large percentage of new construction.

“We are just requiring registration with the intent that projects will certify,” said Alisa Kane, the city’s green building manager for the Bureau of Planning and Sustainability.

“Ultimately the goal is to reduce carbon emissions in the built environment.”

Most buildings constructed in Portland’s Central City – an area including downtown and the close-in east side – already have achieved some type of LEED rating. From 2008 to 2014, 87 percent of buildings of at least 5,000 square feet achieved LEED gold or better.

During that period, 16 projects were rated LEED platinum, 12 were rated LEED gold and nine were rated LEED silver.

“We were already hitting most of these marks,” Kane said. “We wanted to make sure that whatever we did next is better.”

In a sense, the proposed standard illustrates how far green building has come in Portland and nationwide. Modern buildings are far more efficient than those built in decades past, making a LEED gold rating relatively achievable.

“I actually like it,” said Greg Goodman, co-president of Downtown Development Group. “When we build, we’re trying to go to at least LEED gold, LEED platinum. It’s good for our city. It probably pushes costs up a bit, but if the building’s going to be there for a long time, you want to make it efficient.”

The U.S. Green Building Council charges a $900 registration fee. After that, a precertification review starts at $3,250, with expedited service available for $5,000. Other fees are added throughout the LEED review and certification process.

The city estimates that obtaining a LEED gold rating would increase a developer’s costs anywhere from 0 to 5 percent, Kane said.

LEED’s critics argue modern buildings are so efficient that obtaining environmental certification results in little real-world gains.

“There’s just not a lot more room for improvement,” Locke said. “Forty years ago, there was a whole lot of room for improvement, and that’s happened. And now’s there’s not much more.”

Recent buildings built to LEED platinum standards include Park Avenue West, Indigo at Twelve West and the three buildings at Hassalo on Eighth. Indigo at Twelve West has gained a rating, whereas ratings for the other two projects are pending.

In public comments, industry representatives pushed for more flexibility in the city rules. Some of those professionals have lobbied for Green Globes certification to be considered as an option.

The arguments appear to have made some headway with city officials. An upcoming draft of the Central City 2035 Plan, to be released in early fall, may provide more flexibility.

“We have heard through public outreach people want more options,” Kane said. “We are already considering in the next draft putting out more variety of program.”

Green Globes, a program of the Green Building Initiative, is a rival to the more established LEED program. Green Globes is regarded by some observers as more friendly to the timber industry than LEED.

LEED remains the more popular standard. The program gives projects categorical credits rewarding energy efficiency, low water use, recyclable materials and good air quality. Platinum is the highest rating, followed by gold, silver and certified.

Several speakers last week protested the LEED gold requirement at the first public hearing for the Central City 2035 Plan before the Planning and Sustainability Commission.

Tim Atkinson, vice president of sales at Portland-based Stimson Lumber Co., said the LEED standards put renewable wood products at a disadvantage. LEED encourages the use of wood certified by the Forest Stewardship Council – a relatively small portion of the overall lumber market.

Public comments have also flooded in via written testimony. Several people criticized the city’s move to favor LEED certification.

“At a time when the city is in the midst of an affordability crisis, now is not the time to adopt a policy that picks winners/losers and drives up the cost of development, unintentionally impacting housing affordability,” Paul Grove, associate director of government affairs for the Home Builders Association of Metro Portland, said in one written comment.

David Wark, chairman of the Portland Design Commission, wrote on the commission’s behalf that a third-party program such as LEED is likely to be revised and expanded over time, making its applicability to the Central City 2035 goals uncertain. Wark also advocated for allowing developers more flexibility than LEED alone.

“If a third-party standard is necessary, the commission would like to see more than one accepted standard,” he said.

Portland would not be the first municipality to require LEED registration. Washington, D.C., has required LEED certification for buildings of 50,000 square feet and larger since 2012. Other local governments, including Philadelphia and Arlington County, Virginia, reward LEED buildings with greater density allowances, according to the U.S. Green Building Council.

Proposed Central City zoning code

33.510.244 B. New buildings with a net building area of at least 50,000 square feet, and alterations to existing buildings that increase net building area by at least 50,000 square feet must provide a letter from the Bureau of Planning and Sustainability that verifies that the project has registered to earn LEED gold level certification and prepared a preliminary LEED project checklist showing which LEED credits will be pursued for the building.

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Height, and where tall buildings would detract from neighborhoods, dominated the initial public hearing for the proposed draft of Portland’s Central City 2035 Plan.

Goose Hollow and West End residents came out in force on Tuesday to a meeting of the Planning and Sustainability Commission to oppose proposed maximum building heights of up to 460 feet on some parcels. The Goose Hollow Foothills League has been a vocal advocate for preserving views of Mount Hood from the historic neighborhood.

“Excessive heights cause an excessive incentive to tear down rather than preserve,” said Richard Rahm, a West End resident.

Developers and some affordable-housing advocates have been pushing for taller buildings to provide more housing and greater return on investments. That has caused consternation throughout Portland, and the West End and Goose Hollow have emerged as particular hot spots for the debate.

Sherry Salomon, a Goose Hollow resident, said allowing buildings up to 325 feet “threatens the character of our neighborhood.” It puts at risk historic Goose Hollow buildings such as the Concordia Club, a historic Jewish social club, she said.

Fred Leeson, president of the Architectural Heritage Center‘s board, lamented that the neighborhood’s views of Mount Hood haven’t been the same since construction of the KOIN Tower in 1983.

“We seem to be in such a rush to be a huge city just like any other American city,” he said.

Walt Weyler, a West End resident and an Oregon Symphony Association board member, said the city should not allow construction of large multifamily buildings without additional parking.

“Parking is needed for arts performances,” he said.

The city has moved away from minimum parking requirements, instead investing in public transit.

Some speakers advocated for greater heights. Allison Reynolds, a lawyer representing Unico Properties, owner of the U.S. Bancorp Tower, said the code should allow for unlimited height at the site of the skyscraper better known as Big Pink.

The building, along with the KOIN Tower and the Wells Fargo Center, predates and exceeds downtown’s 460-foot height limit. As a result, the towers are considered nonconforming uses, which could complicate refinancing, transactions or rebuilding after a disaster, Reynolds said.

Reynolds added that the buildings’ owners would be amenable to limiting the allowable height on those properties to the towers’ current heights, but she said there are some discrepancies in how skyscrapers’ heights are measured.

Portland State University officials also argued in favor of increasing allowable building sizes along the transit mall and MAX orange line tracks.

Several speakers decried a zoning code requirement that buildings and additions should meet Leadership in Energy and Environmental Design gold standards from the U.S. Green Building Council.

“There is an issue with mandating one single green building program,” said Caitlin Horsley, sustainability and education manager for the Home Builders Association of Metropolitan Portland.

Some speakers said they want the option to use a competing certification: Green Globes from the Green Building Initiative.

Audrey Craig Gnich, with Portland Forward, cautioned against doing away with a floor-to-area ratio for providing day care facilities in the Central City.

“We’ll be left with a zoning code that does almost nothing to support families and family-sized developments in the Central City,” she said.

The Planning and Sustainability Commission will hold a second public hearing on the Central City 2035 Plan on Aug. 9 at 5:30 p.m. in the Portland Building. Attendees can sign up to testify beginning at 3:30 p.m. in Room C of the Portland Building and then return near the start of the meeting.

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Multifamily developers in coming years may be required to more carefully consider how people travel to and from their buildings, and whether future tenants will drive.

Portland Bureau of Transportation officials are discussing proposed new requirements for developers for transportation demand management – planning jargon for how to encourage people to forsake single-occupancy vehicles for bicycles, mass transit vehicles or their own two feet.

More than ever before, multifamily developers would be responsible for influencing how residents get to and from their buildings.

The proposed requirements are part of Central City zoning code changes under discussion. They would apply to new developments or renovations that create more than 10 dwelling units or more than 25,000 square feet of net building area.

In order to comply with the regulations, a developer would have to either: 1, agree to a preapproved standardized plan set forth by the Portland Bureau of Transportation, or 2, undergo a transportation impact review process.

The provisions stem from the City Council’s goals of reducing average driving to 11 miles per day, and boosting the proportion of Portlanders who walk, bike, take transit, carpool or work from home to 70 percent by 2035.

“What we’re trying to do with the Central City plan and parts of the Comprehensive Plan as well is take a collaborative, incentive-based approach to increasing use of public transit and biking and walking,” said Dylan Rivera, spokesman for the Portland Bureau of Transportation.

Rivera said something must be done to steer Portlanders away from driving as the population booms. The city projects 120,000 new jobs and 260,000 new residents by 2035.

“If everyone’s driving, you can’t accommodate all that growth,” he said. “You’ll just choke on traffic.”

PBOT is working on a preapproved plan or template for multifamily developments. If developers agree to a preapproved plan, it could accelerate the review process, Rivera said.

The preapproved plans would require developers to agree to such things as secure bicycle parking, mass transit subsidies or rebates, and monitor screens displaying transit maps and schedules.

Also under discussion are performance standards for reducing vehicle trips and corrective action if standards are not met. Developers would have to demonstrate how their building will achieve the 2035 goals on a straight-line incremental basis.

Developers are monitoring PBOT’s rulemaking. Sam Rodriguez, senior managing director of Mill Creek Residential Trust‘s Portland office, said a process to understand the transportation infrastructure around a proposed development could be beneficial, depending on how it’s implemented.

“If you’re going to do large projects, it’s probably a good idea to understand how transportation is going to play into that,” he said. “I think it could be a positive thing. I just don’t know enough about it.”

The proposed changes are buried on page 193 of a “discussion draft” of the Central City 2035 Plan. The draft also significantly loosens parking requirements for new developments in another bid by city officials to discourage driving.

For central Portland, the maximum ratio for residential uses has been reduced to 1.2 parking spaces per dwelling unit, down from 1.35. The maximum ratio for office uses has been increased to 1 parking space per 1,000 square feet, up from 0.7 and 0.8.

The provisions could change significantly before adoption. But taken together, they appear to be an effort to get developers to weigh the impact of their projects on roads and transit systems.

“It’s very unclear right now as to what the requirements will be and what the transportation demand management review process will look like,” said Stephen Janik, a founding partner of Ball Janik LLP. Janik briefed industry officials on the proposed changes at a recent forum held at Multnomah Athletic Club.

Jack Orchard, a Ball Janik attorney who has been studying the proposed language, said it appears to be part of a larger move away from developments surrounded by car transportation and parking.

“We had a number of generations of development that proceeded on that basis, and now we’re reconsidering that,” he said. “I don’t if that’s right, wrong or indifferent, but that’s where the discussion is headed.”

Orchard said it’s also not clear how the new provisions would affect affordability of Portland housing.

The draft lacks enforcement mechanisms for the provisions. Instead, the city is approaching the changes on the front end, requiring transportation demand management plans before a building permit is issued.

The Central City plan isn’t the only effort in the Comprehensive Plan to discourage driving. The Comprehensive Plan, of which the Central City 2035 plan is part, is likely to also include transportation-related requirements for developments in neighborhood commercial districts such as Alberta, Belmont, Division, Hawthorne and Williams, Rivera said.

“Those would have potentially some different thresholds,” he said.

Portland appears to be on the vanguard of transportation planning for multifamily developments.

Seattle often requires transportation management plans for large commercial or institutional projects such as hospitals or universities, much like Portland’s current practice. But transportation plans are unusual for multifamily projects, said John Shaw, senior transportation planner for the Seattle Department of Construction and Inspections.

“There are very few instances where the city (of Seattle) has required trip reduction measures for projects that are solely or primarily residential,” Shaw said. “I think that’s an interesting effort, and we’ll all be very curious to see how it goes.”

The Portland Planning and Sustainability Commission is scheduled to discuss the Central City 2035 draft at a May 24 meeting. Hearings will follow on June 14 and 28.

Public comments will be accepted at each meeting. The commission is then scheduled to make a recommendation to the City Council on July 26, to be followed by council hearings in the fall.

“We’re looking for input on this and help from the development community on this so it can be effective and useful,” Rivera said.

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