Portland’s Menashe Properties has doubled down on Chicago office space, purchasing a 31-story tower in the West Loop area for $51.5 million.

The commercial real estate firm closed on its acquisition of 125 S. Wacker Drive on Friday, according to an announcement. It is Menashe’s second major purchase in Chicago, after the acquisition of 230 W. Monroe Street, a 700,000-square-foot tower, in 2023.

“It is amazing the momentum in Chicago,” said Jordan Menashe, the firm’s CEO and principal.

The seller was La Caisse, a major investment firm based in Quebec, Canada.

Chicago’s office market is heating up, Menashe said. Meanwhile, developers can’t build spaces on speculation fast enough, he added.

“You can’t move fast enough for the market right now,” he said. “It is under-officed.”

The recent purchase values 125 S. Wacker Drive, a 640,000-square-foot property, at approximately $80.47 per square foot. The building is across Adams Street from Willis Tower, formerly Sears Tower – the tallest building in Chicago and the third-tallest building in the United States.

Menashe Properties often looks to purchase somewhat distressed assets and increase their occupancy. In 2024, the firm purchased Montgomery Park, a 768,443-square-foot building in Northwest Portland, for $33 million after it was foreclosed upon.

The Chicago building at 125 S. Wacker Drive is 63 percent leased, Jordan Menashe said. It has no anchor tenant.

“There is no tenant that has more than one floor,” Menashe said. “What does that do for you? It offers you flexibility.”

Chicago’s most desirable office space is occupied, leading tenants to consider the next tier, Menashe said.

“Trophy, class-A (office space) is full,” he said. “Class-C is never coming back.”

The Wacker Drive property is an “A to A-minus” property, he said.

Occupancy at Menashe’s other Chicago property, 230 W. Monroe Street, grew from 60 percent to 85 percent in less than two years, Jordan Menashe said. Stream Realty Partners will lease and manage both properties.

Menashe Properties’ Chicago purchase comes as dealmakers establish a new, post-pandemic ground floor for downtown Portland office values. The PacWest Center sold last week to an Alaska developer for a reported $55.7 million, or $101.64 per square foot.

In July, the U.S. Bancorp Tower — better known as Big Pink — sold for $45 million, or about $39.13 per square foot.

Office property is gaining momentum in other West Coast cities, Menashe said.

“It’s starting to build in San Francisco and Seattle, which bodes well for good ol’ Portland,” he said.

Menashe said Portland is perhaps seven years behind Chicago’s office market.

Portland has cleaned up since the pandemic, he added, but it lacks attractiveness to businesses.

“They have to lower taxes in Multnomah County,” he said.

Menashe Properties was founded by Jordan’s father, Barry, in 1978 and is one of the largest owners of Portland real estate. The company owns more than 7 million square feet of commercial real estate, including, in Portland, the 12th & Morrison Building in the West End, the Plaza on 6th, the American Bank Building and the JK Gill Building. The firm also owns major commercial properties in Dallas, Seattle and Denver.

The post Menashe Properties buys Chicago tower for $51.5 million appeared first on Daily Journal of Commerce.

Menashe Properties made a $33 million bet last year on the future of Portland office space when it purchased Montgomery Park.

Now the local real estate investment firm is leading what CEO Jordan Menashe called a “soft reposition” of the property with an eye toward attracting tenants looking for a deal.

Menashe said he’s encouraged by early signs of a bounce-back in the office market. He noted increasing competition from institutional investors in cities such as San Francisco, which was hit hard by pandemic shutdowns. Companies large and small have ordered employees to return to offices, at least part time.

“Office is back,” Menashe said in an interview.

Whether Menashe Properties is successful in turning around Montgomery Park will say much about the post-pandemic office market in Portland and whether it has hit bottom.

Montgomery Park is a sprawling, aged asset. Its 768,443 square feet make it Portland’s third-largest commercial property, behind only the U.S. Bancorp Tower — better known as Big Pink — and Wells Fargo Center.

In competition for tenants, Menashe representatives are carefully positioning the property as a value. Built in 1921 as a Montgomery Ward & Co. warehouse, the building offers different space than in sleek 21st-century towers such as Block 216 and Eleven West. Montgomery Park tenants will not share the building with a cantilevered swimming pool, nor Ritz-Carlton condos.

“We will be the value proposition for tenants in the market, offering a great building with unique views, great parking and amenities,” Menashe Properties President Ross Kelley said.

Montgomery Park’s future was the focus of a luncheon last week hosted by the Portland chapter of CREW (Commercial Real Estate Women) Network.

“The thesis was this was a terrific asset — great location, great parking,” Kelley said at the luncheon. “With a reset basis and bringing in some new amenities, we’re really excited to continue the reposition.”

What Kelley called the reset basis — commercial real estate lingo for a lower initial investment — is key to making Menashe’s purchase work. The 2024 sale price valued the building at only $42.95 per square foot, a deal that would have been unheard of before the COVID-19 pandemic. The building in 2019 sold for $255 million — more than seven times the price later paid by Menashe Properties.

After paying a modest amount, the new owners don’t necessarily need to command market-leading rents. That strategy leads to a light touch with the repositioning. Menashe Properties is focusing on the bottom floors with changes that visitors and tenants will notice immediately, such as better lighting and new furniture.

Walen Construction is serving as the general contractor for the update, which is being designed by West of West.

The ownership has also applied for permits to add a gym in another bid to attract tenants.

“Everyone knows, it’s just a massive building,” said Clayton Taylor, partner at West of West. “So, you want to reposition the building, you want to get activation going. You want to show action in the market — that something’s happening. But you’re trying to do it across a three-city-block scale of interior space that you’re trying to touch at once. So how do you do that in a nominal way?”

Montgomery Park is no stranger to cost-conscious cosmetic updates. When the iconic sign atop the building was changed, only two letters were swapped to transform “Montgomery Ward” into “Montgomery Park.”

Menashe Properties is working to create foot traffic in part by improving the experience in the entrance and lower floors. An escalator takes visitors to the second floor, where the Adidas employee store acts as a retail anchor. Banks of elevators chime as they move up and down at the rear of the atrium. On a recent visit, a pianist was playing to a light lunch crowd while a few workers pecked away on laptops.

The building is also host to a rotating cast of food carts for employees and visitors. On Monday, Smak Dab’s sold burgers next to the building’s artificial-turf putting green.

The tenants offer a mix of uses including health care services such as WebMD and Pediatric Associates of the Northwest, and professional services. Avangrid Renewables has its headquarters in the building. Daimler Trucks North America has an office there, as does a law firm.

Some analysts have observed signs of life in the office market.

“Tenant demand in Portland is showing signs of recovery and the market should continue to stabilize in 2025,” JLL stated in a recent report.

Another developer, Vanessa Sturgeon, who leads Sturgeon Development Partners, pointed to strengthening sentiment in the office market.

“I do think we’re starting to see the market shift a bit,” she said. “It’s starting to bottom out, and it’s starting to turn a bit, and I think people are recognizing the need to support business.”

Menashe Properties is confident that its recent acquisition will appeal to prospective tenants.

“Montgomery Park sells itself,” Menashe said. “All you have to do is open the doors and take care of people.”

The post Light touch being used to reposition Montgomery Park appeared first on Daily Journal of Commerce.

Portland-area office vacancies rose to 11.2 percent in the fourth quarter of 2021 as the COVID-19 pandemic continued to dampen demand, according to a new Kidder Mathews report.

Lease rates remained stable as landlords offered concessions to maintain pricing. Average lease rates held steady at $28 per square foot for full-service office space.

Kidder Mathews’ report released last week adds to concerns that Portland is falling behind other western cities where the office market has rebounded faster.

“I wish it was coming back faster than it has been,” said Jonathan Barach, president of Vista Investment Group, a Santa Monica, California-based firm that owns several Portland-area properties. “There certainly were some other markets that we’re invested in where they have come back, and even surpassed, where they were before the pandemic.”

Denver and Austin, Texas, are among the markets outperforming Portland, Barach said.

“They were minimally impacted and seem to be doing fine,” he said.

Menashe Properties, a major Portland office owner with investments in other cities, has seen similar trends in its portfolio, CEO Jordan Menashe said.

A 400,000-square-foot property the Menashe family firm owns in Dallas “had more positive absorption than our entire Portland core combined,” he said.

Meanwhile, leasing activity in Portland has been very slow. Total new leasing fell to 646,511 square feet, including 212,622 square feet of Class-A office space, Kidder Mathews reported.

“There are no deals right now,” Menashe said. “There’s no momentum.”

Menashe said Portland is stuck in a rut of its own making.

“It’s not the weather,” he said. “It’s probably not even the streets that have homeless people on them. It’s the attitude. We need to get out of our own way.”

During the fourth quarter, office sales volume fell, with transactions averaging $241.83 per square foot. Capitalization rates settled at 6 percent.

Office projects totaling 812,775 square feet are under construction, including 269,908 square feet at 503 on Tenth in Southeast Portland and 169,188 square feet at Block 216 downtown, Kidder Mathews reported.

The stop-start nature of the pandemic has led landlords to wonder when the office market will recover fully. Many employers were planning to welcome employees back to offices this month before the omicron strain led to a spike in COVID-19 cases.

“As local businesses reopen and the state continues to rebound from the effects of the pandemic, the new omicron variant may hinder a more robust recovery,” Kidder Mathews’ report stated. “Yet, there is strong optimism that current demographics and consumer spending will drive the Portland economy forward within the next 12-24 months.”

Suburban markets with strong mixed-use products will continue to drive demand, the analysis predicted.

Among the empty office buildings has been Vista’s U.S. Custom House, the revamped historic building near Portland’s North Park Blocks that was vacated by WeWork in early 2021.

Barach said there may some good news coming for the 66,935-square-foot, full-block building: A lease is “out for signature” for a majority of the property. He declined to reveal the tenant before the lease is signed, but said it is a national operator.

The timing of a recovery is difficult to predict, Barach said.

“It’s hard to bifurcate what is wishful thinking with what is a more sober outlook,” he said. “By the end of this year, things will be more quote-unquote normal. And that might mean that people have just adjusted to living with this thing.”

The post Office vacancies climb as pandemic endures appeared first on Daily Journal of Commerce.

Menashe Properties has purchased two office buildings in Dallas, giving the Portland firm a footprint in another fast-growing city.

The property includes twin buildings, Heritage One and Heritage Two, totaling approximately 370,000 square feet with two parking structures on 12 acres.

Menashe Properties paid “under $125 per square foot,” CEO and principal Jordan Menashe said. The price would thus be less than $46.25 million, though the exact amount was not disclosed (in Texas, real estate sales prices are not public record).

The seller, Brookwood Financial, made the deal as a fund came to a close, Menashe said.

“They were ready to move on, and we were ready to take over,” he said.

Menashe Properties made the purchase with no outside financing.

The property was built during the 1980s, and Brookwood completed multimillion-dollar renovations, Menashe said. Occupancy is about 75 percent, he said.

Dallas represents a new market for Menashe Properties.

“We should have been there a long time ago,” Menashe said. “Dallas is clean. … You don’t see tents on the street. It’s clean. It’s fun. You can tell people are happy.”

The complex is next to Interstate 635 and is an “A-plus-plus-plus” property, according to Menashe.

“North Dallas is taking off,” he said.

The transaction continues Menashe Properties’ geographic expansion into cities including Seattle, Denver and Vancouver, Washington.

Last year, Menashe Properties purchased the Vancouver Village shopping center for $22.25 million. In 2019, the firm bought a medical office building in Seattle for $113 million. In 2017 the company bought an office park in Denver for $35.5 million.

The family firm has also continued to grow in its own backyard, developing downtown Portland’s Canopy by Hilton hotel and a 62,381-square-foot office and retail building in the West End. In 2018, Menashe Properties purchased the Unitus Plaza block in downtown for $26 million.

The post Real estate investment firm expands into Texas appeared first on Daily Journal of Commerce.

Commercial landlords in the Portland-metro area are enduring the ongoing shutdowns along with their tenants, but also pointing to reasons for optimism.

Different commercial real estate sectors have been affected by varying degrees. Retailers have experienced tremendous stress because of pandemic-driven closures; some have worked with building owners to have portions of their rent delayed or forgiven. Other sectors, such as grocery, have seen little negative impact.

Restaurants have been hit particularly hard by losses of sit-in dining and alcohol revenues.

“It’s the restaurants and bars that are the lion’s share of the impact,” said Tom DiChiara, principal at Cairn Pacific, a developer that has invested heavily in Northwest Portland’s Slabtown neighborhood.

Some restaurants were immediately in a dire financial situation when stay-at-home orders were given, DiChiara said. That may impact how Cairn Pacific chooses tenants for its buildings in the future, he added.

“Some of that was surprising and warrants further study as far as the financials of tenants,” he said.

Beam Development also has a substantial tenant portfolio of local restaurants and shops such as Bunk Sandwiches and Water Avenue Coffee. Some of those tenants have kept money flowing in with “fairly robust” to-go service, Beam Development principal Jonathan Malsin said.

“Public-facing businesses continue to be at least initially the hardest hit,” he said. “It hasn’t been some kind of catastrophic fall-off in collections. But businesses that are suffering, we’re working with them and helping to maintain occupancy.”

Cairn Pacific has reduced or deferred rents to keep commercial tenants in place. But such concessions can’t be extended indefinitely, DiChiara said.

“We’re working with them where we can,” he said. “But there’s going to be a limit. There’s going to be a limit at some point.”

Additional economic ramifications are expected to materialize as the coronavirus crisis drags on, Malsin said.

“It’ll start affecting all businesses, but a lot of those office types of businesses that are not publicly facing may be hit later,” he said.

JLL recently released a study of how Portland’s commercial real estate sector performed in past recessions. The overall takeaway was positive, particularly for office.

“What we did tend to, in terms of rents, was bottom out faster than the national average, and we tended to rebound faster than the national average,” said Tim Harrison, research manager at JLL in Portland.

Coming out of past recessions, Portland experienced strong population growth from young people moving for employment.

“I don’t think there’s a reason to think the same thing isn’t going to happen again,” Harrison said. “I can certainly see another wave of in-migration coming our way.”

Most of Beam’s tenants have relatively small footprints. That’s proven a boon in past recessions, Malsin said.

“Having a rent roll with a lot of smaller tenants is not a bad way to get through a recession,” he said. “If a 1,500-square-foot tenant doesn’t make it in the middle of a recession, it’s easier for us to pivot and re-rent at a lower cost,” he said.

Commercial rent collections have remained strong for Menashe Properties, CEO and principal Jordan Menashe said.

“It’s a mixed bag, but collections for April and May were 97 or 98 (percent),” he said. “June, as of (Monday) morning, is looking good.”

Nevertheless, Portland now is being affected by both the pandemic and the upheaval of nationwide protests.

“Our community has taken a one-two blow, but my gut tells me that we’ll get through the other side of this,” Menashe said. “My positivity radar has gone up.”

But the extent of the downturn remains to be seen, DiChiara said.

“It depends on how long things play out,” he said. “June is still a little too early to see. We have engaged with our tenants and have plans with them that will get us through the summer months.”

Multnomah County will be the last jurisdiction in Oregon to apply for Phase 1 reopening procedures. County officials have said the target to begin the first phase is June 12.

The post Landlords continuing to work with business owners appeared first on Daily Journal of Commerce.

Menashe Properties has acquired Vancouver Village, a shopping center in Southwest Washington, for $22.25 million.

The acquisition adds 105,000 square feet of retail space to the family-owned firm’s portfolio.

“It really fit well for us to end a big year,” principal and CEO Jordan Menashe said.

Vancouver Village is at 4816 N.E. Thurston Way, near Vancouver Mall, and has 20 tenants, including Total Wines and Ross Dress for Less. Many of the tenants have a long-standing presence.

“It’s got a very stable occupancy history,” Menashe said, noting the cap rate was 8 percent.

The seller was Vancouver Village Properties Inc., a longtime local owner. The entity lists Mark Norby and Justin Phillips as governors, according to the Washington Secretary of State’s office.

The Vancouver purchase caps a busy year for Menashe Properties, which has aggressively grown its holdings.

In September, Menashe Properties acquired the Medical Dental Building in downtown Seattle for $113 million as part of a 1031 tax exchange. The firm in 2018 bought the Unitus Plaza building, a full-block downtown Portland property, for $26 million.

The firm has also developed projects. In 2018, Menashe Properties opened a new 62,381-square-foot office building with ground-floor retail space at 1155 S.W. Morrison St., with tenants including Turner Construction Co. and Blue Star Donuts. The company previously developed Canopy by Hilton in the Pearl District.

Vancouver Village adds to Menashe Properties’ retail portfolio, which includes College Square, a 139,000-square-foot shopping center in Gresham, as well as Greenburg Corners near Washington Square Mall and Raleigh West Shopping Center in Raleigh Hills.

“We’re trying to diversify more,” Menashe said. “We’re ready at any time to buy a deal – retail, office or industrial – along the West Coast.”

Menashe Properties is considering whether to seek a larger capital partner, he said.

“We’re internally discussing the idea of working with the right fit, the right marriage down the road as we continue to grow and evolve,” Menashe said.

The firm is also working on a local development project, said Menashe, who declined to reveal details.

“We will be embarking on another development in 2020,” he said.

The post Portland firm adds shopping center to portfolio appeared first on Daily Journal of Commerce.

Menashe Properties has purchased a medical office building in downtown Seattle for $113 million.

The Medical Dental Building has approximately 300,000 square feet and more than 130 tenants.

“This is the next step for me and our company and the direction we want to grow – all over the West Coast,” said Jordan Menashe, CEO of the Portland-based real estate firm.

The building is located at 509 Olive Way, only a few blocks from Pike Place Market in the heart of Seattle. Planned expansions by Amazon and Apple nearby are adding to the bustling business district.

“This particular asset we feel like we’re buying at an excellent price per square foot,” Menashe said of the transaction.

The deal equates to about $376.67 per square foot.

“We feel like it’s a very safe asset because you’ll never get hurt by one major tenant,” he said. “And we feel like our management style, and some good things we found through the process of the acquisition, we can add some value right away with some minor tweaks without hurting the tenants at all financially.”

The transaction came as the result of a 1031 exchange. Menashe Properties sold Creeksides at Centerpoint, a 225,000-square-foot office complex in Kent, Washington, for $39 million earlier this summer after purchasing it in January 2016 for $26.5 million. Menashe rolled that transaction, plus some cash, into the Olive Way purchase. Menashe does not have a partner in the deal.

Menashe Properties is still looking to grow via additional office, industrial or retail deals, Jordan Menashe said.

Jordan Menashe credited his father, Barry, with laying the foundation for the family firm’s growth.

“None of this could or would be imaginable without what Barry started,” he said.

The post Portland-based firm makes $113M acquisition appeared first on Daily Journal of Commerce.

The Portland Bureau of Planning and Sustainability is looking to tighten a historic zoning designation around the Police Block downtown.

Reducing the area would allow the proposed Toyoko Inn project to proceed through design review before the Portland Design Commission, rather than the Historic Landmarks Commission, according to BPS.

A boundary reduction would require the Historic Landmarks Commission’s approval. The request is slated for the commission’s June 10 agenda.

The Police Block consists of three buildings that were constructed between 1912 and 1955. Additions were built in 1944 and 1955. All three buildings were vacated by the city in 1984 after the completion of the Justice Center.

The block is bounded by Southwest Oak and Pine streets and Second and Third avenues. The proposed boundary adjustment pertains to the property at 209 S.W. Oak St., which is owned by Menashe Properties through a limited liability company.

Menashe Properties principal Jordan Menashe said he opposes the boundary change.

“Why should our city be punished by losing a historic block for a 2.5-star Toyoko Inn?” he said.

The Japanese hotel chain last year revealed preliminary plans to build a 19-story business hotel with 120,000 square feet and 486 guest rooms. The proposal has not entered the design review process. In October, Toyoko Inn requested a complex zoning analysis from the city to check on zoning rules at the site in a possible prelude to development.

The city decided to pursue a boundary reduction to reflect changes to the historic nature of the block over time, said Brandon Spencer-Hartle, historic resources program manager for BPS. “The character of the rest of the block has been altered beyond recognition from what it was during the historic period,” he said.

The request for the boundary change was not prompted by Toyoko Inn or any other party, Spencer-Hartle said.

Toyoko Inn purchased the quarter-block property at the southwest corner of the block from the Portland Development Commission (now Prosper Portland) for a little more than $1 million in September 2016.

The post Historic property’s boundary could change appeared first on Daily Journal of Commerce.

Lauren Menashe, 26, has joined her family’s firm in Portland after an apprenticeship in Los Angeles’ commercial real estate market.

As director of asset management at Menashe Properties, Lauren is working with her older brother, Jordan, and father, Barry, in managing and expanding the Portland property investment and development firm’s local and national portfolio.

Lauren grew up in Portland, and graduated from Jesuit High School. She followed Jordan to the University of Southern California, where she studied business and real estate development. Then she worked as retail manager at The Grove, a major Los Angeles shopping center, for real estate magnate Rick Caruso. Lauren then served as manager of business development for Macerich, a real estate investment trust.

The 91��Ƶ spoke with Lauren last week about her new role and Menashe Properties’ future. This interview has been edited for length and clarity.

91��Ƶ: Why did you decide to return to Portland and join the family firm?

Lauren Menashe: It finally kind of dawned on me that if I’m going to be working this hard the rest of my life, I’d rather be doing it for my family (and in the city of Portland). So after I left (Rick Caruso and The Grove), I kind of knew that would be soon to follow.

91��Ƶ: What has it been like to be back in Portland and be working with your brother and your dad?

Menashe: So far, so good. I think with any family business, it’s complicated, but I think Jordan and I are fortunate that it’s just us two and we get along extremely well. We’re kind of yin and yang. He’s very instinctual and intellectual, and I’m more thoughtful and analytical, so it’s a really nice balance. I couldn’t ask for two better teachers.

91��Ƶ: So what is your role at Menashe Properties? What does your (typical day) look like?

Menashe: Since I’ve been back, I’ve been shadowing and spending as much time as I can with Jordan. I’m evolving to be the asset manager, so overseeing all of the suburban properties and all of downtown. I’m kind of just like another owner of the company, so my hands are involved in everything. I’ve gotten more involved in leasing, which has been a lot of fun because I didn’t do that at my prior jobs.

91��Ƶ: What do you see as the next chapter for Menashe Properties?

Menashe: As we plan to grow, we have been and will continue to strategically dispose of some of the smaller assets that hopefully can help us buy larger stuff out of state. Anywhere within a three-hour flight, we’re pretty much open to. I think Jordan and I are more traders, unlike dad, who (holds assets long term). We both are very keen on development. It’s something that really excites us, and just leaving our own lasting legacy in Portland. We’re working on a significant plan on the Eastside right now, which has been really fun.

91��Ƶ: Is there anything else you can tell me about that … Eastside idea?

Menashe: It will be one of its kind, or the first of its kind, and it will cater to the Portland market.

91��Ƶ: Is it office, or a different program?

Menashe: That’s all I’ll say. I’m sure as you know, we don’t divulge too much until it’s fully vetted through.

The post A conversation with Lauren Menashe appeared first on Daily Journal of Commerce.

For a Portland office building of a certain age, 2019 seems to be the time to get that face-lift.

The Wells Fargo Center, Portland’s tallest building, completed in 1972 and purchased by Starwood Capital Group in 2017 for $188 million, will receive new canopies and landscaping. The neighboring data center structure will get a new lobby and rooftop deck, and a drive-through bay will be removed.

In Northwest Portland, One Pacific Square will get an extensive renovation to the lobby and plaza areas with an eye toward attracting a tenant to replace NW Natural, which will vacate approximately 180,000 square feet some time in 2020 for new space in the 250 Taylor building. The older 13-story building, completed in 1984, was purchased by New York Life and local partner Specht Development in January 2018.

“We believe we can bring this building to life after the gas company leaves at a price that is very competitive,” said Greg Specht, chief executive of Specht Development.

Office repositioning projects are not new, but a long period of economic expansion, growing in-migration to Portland, existence of institutional investors flush with capital, and competition from newly constructed office buildings has resulted in a rush of renovations.

“You’re seeing this final push,” said Jake Lancaster, a managing director for Jones Lang LaSalle in Portland. “The majority of the buildings that have been built over the last 20 to 30 years have been getting upgrades or improvements. Most of the buildings have been traded or sold. The market has proven that by making the investment, the tenants will come and they will pay the rates to be in upgraded real estate.”

The raft of projects is characteristic of a mature real-estate cycle, analysts said. With newer office properties in desirable locations earning lease rates of $36 per square foot or more, owners of older properties are racing to catch up and hike rates to match or come close.

At the same time, tech companies want different office environments than the old-guard law and accounting firm spaces in many of Portland’s office towers. Cubicles are out, and Silicon Valley-inspired open-plan offices with foosball tables and baristas are in.

Portland’s office market saw 9 percent rent growth in 2018, according to JLL. Vacancy rose to 13.1 percent. Absorption was negative, with 306,780 square feet added to the market as office users including Wells Fargo, Jive and the Art Institute of Portland vacated office space.

First-quarter 2019 data was not yet final, but absorption for the period is expected to be slightly positive, according to JLL.

Not only older buildings are being targeted for renovations. Tanner Point, formerly known as 9North, is set to undergo a retail makeover and other interior renovations. The eight-story North Pearl District property was completed in October.

CBRE Global Investors purchased the 182,851-square-foot building from Williams & Dame Development and Global Miller Properties for $76.6 million shortly after it was delivered to market.

Kevin Kaufman, a CBRE vice president, said the investment arm underwent a “data-driven process” based on national and local trends in deciding to reposition the newly constructed building to attract tenants.

“We think that type of approach here will help Tanner Point,” he said.

For new construction, several major projects are on the way, including the office portion of the Press Blocks that will bring more than 193,000 square feet of office space to market. Also, District Office in the Central Eastside from Beam Development and Urban Development + Partners will add approximately 72,000 square feet and 7 S.E. Stark from Harsch Investment Properties will have about 70,000 square feet of leasable office space.

“There has been a tremendous push in the new construction pipeline and deliveries,” Lancaster said.

Further out, construction of the 35-story Block 216 project from Walter Bowen’s BPM Real Estate Group is expected to begin this spring or summer. The tower-and-podium project would bring approximately 167,000 square feet of office space to market.

Construction of Eleven West, another mixed-use project from Gerding Edlen Development and Downtown Development Group at Southwest 11th Avenue and Washington Street, has not begun despite design approval being given in December 2017. Eleven West would add 110,000 square feet of office space.

The ample development pipeline is causing some observers to question whether Portland’s office market can absorb all of the new space.

“There is way too much office available,” said Jordan Menashe, principal at Menashe Properties, a Portland-based property management and development company. “It is insanity.”

Menashe said there’s a mismatch between the mostly smaller prospective tenants in the marketplace and the large spaces being offered.

“It’s all the same amenities, and the same floor plate sizes, and it’s all not catering to the Portland tenant,” he said.

Yet for now, rent growth remains strong and investors keep coming. On March 15, Intercontinental Real Estate Corp of Boston announced it had acquired Heartline’s five-story office and retail building in the Pearl District totaling 72,130 square feet. The sale price was not disclosed and was not yet available in Multnomah County records.

Another major office trade is anticipated with the Bill Naito Co. expected to sell the Montgomery Park building in Northwest Portland, with 850,540 square feet, to an institutional buyer. A repositioning project could follow.

“There’s tons of institutional money out there, and it has to go somewhere,” Menashe explained. “And Portland still is affordable compared to Seattle, San Francisco, Los Angeles, downtown Denver.”

Kaufman also said he expects the office market to remain healthy.

“I don’t think we’re headed to a point – in the Portland market anyway – where you will see massive spikes in vacancy,” he said.

Lancaster said the development pipeline is poised to slow after the current round, aiding absorption of the new space.

“Our market is about slower and incremental absorption,” he said. “That will be the case as well with this round of absorption through 2020. The majority of the capital that’s invested in new construction, it’s very patient capital.”

The post Revving up renovations to tempt tenants appeared first on Daily Journal of Commerce.