Self-storage projects around the Portland-metro area are on hold amid a burst of oversupply, and few are likely to be built anytime soon, according to analysts and developers.

For years, Portland has been one of the nation’s busiest markets for self-storage construction. In the Pearl District, for example, inventory has risen from 250,000 square feet five years ago to 550,000 square feet today.

“The negative is Portland is the number one most overbuilt market in the world,” said Kevin Howard, owner of Northwest Self Storage, a large operator based in Clackamas with 97 facilities around the region. “Not just in the country – in the world.”

Rental rates in Portland for 10-feet-by-10-feet climate-controlled units have dropped 10 percent since 2017, according to a Cushman & Wakefield report released July 7.

Self-storage companies were attracted to Portland, which was touted along with Denver and San Antonio as a growing market. Self-storage has some of the highest operating margins of any real-estate class – upwards of 60 percent to 70 percent margin on net operating income, according to Cushman & Wakefield. High-dollar sales helped pique interest.

“There was a lot of pent-up money,” Howard said. “Developers were looking to release that money.”

More recently, however, in-migration has slowed and the COVID-19 pandemic sent shockwaves through the economy. And as developers rushed to meet demand for self-storage, they quickly exceeded it.

Portland was among the leading markets of a long expansionary bubble, with construction spending on storage nationally surging 584 percent from January 2015 to January 2020, according to the U.S. Census Bureau. Yardi Matrix, a national real estate analysis firm, recently forecast new self-storage deliveries in the U.S. to fall 52 percent by 2023, Cushman & Wakefield reported.

Some local projects were paused, and may never be built. A six-story self-storage facility from Hoyt Street Properties in the North Pearl District was approved by the Portland Design Commission in April 2018. Construction of the 129,520-square-foot facility designed by MCA Architects has not begun.

“We have put the project on hold for now,” Tiffany Sweitzer, president of Hoyt Street Properties, stated in an email. “We still think storage is a viable option for a future project on our property, but just not sure when we might take up the project again. Given the density built in the Pearl, this would be a great asset to those living in both condos and apartments.”

Hoyt Street Properties would have more time to begin building the facility under a plan being considered by the City Council to extend development deadlines. If proposed amendments were approved, the project team would have until Jan. 1, 2024, to begin construction.

Northwest Self Storage recently opened a new facility at 4716 S.E. Powell Blvd. Before that, the company built one on Southeast 82nd Avenue. Another facility opened in Camas, Washington, after a lengthy delay in obtaining an elevator inspection because of the pandemic, Howard said. But no more will follow in the foreseeable future, he added.

“That’s all on hold,” he said. “Obviously, with this kind of market, there’s a couple of them I wish I hadn’t built.”

Others stopped short of construction. A PacTrust proposal to build a multistory storage facility north of Benson Polytechnic High School went before the Portland Design Commission for design advice in 2018, but the project has not moved forward.

Occupancy has held up amid the pandemic, Howard said. Few people are moving, but some renters are consolidating apartments or moving back in with their parents and need storage, he said.

Other large self-storage projects have popped up around Portland, including West Coast Self-Storage, a four-story (three above grade) building at Southeast McLoughlin Boulevard and 17th Avenue; and Extra Space Storage, a four-story, 126,820-square-foot facility at 685 S.E. Division Place that is part of a Salt Lake City-based chain. Both projects were completed in 2019.

Storage unit rents in the Portland-Hillsboro-Vancouver area fell 4.9 percent in May, compared to a year earlier, according to a survey by Yardi Matrix. The metro region remained among the most expensive self-storage markets in the U.S., with the 10th-highest rent among the top 100 markets. The average rent for a standard unit was $135 in May.

Nationally, self-storage has largely avoided the rush of consolidation that has transformed other industries. Approximately 20 percent of the market is owned by the five largest real estate investment trusts – Public Storage, Extra Space Storage, CubeSmart, Life Storage and National Storage Affiliates (NSA) – while the remainder is owned mainly by small operators, according to the Cushman & Wakefield report.

“Self-storage remains relatively resilient with minimal fundamental changes to underlying drivers of demand in the long term,” the analysts stated.

Yet in Oregon’s largest city, the expansion has created a massive oversupply, Howard said.

“It’s a bloodbath in Portland,” he said.

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A Phoenix-based developer is moving forward on a senior housing tower that would fill in one of two remaining undeveloped parcels in the north Pearl District.

The Holden of Pearl project team received design advice from the Portland Design Commission for the second time on Thursday. The 16-story podium-and-tower project would bring 224 senior housing units to the northeast corner of Northwest 13th Avenue and Quimby Street.

The full-block property is owned by Hoyt Street Properties, which is poised to sell the parcel to Alliance Residential Co. for development. The property is one of two remaining from the 1989 Hoyt Street Yards master plan.

Hoyt Street Properties’ Tiffany Sweitzer, in an email, stated that the local developer’s role in the project is only as the potential property seller.

“We would not play a role, but do think it’s needed and will be well accepted in the neighborhood,” Sweitzer stated.

The design from Ankrom Moisan Architects centers on a tower that would rise from a three-story podium on the block’s eastern portion. At 210 feet by 210 feet, the property is larger than a typical Portland block.

Commissioners praised the designers, Ankrom Moisan’s J.P. Emery and Lauren Jones, for their consideration of comments given at the first design advice hearing.

“You responded creatively, and we really appreciate it,” Commissioner Zari Santner said.

The tower would be a mix of red brick, metal panel and glass. Bureau of Development Services staffers noted brick is an atypical material on Pearl District towers, which tend to feature glass and concrete expressions. Red brick is often used on lower floors. Some commissioners said the red brick would be acceptable.

Santner urged the project team to tone down the brick’s bright red color as it appeared in renderings.

“Hopefully there is something that is more subtle,” she said.

The top of the building needs some architectural detail, Chairwoman Julie Livingston said. The tower terminates in a plain fashion, without any design flourishes.

The entrance lobby would be on 13th Avenue, with a dock. At the building’s center, an internal courtyard would serve memory care patients. Motor vehicle drivers would enter from Quimby Street and navigate a turnaround to drop off residents. Valets would take any vehicles needing to park into a parking ramp.

Holden of Pearl’s exterior would have a number of protruding canopies to shield pedestrians from rain, as design guidelines encourage.

“You can’t have too many canopies,” Commissioner Jessica Molinar said. “The more canopies, the better.”

The building would be constructed at the far northern edge of the Pearl District. Fields Park lies to the east. The designers anticipate a pedestrian connection through Block 245, a vacant parcel, to the park. Holden of Pearl would join several large buildings nearby, including the Ramona Apartments, The Parker, The Abigail, Modera Pearl and NV.

The property is within the 1996 flood zone.

Holden of Pearl comes from Alliance Residential Co.’s Seattle office. The applicant is Alliance Realty Partners, a limited liability company. Alliance’s Evan Lawler was out of the country and not available for comment.

The project is likely to return before the Portland Design Commission for a land-use review, but it has not yet appeared on future agendas.

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The Portland Housing Bureau has loosened inclusionary housing rules pertaining to condo development after strong criticism from developers.

It remains to be seen whether it will be enough to encourage developers to build condos again. The rules modify the allowable size of affordable units, provide a path for hardship waivers, change the sales price formula and more.

A notice of final rulemaking was issued Aug. 28. That followed a first draft in January and a second draft in June. The rulemaking process was based on City Council authorization for the program in December 2016.

Inclusionary housing is part of the city’s effort to provide affordable housing during an economic expansion that’s now approaching a decade. The rules for condos are a companion to rules for rental properties – a far larger market.

“One big theme we heard in the rules (process) was that condo development is different than rental development,” said Matthew Tschabold, policy and equity manager at the Housing Bureau. “There should be more flexibility there given that the buildings are often of a different quality level, the amenities and fixtures are of a different quality level, and the purchaser is buying for life.”

Throughout the process, Housing Bureau officials spoke with condo developers and with Oregon LOCUS, a trade group.

“We had a lot of hearings, a lot of meetings, a lot of phone calls and emails with developers,” Tschabold said. “I think it was a positive process.”

Changes to the draft rules were able to address most of developers’ concerns, he said. Others could not be accommodated within Title 33, the zoning code enacted by the City Council.

Some developers remain skeptical condos can be built profitably.

“Yes, there is some improvement, but the city … still has a long way to go before new for-sale inclusionary housing rules can work,” Tiffany Sweitzer, president of Hoyt Street Properties, wrote in an email.

“There is a reason why there are currently only two condominium projects being developed in the Central City – financing,” Sweitzer stated. “Developers already have a difficult time getting financing for condo projects. With these added rules, construction lenders will require even more equity for a loan or reduce the total loan amount to developers.”

Hoyt Street Properties is nearing completion of the Vista Condominiums in the Pearl District. The building has 153 condos that were vested under pre-inclusionary housing rules.

“We are done building for-sale housing under these rules,” Sweitzer wrote in response to questions.

One major Portland project would boost funding for affordable housing, but not provide affordable units on site. Developer Walt Bowen’s proposal to build a 35-story tower on Block 216 in downtown Portland would be subject to inclusionary housing rules. Plans call for 148 high-end condominiums along with a luxury hotel, office space and retail space.

Instead of building affordable units, the Block 216 project backers plan to pay a sizable fee. It would be about $7.5 million, Phil Beyl, director of GBD Architects, said during a June meeting of the Design Commission.

Beyl told the Design Commission that more affordable housing could be provided off-site for the cost.

“We can do a far better job of spurring affordable (housing development) by paying into the fund,” he said.

Among the changes to the inclusionary housing rules finalized in August was a looser definition of reasonably equivalent units. Now, affordable condos are required to be 85 percent as large, on average, as their market-rate counterparts. That’s down from 90 percent.

The Housing Bureau also changed how the sales price of affordable units is calculated after criticism that it resulted in prices that were too low.

“We modified the formula to adjust the sales price to be something that would be more workable,” Tschabold said.

The bureau retains right of first refusal to purchase affordable units. The final rule clarifies the process for the listing and sale of affordable units to provide a waiver if a seller is unable to find an income-qualified buyer.

Generally, the inclusionary housing rule requires 20 percent of condos be affordable units at 80 percent of area median income, or 10 percent of units at 60 percent of area median income.

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Luxury condos, once regarded by developers as a dead end, are making a comeback. The latest example: the ambitious proposal from Portland developer Walt Bowen for a 35-story tower on a full block in downtown.

The Block 216 project would have approximately 148 high-end residential condominiums. The skyscraper would also include a 250-room luxury hotel and 175,000 square feet of office space.

A few other major projects now under construction in Portland include condos, including Vista Condominiums, a 153-unit building in the north Pearl District from Hoyt Street Properties, and TwentyTwenty, a 162-unit project in the Sullivan’s Gulch area, from PHK Development. Also, The Waterfront Vancouver will have 40 condos adjacent to a luxury hotel. That project, from Gramor Development, is expected to be completed in 2020.

The move to build luxury condos represents a modest comeback for the product type. After the economy tanked in 2009, condo development all but halted in the Portland area.

At the same time, a flood of apartment construction in recent years has resulted in a softer market for luxury apartments. Rents in Portland were down 2.2 percent in May compared to a year earlier, according to Apartment List.

Many luxury apartment managers are offering concessions to sign up new residents. In that environment, some developers are looking anew at condos as a more competitive product.

Bowen, in a response to questions via email, stated the Block 216 condos will be unique in the city.

“Portland does not have any high-end, co-branded hotel condominiums like other cities,” stated Bowen, who is president of BPM Real Estate Group. “We believe there is demand for this type of product.”

The condos will begin on the 21st floor, giving buyers commanding downtown views. Bowen also pointed to timing: Vista will deliver more than three years before Block 216 is ready, allowing plenty of time for market absorption.

An alternative multifamily option was explored for Block 216 and rejected, according to Bowen.

“Market-rate apartments are not economically viable for this project,” he stated.

Cost is one of the challenges for condos because they tend to be more expensive to build than apartments. Condos are typically built with concrete and steel stud frames, while apartments often have wood frames. Condo developers also face greater legal liabilities from homeowners.

Patrick Kessi, president of PHK Development, said he does not believe the Portland area will see a rush of condo building.

“I think it’ll be a measured amount of building with condos,” he said.

At TwentyTwenty, condos will start around $300,000 for one-bedroom units and $500,000 for two-bedroom units.

Hoyt Street Properties’ Vista Condominiums in the Pearl District is expected to be completed in October.

So far, 90 of the 153 condos have sold. Tiffany Sweitzer, Hoyt Street Properties’ president, said she expects sales to accelerate once potential buyers are able to tour the units. Prices range from $441,000 to $3.2 million.

“People are not wanting to buy a year or two ahead of time,” she said. “They’re wanting to look at product.”

Sweitzer doesn’t believe condos alone would work at Block 216.

“They have hotel and office that can help their bottom line,” she said. “Could a luxury tower be built without those other components to it? I don’t think so.”

The city’s inclusionary zoning rules pose another significant obstacle for condo developments. The policy requires developers build affordable units or pay a hefty fee. The Block 216 project team has indicated it will take the latter route, with plans to pay $7.5 million into the city’s affordable housing fund.

City officials are looking at possible changes to the policy to address complaints from developers.

The rules are unworkable, Sweitzer said.

“We will not be building for-sale product with the rules that are currently in place, but the rules are in flux,” she said.

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Portland design commissioners agreed that exterior alterations proposed for the PacWest Center are headed in the right direction, but not yet ready for approval.

“I think it’s a very sensitive intervention of a very interesting building,” Commissioner Samuel Rodriguez said during a design review hearing on Thursday.

Construction of the 30-story PacWest Center finished in 1984. It’s part of the transit mall, on the block surrounded by Southwest Madison and Jefferson streets and Southwest Fifth and Sixth avenues. Lincoln Property Co. owns the skyscraper.

Plans call for remodeling the Fifth Avenue entrance, removing the canopy at the Sixth Avenue entrance, removing and replacing granite planters, sidewalk material, steps and landscaping by the Fifth and Sixth entrances as well as the east corner of Madison Street, and altering the third-floor roof terrace.

“This is an important project for the city,” Vice Chairman Tad Savinar said. “This is a fantastic building that serves fantastic tenants. It’s a dream and we’re fortunate to have it.”

The project goals are to create presence through the entries, cultivate and activate the ground-floor experience and enhance the landscaping, according to GBD Architects‘ Dustin White.

“We’re trying to offer better opportunities and enhance opportunities for pedestrians,” he said.

Along the main entrance on Fifth Avenue, designers proposed removing the existing one-story entry vestibule and partially removing the existing metal panels and glass at the second level façade, and then adding a two-story vestibule and a new metal canopy above it.

They also proposed removing the granite planter that is partially in the sidewalk and replacing it with two smaller planters in an effort to open up the pathway to the entrance.

“We feel that it struggles because the sense of identity as an entrance is not there,” White said about the existing layout.

The design team also wants to replace the large canopy over the office entryway along Sixth Avenue and a portion of the storefront with a new all-glass entrance. However, commissioners didn’t approve the proposed change to pavement material on the sidewalk adjacent to the building.

For the corner retail space along Madison Street, the team proposed removing the brick planter, stair and railing, and installing a granite planter, retaining wall and glass railing.

Retail has struggled in the building for quite some time, White said, so the goal is to highlight the retail space by increasing the visibility and improving the entrance.

However, commissioners didn’t like revisions to the Madison Street corner and asked for the design team to come back with alternatives.

“I think in general the concept is a good idea, but not the execution,” Commissioner Jessica Molinar said. Commissioner Andrew Clarke agreed, saying he doesn’t think the alterations create a successful retail space.

For the third-floor terrace, the design team proposed replacing the existing planters and landscaping with new metal planters, wood benches and lighting.

Overall, most commissioners said they like the direction of the proposal, but want to see some revisions.

“What you’re proposing is waking up that area, that whole pedestrian experience,” Clarke said. “You’ve been able to add a lot more usable space for the tenants and a lot more spaces for people who have to walk around this whole entire building and experience it from a whole block perspective.”

The design team will come back on April 26 to present design alternatives.

Also on Thursday:

Pearl District storage facility design approved

The Design Commission voted 5-0 in favor of a proposal by developer Hoyt Street Properties to build a new 129,520-square-foot self-service storage facility in the Pearl District, on a vacant site at Northwest Savier Street and 14th Avenue.

MCA Architects‘ design calls for a six-story, 97-foot-tall building with an 8,400-square-foot plaza and six ground-floor retail spaces. A 20-foot-high rose sculpture by artist Ivan McClean has been proposed within the plaza.

The building’s upper stories will be clad in metal panels, with alternating gray tones, and glass. Entry to the storage facility and surface parking area will be along 14th Avenue.

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Tiffany Sweitzer has built in Portland more than 2,000 housing units, including the luxury Cosmopolitan condos in the Pearl District.

But now Sweitzer’s development company, Hoyt Street Properties, will not build more condos in Portland’s Central City, she said, unless changes are made to the city’s inclusionary housing program.

“With the latest inclusionary zoning constraints, we will probably sell our remaining land or build office (space) instead,” she said.

A year after inclusionary housing rules took effect, they are being reviewed by the Portland Housing Bureau. The rules for condos are the first part of a comprehensive reassessment of inclusionary housing, which took effect Feb. 1, 2017.

“We’ll look at what changes are needed to make sure the inclusionary housing program is effective, because the more units that are built, the more inclusionary units we get,” said Matthew Tschabold, policy and equity manager for the Housing Bureau.

Mayor Ted Wheeler has made building affordable housing a priority during his administration to address Portland’s self-declared housing crisis. In December, he shook up the Housing Bureau, replacing Director Kurt Creager with Shannon Callahan, a city policy analyst who is serving as interim director.

The inclusionary housing program has dramatically affected the multifamily pipeline. Developers rushed to submit applications for projects before the effective date, putting 19,000 units into the pipeline. But the amount of work for architects who design multifamily projects has since dwindled.

Among rental proposals, 23 projects totaling 1,083 units have moved into the permitting process. Of those, 730 units come from the private sector, with the Housing Bureau responsible for the rest.

The flow of condo projects has already slowed to a trickle. Since Feb. 1, 2017, only one application for a condo project – totaling 15 units – has been submitted for land-use approval, according to the Housing Bureau.

The condo rule changes are expected to take effect March 20. Prior to that, the Housing Bureau will take public comment at a Feb. 21 staff hearing.

The draft changes outlined by the Housing Bureau set restrictions on the resale of inclusionary housing condos. The bureau is given first right of refusal on purchasing units. Refinancing is tied to the restricted resale value of a unit set by the Housing Bureau.

Other rules require condos be maintained as a primary residence, be purchased by a first-time homebuyer and not be operated for purposes such as vacation rentals. Cash purchases of inclusionary housing condos would be barred. And units must be maintained under affordability rules even if they are converted from condos to apartments or vice versa.

Taken together, the rules would spook lenders, making financing for condominium projects difficult, Sweitzer said.

“It looks like condo construction is stopped in its tracks – and it will be with us,” she said. “We will be done under rules like these with building condos.”

Sweitzer said she was disappointed she was not asked to weigh in on the draft rules.

“I’ve built over 2,000 housing units, and I have not talked to the city of Portland, the Housing Bureau or anyone else working on the rules, which is just incredible,” she said.

The draft rules revisions allow for more flexibility, Tschabold said. For example, if a condo owner is unable to sell for 12 months within the program guidelines, the income restrictions on sales would be loosened. A buyer with 100 percent of Portland’s median family income could purchase a condo set aside for buyers at 60 percent of median family income, and a buyer with 120 percent of median family income could purchase a unit set aside for buyers at 80 percent of median family income.

“We’ll do whatever we can to help facilitate linking a buyer and seller,” Tschabold said.

Even after inclusionary housing rules took effect, the Housing Bureau permitted approximately 5,000 units – about the annual average in recent years, Tschabold said.

A forthcoming report from the Bureau of Planning and Sustainability analyzing inclusionary housing’s first year is expected to add fuel to the debate.

The Housing Bureau has been working with Oregon LOCUS, a trade group for developers, to devise incentives for developers who applied before inclusionary housing rules took effect to opt into providing affordable units. Mike Kingsella, executive director of Oregon LOCUS, did not return messages seeking comment.

The incentives will look similar to the Housing Bureau’s old Multiple-Unit Limited Tax Exemption (MULTE) program, Tschabold said, offering tax breaks in return for affordable units.

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The north end of the Pearl District is one of the last areas of central Portland to fill with high-density apartment buildings and offices.

As the Slabtown area grows to the northwest and the Pearl continues to see new development to the south, more developers are taking a chance on the industrial blocks in between.

“It’s kind of a transitional zone, like the Central Eastside, and that makes it interesting,” said Tom Cody, whose development firm project^ has several investments in the area.

Yet the neighborhood faces a range of challenges as it develops. The Interstate 405 overpass acts as a dividing barrier for pedestrians and traffic. It’s less proximate to downtown and isn’t served by light rail. And some believe public infrastructure, from parks to schools, has lagged behind private investment.

“It’s the last part of the Pearl to develop, but it’s kind of developing along with the Con-way site, so ultimately those are going to come together,” said Don Vallaster, a member of the Portland Design Commission.

The area near the interstate overpass bears the signs of an industrial past. Many of the buildings have loading docks, and long-disused railroad tracks stretch down 15th Avenue. The area has a grittier feel than neighborhoods to the north and south, where high-end grocery stores and exercise studios cater to wealthy residents.

“It is the in-between,” Cody said. “It has quite a bit of character. It’s not homogeneous like the Pearl. There’s older buildings. There’s newer buildings. There’s low-lying buildings. There’s taller buildings.”

As construction sites blossom with work, public infrastructure has not kept pace with private growth in the neighborhood, Cody said. Despite the millions of dollars generated in system development charges and related fees, there’s been little public work in recent years.

“You don’t see a proportionate level of infrastructure investment,” he said.

Troy Doss, senior planner for Portland’s Central City, said the city provided for today’s growth with earlier infrastructure improvements.

“The reality is the area was a railyard,” he said. “It had no parks. It had no streets, no water, no sewer. It had a viaduct that had to be removed. There’s been hundreds of millions of dollars of infrastructure improvements to get it to where it is today.

“It’s not like it’s behind,” he added. “We were ahead.”

Cody said the neighborhood needs other public investments, including parks. The Fields Park, the area’s newest park, at Northwest 10th Avenue and Overton Street, was completed in 2013.

Perhaps most acute is the situation at Chapman Elementary, a neighborhood school at 1445 N.W. 26th Ave. that has long experienced overcrowding. Last fall, as residential growth reached a crescendo, Chapman moved kindergarten classes off-site to the Ramona, an apartment building at 13th Avenue and Quimby Street, to give grades 1-5 more room at the original elementary buildings. The four kindergarten classrooms at the Ramona site are isolated from the rest of the school.

“There’s no mentorship anymore,” Cody said. “They’re not part of the school community anymore.”

Enrollment at Chapman grew 42 percent from fall 2007 to fall 2014, peaking at 674 pupils. With kindergarten moving off campus, enrollment at Chapman dropped last fall to 584 pupils, according to Portland Public Schools.

The neighborhood could be heading toward a political backlash, Cody said.

“It’s ripe for some kind of an uprising,” he said. “It’s not a neighborhood of need, but it’s being subjected to so much growth without any investments from the public sector. I think it’s kind of a time bomb in that way, and the canary in the coal mine is Chapman Elementary.”

The city needs to re-examine traffic in the north Pearl, including on 14th and 15th avenues, said Tiffany Sweitzer, president of Hoyt Street Properties. Northrup and Overton streets are becoming major thoroughfares, and some of the neighborhood’s one-way streets are not working well, she said.

“I do think we need to take another look,” she said. “This area tends to get forgotten because people think it’s built out, but we need to take another look at it after all of these years.”

Developers are approaching the neighborhood in various ways. Land prices remain high, so new projects tend to be large so they are worthwhile.

Paul Rudinsky’s Overton 15, an apartment building designed by Vallaster Corl Architects, will have small and relatively affordable units, compared to others in the Pearl.

“We are catering towards a younger demographic,” he said. “What we’re envisioning there is not your typical Pearl renters.”

The project won approval from the Design Commission last week; Vallaster recused himself from the hearing.

The 68-unit development will have a mix of studio, one-bedroom and two-bedroom units. And they’ll be small: a little more than 400 square feet for a studio, 550 to 625 square feet for a one-bedroom and less than 800 square feet for a two-bedroom apartment.

Vallaster, in designing the building, made efforts to mitigate noise from I-405. Overton 15 will use noise-resistant windows, noise-reducing packing beading within the walls and double the usual amount of insulation. The top floors of the seven-story building will be roughly even with the overpass.

The ground floor will have three commercial spaces totaling 3,000 square feet. The spaces are likely to be creative office, not retail, Rudinsky said.

That points to a potential role for the developing neighborhood as an employment center. The area is already home to a Legacy Health System office and a field office of U.S. Citizenship and Immigration Services, among others.

“In that location and being next to (Interstate) 405, I just think creative office will be better received than retail,” Rudinsky said.

More office space is coming. Field Office, from project^, is under construction with Lease Crutcher Lewis as general contractor. The two-building development on Northwest Front Avenue will bring about 300,000 square feet to market later this year.

The development is happening not far from what’s been branded as Slabtown, the former Con-way shipping site in Northwest Portland. Developers including Cairn Pacific and Capstone Partners are building a fast-growing mixed-use district centered along Raleigh Street. A New Seasons grocery store has provided a core asset to the neighborhood.

Other developers are playing off of that success and extending its reach.

Rudinsky, a Eugene-based developer, purchased the quarter-block parcel for Overton 15 from developer Tim O’Brien in November 2016 for $3.3 million. It’s the latest project for Rudinsky, who was also involved in developing 11 Marché and Couch 9, and has ownership interests in the Lower Burnside Lofts and Hawthorne 44.

The area “just has everything we’re looking for,” Rudinsky said.

A Safeway grocery store and an L.A. Fitness are nearby, and the Portland Streetcar provides a public-transit option.

A few blocks north, at Northwest 14th Avenue and Pettygrove Street, crews are building Modera Pearl. The building will offer 290 market-rate apartments.

Broadstone Reveal is under construction at Northwest 14th Avenue and Raleigh Street. The project from Alliance Residential Co., based in Phoenix, will bring 147 luxury apartments to market in summer 2018.

Also under construction is Vista, Hoyt Street’s 21-story condominium tower on Block 20. The project designed by Bora Architects is on schedule for delivery in October 2018, Sweitzer said. Andersen Construction is the general contractor.

Presales of the condominium units begin this week.

Hoyt Street has built approximately 2,800 housing units in the Pearl District. The company originally held 34 acres in the neighborhood.

More development is in the works for Hoyt Street.

Sweitzer is partnering with local developer Joe Weston to build a five-story self-storage facility on Block 29, at Northwest Savier Street and 13th Avenue, under the Fremont Bridge. That project is scheduled to go before the Portland Design Commission for a design advice hearing on Thursday.

The self-storage units are targeted for use by condo and apartment residents nearby.

After Vista, Hoyt’s next project may be a senior-living facility on Block 24, just north of Vista.

“We’re doing our own homework on that and looking at the interest level,” Sweitzer said.

The facility could be a destination for seniors already living in the north Pearl, she said.
“They’re happy with the neighborhood,” she said. “They’re here to stay.”

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Holst Architecture‘s design for a sizable mixed-use project in the Lloyd District failed to gain the Portland Design Commission‘s approval on Thursday, but the firm is optimistic about the next meeting.

Capref Lloyd Center LLC is planning two six-story buildings that will provide 677 apartments and about a dozen live-work units, five micro-restaurants, close to 40,000 square feet of retail space and four interconnected public plazas. The development site is a 700-space parking lot that currently serves the Lloyd Center mall.

Thursday’s design review hearing was the project’s first before the Design Commission.

“I think we had a good hearing today and I think that if we answer all the questions asked, that we would be prepared for a vote at the next meeting,” said Holst Architecture partner Jeff Stuhr.

He expects the Design Commission to approval the project when it returns on Aug. 6.

But there are still some kinks to be worked out. City planner Staci Monroe said city staffers did not recommend approval this time and outlined some problem areas. These include long-term viability of several green walls, the need for more details for an interactive digital art installation in one of the plazas and the use of exposed wood at the ground-floor level.

Monroe added that before the Design Commission can approve the project, the Portland Bureau of Transportation must also approve final plans for the location of the private drive for parking that traverses the project, improvements to the traffic signal on Northeast Multnomah Street and relocation of the bus stop there.

But the major concern of city planning staffers was the “sameness of architecture and form,” Monroe said. That was a major theme at the project’s three design advice request hearings.

Changes were made in that direction, she said, including a 30-inch reduction in overall width of the buildings that resulted in a 4,000-square-foot reduction in the building’s footprint, and added variety in height to articulate the massing, roof decks and changes in the color palette.

“Staff feels these changes are not enough to identify the emerging character of the diverse architecture that is starting to identify and characterize the Lloyd District,” Monroe said.

Another problem area is a modification request by Capef Lloyd Center LLC to eliminate all windows on the south side, facing light-rail tracks.

“There’s no vehicle access or sidewalks on that frontage, but (windows are) still required,” Monroe said.

Exterior finishes for the buildings include brick masonry, concrete oko panels, metal composite panels, hardwood and weathering steel, which Monroe said should be stained or replaced with another material.

Dave Otte, a principal with Holst Architecture, said the project would not compete with adjacent Holladay Park and would link the mostly residential Sullivan’s Gulch neighborhood with the Lloyd District, which is mostly comprised of office space and commercial properties.

“We are bringing the park green street up through the site, complementing the park,” he said.

Along with four major podium decks, Otte said, two roof decks overlooking plaza areas are included in updated plans, Otte said.

The 677 residential units will mostly have one bedroom, though some will be studios and others will have two bedrooms, Otte said. A dozen live-work units at ground level will have loft bedrooms.

During discussion Thursday, Commissioner Tad Savinar said the design for the main access to the site, across from the Holladay Park at Northeast 13th Avenue and Multnomah Street, isn’t inviting enough to draw the public in.

“There’s nothing to indicate there’s something inside,” he said.

But what’s inside, in the public plaza areas between the buildings, will be very inviting, with a large fountain, restaurants and landscaping, Holst Architecture associate Dustin Furseth said.

“The plaza is a moment of arrival and is larger than the center place in the park,” he said. “And we’re taking advantage of the grade change with a flowing fountain.

“The maker units are more work than live, with an industrial nature, which is good for makers.”

Another engaging feature, Furseth said, is a diagonal pedestrian path that will dissect the site from the southeast to the northwest and be lined with granite pavers in graduated colors.

“It has a tonal change, with the middle (being) the darkest, the richest granite you can get, and becomes lighter as it approaches the edges of the diagonal,” he said.

Savinar complimented advances in the landscaping design, but said he was concerned about the width of pedestrian areas along the private drive that leads to indoor parking areas. He added that he would like to see more public seating areas than those provided around the restaurants.

Although plans have not been finalized for the digital art project, which will be about 14 feet by 30 feet, Furseth said $1 million of the project’s budget will be devoted to the fountain and the art installation. Urban Art Projects of New York City has been brought in as a consultant to ensure a quality end result.

“We don’t know what it will be yet, but we would really like it to be interactive,” he said.

Savinar cautioned him that “underfunded art is not a good thing,” and said half of the $1 million should go to the art project, prompting Stuhr to walk to the applicant’s table to respond.

“I don’t think you can set a dollar amount,” he said. “I don’t think the commission has that purview.”

Block 20 residential tower approved

Before considering the Lloyd District project, the Design Commission approved the design for Hoyt Street Properties‘ new 21-story residential tower on Block 20, bounded by Northwest 11th and 12 avenues and Pettygrove and Quimby streets.

The project calls for 149 residential units with three levels of parking for 192 vehicles.

Brad Demby, an architect with Bora Architects, said the side nearest Pettygrove Street was the most challenging because of a step-down in grade and the fact that the site is in the 100-year floodplain.

Creating ground-floor retail space on all sides of the building was also a problem that was resolved, he said. All retail units will be sold instead of leased out.

After about an hour of discussion, the project was approved unanimously.

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After developing 150 condominium units at The Cosmopolitan on the Park in the Pearl District, Hoyt Street Properties didn’t hesitate before making plans for 148 units on Block 20, also in the Pearl.

The as-yet-unnamed Block 20 project builds on the success of The Cosmopolitan, the first major condo building constructed in Portland since the Great Recession ended.

The Cosmopolitan is nearly sold out, and commanding prices not seen for condos since the previous boom. The units, ranging from 700 to 3,400 square feet, have sold for $700 per square foot on average, Hoyt Street Properties President Tiffany Sweitzer said.

Block 20, meanwhile, went before the Portland Design Commission last week and will return for a second review June 30.

Hoyt Street Properties is developing condos at a time when few others are. Litigation fears and tough lending standards are influencing developers’ decisions.

But the success of The Cosmopolitan, where less than 5 percent of units remain unsold, has raised eyebrows in the industry. Unit sales have demonstrated demand for condos at a time when developers are heavily favoring multifamily rental projects.

“They’re to be commended,” Killian Pacific Vice President Noel Johnson said. “They’re achieving pricing when they’re selling condos that are higher than a lot of people thought possible.”

For now, Hoyt Street has the luxury condo market essentially to itself. Others such as Portland Development Group have projects in the pipeline, but nothing like the scale of Hoyt Street’s projects.

Portland may start to see more condo projects, Sweitzer said. After a years-long apartment construction boom in the metro area, selling condos is one way for a developer to carve out a niche.

“We’re feeling like it’s starting to get saturated with rentals,” she said. “Not that Portland’s not strong – I think it will be for a while – but I think condos will set us apart.”

At a time when some city officials and housing advocates are lobbying for greater density in Portland’s neighborhoods, the lack of condo development stands out. While many new condos come at luxury price points, some condos can be had for less than comparably sized single-family homes.

“In theory, you could build a duplex or triplex as condos and sell them, but we’re not seeing a lot of those,” said Mike Westling, who authored a recent City Club of Portland report that called for greater density and more varied housing types. “I’d like to see more of it.”

Everett Custom Homes is targeting that market. The firm plans to build 15 to 20 workforce-priced condo units this year in close-in neighborhoods of East Portland. It’s also considering building condos on lots off of North Interstate Avenue and North Williams Avenue.

The aim for those condos is for a lower price point that is in high demand. Plans for the condos call for units of approximately 900 to 1,200 square feet, and prices around $300,000.

“There’s a need for a price point out there,” Everett Custom Homes owner Vic Remmers said. “With all of the fees and the price of land for a single-family home, it’s near impossible to hit a workforce housing price point.”

Remmers said he’s pursuing permits and that his firm intends to break ground on the first condo units in about two months.

Portland’s market for single-family homes is under strong pressure from extremely low inventory. In May, Portland again had the highest price jump (12.3 percent) from May 2015 among major cities tracked by the Standard & Poor’s/Case-Shiller Home Price Index.

More condos could help relieve pressure on the housing market, Johnson said. As buyers trade up to luxury condos, they typically leave behind rentals or homes that are more affordable. But Johnson said he has no plans to build condos because of the threat of litigation and other obstacles.

Bob Ball, owner of Robert Ball Companies, developed during the boom in the early 2000s several condominium projects, including the Avenue Lofts and the Marshall-Wells Lofts in the Pearl District. Now he’s developing multifamily projects, and doesn’t expect that to change.

Combative homeowners associations and overstretched management companies make developing condos unappealing, he said.

“If you can build and achieve the same profit level for apartments, you’re more likely to do that, because you own it and control it and make sure the building is well-managed,” he said.

Ball is awaiting permits to break ground on 21 Astor, a mixed-use project at Northwest 21st Avenue and Kearney Street. Plans call for 27 multifamily units on top of 4,500 square feet of ground-floor retail space, but no condominiums.

Like many developers, Ball will continue to own 21 Astor after it’s built, and collect a steady stream of rental revenue that condo projects can’t match.

Johnson decried a long line of construction-defects litigation that he and other developers say has hobbled condo construction.

“It’s more costly to build a condo than normally it would be,” he said. “Add to that, it’s just really unpleasant to be sued. At Killian Pacific, our brand is really important to us, and we try to do projects people will really like.”

Johnson said that if Killian Pacific were to develop condos, legal costs would be incorporated into unit prices because of the near-inevitability of litigation. In essence, condo buyers would fund the developer’s legal defense in advance.

“As a developer, if you have to plan on getting sued whether the suit is justified or not, then you build that future cost of defending yourself into the budget up front, because it’s virtually a known cost,” he said.

There appears to be little prospect of change to the litigation environment, because the Oregon Legislature has stalled legislation that would guard against such lawsuits.

“Anything that looks, smells or tastes like tort reform makes one side of the political aisle nervous,” Oregon Home Builders Association CEO Jon Chandler said, in reference to Democrats who control the Legislature.

It’s unclear if condo litigation reform will stand any better chance when the Legislature reconvenes in February 2017, he said.

“We need to talk about it because the presence of those claims does tend to skew the market away from condos and towards apartments,” Chandler said. “That may be the way the market is going anyway, but it should not be nudged that way by nonmarket forces.”

Despite the downsides, some developers are beginning to revisit condos as a viable option. Portland Development Group has six condo units under development. The furthest along is a two-unit building at 4511 S.E. Madison St., off of Hawthorne Boulevard. It is the firm’s first condo project.

“My staff had been coming to me for the last year and saying, ‘Why don’t we develop condos?’ ” Portland Development Group managing partner Mike Hubbell said.

It took a while for Hubbell to be persuaded.

“Part of it was an apprehension: Is there a stigma attached to condos?” he said. “We made a decision to jump out and see how it works out for us.”

After green-lighting the first project, Portland Development Group has begun developing two more. The units are planned to be about 2,300 square feet each and cost $650,000 to $750,000.

“Sometimes you have to be willing to take a chance where no one else will,” Hubbell said.

Obtaining financing can be the greatest hurdle for big condo projects. Even for Hoyt Street Properties, securing a loan from Wells Fargo for The Cosmopolitan wasn’t easy.

“We were able to do that with The Cosmopolitan, not that it wasn’t difficult,” Sweitzer said. “We were able to do that because we’d built 12 projects prior and had a track record.”

It also helps to have access to deep pockets. Longtime developer Joe Weston is providing some of the financing for Block 20, Sweitzer said in an email.

“Without his financial strength, we would not have been able to develop either project as a condominium,” she said.

The post Condos: weighing risk versus reward appeared first on Daily Journal of Commerce.

A new 21-story condominium building is coming to the Pearl District, but its design is still being refined.

Plans call for a 246-foot tower at the northwest corner of vacant Block 20, which is bounded by Northwest Pettygrove and Quimby streets, and 11th and 12th avenues. A six-story podium to the south would have a rooftop garden and step down at the fifth floor with another rooftop terrace.

The project’s review by the Portland Design Commission on Thursday was its first, according to city planner Staci Monroe. City staffers have been working with Bora Architects on the design, she said, and requested several modifications. These include reducing the size of a large loading space, reducing the width of long-term bike parking spaces from 2 feet to 18 inches, adjusting the façade length and providing more active ground-floor use.

During the meeting, however, it was apparent that commissioners objected to the proposal for ground-floor residential units. The project’s developer, Hoyt Street Properties, is looking to provide 150 residential units and 2,000 square feet of retail space.

Commission Chairman David Wark said that because the building will face a park, it should have a more active use than residential on the ground floor. He suggested live-work units.

Commissioner Tad Savinar agreed that ground-floor residential use doesn’t work and suggested micro-retail stores or even a movie theater to provide more active use at the lower level.

Commissioner Julie Livingston said people living in units on the ground floor would tend to keep their blinds drawn for privacy and diminish the building’s active use at the sidewalk level.

Other commissioners agreed.

“Housing on the first floor was a mistake,” Wark said.

Savinar added, “The challenge is not to fall back and say you want residential on the first floor because retail doesn’t work but how can you make it work. Pearl need to be an extremely active space.”

But architect Leslie Cliffe, a principal at Bora, said after the meeting that if the design commission is adamantly opposed to ground-floor residential space, then it should be part of city code.

“It’s not actually in the zoning code, but it is what the commission is enforcing,” she said. “I feel it should be incorporated in the zoning code so we don’t get blindsided at design review.”

The design team knew from prior meetings with city staff that the commission had issues with residential space at the ground-floor level, Cliffe said, but didn’t know it was a hard-and-fast rule.

“I thought it was something we could discuss and persuade them that our location was appropriate,” she said. “What I’m understanding is that it is more of a rule, but when it becomes a rule, it should be incorporated.”

The Block 20 design will receive a second review on June 30.

Also on Thursday, the commission approved the design for a new five-story, 52-unit apartment building at 10506 E. Burnside St. in the Gateway District. The design for a 14-story apartment building at 1133 S.W. Market St., will come back for a second review on June 16.

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