Construction is set to begin in November on the latest hotel project in Portland’s central city. The 197-room Moxy Portland will rise to 12 stories above grade on a former surface parking lot and food cart site at 585 S.W. 10th Ave., at the corner of Alder Street.

The building was designed by DLR Group for Minneapolis-based owner/developer Graves Hospitality, which is making a foray into what it considers a vibrant hotel market in Portland.

“There are a lot of incubators of some industry-leading concepts in the lifestyle business here with all of the independent hotels,” said Ben Graves, the company’s CEO. “It’s a very independent vibe, and we love that.”

The metrics of the Portland market and its projected growth drew the company to the city. After digging around and submitting offers for various sites, Graves was introduced to the Goodman family, whose Downtown Development Group owns the 3/16ths-block site in the burgeoning West End area.

“For the type of hotel that we’re doing, there’s not a better location in Portland,” Graves said.

Marriott International’s Moxy brand targets lifestyle-conscious millennial travelers, and the Portland location will enter a market that includes recent offerings with similar concepts. They include: the 204-room AC Hotel Portland Downtown, which opened last year, and two Hilton hotels that opened earlier this year – the 153-room Canopy in the Pearl District, and the 299-room Porter Portland Hotel, which is part of Hilton’s Curio chain.

In addition, the 180-room Radisson Red is slated to open next month in the Broadway Tower, and a 220-room Hyatt Centric is under construction a block west of the Moxy site. Despite the apparent saturation of the hotel market, Graves Hospitality is optimistic about the health of the market and continued demand for rooms in the city.

“There weren’t a lot of hotels developed between 2002 and a couple years ago, so a lot of it is just catching up with the demand that’s been growing over the last decade,” said Matt Mering, the firm’s director of development.

Longtime pent-up demand for rooms, Graves says, has led to local hotels running at occupancy rates of around 85 percent, a number that could decrease 10 to 15 percent and still be considered very healthy.

“The supply will all be absorbed in the market,” he said. “It’s just an amazing amount of growth happening in this marketplace.”

Even with the strength of the market, Graves Hospitality underwrote the project under the assumption that it will take some time for business to ramp up. Along with development and equity partner KCB Real Estate, the firm is committed to being vested in the project for the long term.

“We’re taking the 15-year view on this, not the three-year view,” Mering said.

The 71,000-square-foot building is being constructed on a compact 7,500-square-foot parcel by general contractor Howard S. Wright, a Balfour Beatty company. Urban Resources Inc. is the owner’s representative and project manager for the project, which is funded by clients of Washington Capital Management. Construction is slated for completion in August 2020.

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In the past few years, a growing influx of new tech workers and residents has helped transform the city of Portland.

This population growth and demographic change has, in part, allowed the Goodman family and its Downtown Development Group to begin to put into action a series of development moves, including its ambitious . It calls for 11 new buildings, including five high-rises, on downtown properties near the Willamette River between Washington and Burnside streets. One of the first projects is 230 Ash – a modest, six-story mixed-use building, but much more is planned by Downtown Development Group – one of the oldest development firms in Portland.

For instance, preliminary plans have been formed for Downtown Development Group to work with a local, unidentified engineering firm on a net-zero building at the intersection of Southwest First Avenue and Pine Street.

“It will be like the Bullitt Center in Seattle,” Downtown Development Group co-President Gregory Goodman said, referring to the commercial building that opened in 2013 and was certified as a “living building” by the International Living Future Institute. The six-story, 52,000-square-foot structure uses solar panels and other green features to produce more electricity than it uses over the course of a calendar year.

Meanwhile, talks with an outside developer, Gregory Goodman said, have been ongoing about a possible project at the west end of the Morrison Bridge on Block 40, as well as another on a half-block site that currently serves as a parking lot just south of the Pine Street Market.

“We’ve had interest from people, but we don’t know what we’re going to do with that half block yet,” he said. “We were thinking a heavy-timber office building or maybe more housing, or a hotel? We’re trying to sort through all of that now. We’ve definitely had a lot of interest in other sites.”

Also, on Wednesday, the city received a proposal for a 33-story tower and podium building to be constructed on the full block owned by the Goodmans that is bounded by Southwest Ninth and 10th avenues and Washington and Alder streets. The project would include 750,000 square feet of office, hotel and residential space above ground and four and a half floors of underground parking.

The block is home to the largest collection of food carts in the Portland area.

One project that has moved along is Eleven West, which received approval from the Portland Design Commission in December 2017. ZGF Architects has designed the project for developer Gerding Edlen. The site is Southwest Washington Street, between 11th and 12th avenues. Plans call for a 24-story building featuring 7,900 square feet of retail space on the ground floor. Floors two through seven will hold 110,000 square feet of office space, while floors eight through 24 will hold 222 luxury apartments averaging 980 square feet each.

In addition, there will be four floors of below-grade parking accommodating up to 260 vehicles. A 7,900-square-foot rooftop amenity space will round out the project.

At 290 feet tall, Eleven West is intended to be “an iconic structure for our city in the west end,” Downtown Development Group co-President Mark Goodman said.

It’s also intended to mirror the Twelve West building finished in 2009 less than a block away. That building, rated Leadership in Energy & Environmental Design platinum, also developed by Gerding Edlen with Downtown Development Group as the largest investor.

“(Eleven West) has the benefit of two things,” Downtown Development Group Vice President Matthew Goodman said. “It has a proxy across the street that has performed very well. And, second, like any development, you learn from the things that went well, and we have the benefit of hindsight in having the parcel across the street and in the West End more generally. I don’t know if there’s a better location to be building that product right now.”

Currently, the project remains stalled because of needs for permits and full financing. In regard to the latter, Downtown Development Group is looking for a sizable financial partner, Matthew Goodman said.

“We want to be equity holders,” he said. “It’s an equity race, and we are trying to shop our partnership equity. With Twelve West we capitalized with a handful of families, but for this we’ll be looking for one large, potentially institutional investor. We’re kicking off the process and are hoping to have it wrapped up by the end of the summer.”

Eleven West, when it is finished, will join a surging West End replete with new office and hotel space. Projects include:  new six-story office building at Southwest 12th Avenue and Morrison Street; an 11-story, 179-room Moxy Hotel designed by DLR Group for a quarter-block parcel along Southwest Alder Street between 10th and 11th avenues; and a 15-story, 220-room Hyatt Centric hotel being built by Mortenson Construction on the same block at the corner of Alder Street and 11th Avenue.

“Look at the West End in the last year and it’s amazing,” Mark Goodman said. “It’s really got quite a there-there energy.”

Market conditions may soon change, he noted. But with interest rates still at historic lows, this may not be quite so important to investors and developers. This is, in part, what gives continuing impetus to projects like Eleven West.

“You have to acknowledge we’re toward the end of a development cycle,” he said. “But also key is that the cost of money is still historically cheap. Where you look at it from our perspective, where you look at holding it for many cycles, it’s more important to have low cost of funds than to directly develop into the right cycle.”

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A downtown hotel proposal from a Minneapolis developer sailed through a design review hearing Thursday.

The Portland Design Commission voted 6-0 to approve DLR Group‘s design for a Graves Hospitality hotel at Southwest 10th Avenue and Alder Street. The “boutique lifestyle” hotel will reach 12 stories and include 197 guest rooms.

The hotel will displace a row of food carts that face Alder Street and the northern side of Jake’s Grill. Some of the food carts have found other locations. The new hotel will incorporate on the ground floor four food establishments that will be integrated into the lobby in a food hall-like concept, said Benjamin Graves, president and chief operating officer of Graves Hospitality.

“We started looking at hotels here probably seven years ago,” Graves said. “Essentially, we’re a lifestyle company. We like to do business in places we like to go, where we like to hang out. We love Portland.”

Hospitality companies must expand beyond their hometowns, as there’s only so much room in any given market for a certain hotel concept, Graves said.

The hotel will fit snugly on the 7,500-square-foot lot. The hotel will also replace a surface parking lot. The property is owned by the Goodman family through limited liability companies. Graves said his company had agreed to a 99-year lease after the Goodmans declined to sell the property.

Graves Hospitality is a long-term holder of its assets, said Matt Mering, director of development.

Company executives said they expect to break ground as soon as possible after obtaining permits – likely this summer. Graves did not answer questions via email regarding the upcoming hotel’s brand identity.

Design commissioners greeted the project with enthusiasm. The hotel had been the subject of two prior design advice meetings.

“The design has evolved so well, so positively since the first conversation,” Commission Chairwoman Julie Livingston said.

The proposal does an “extraordinarily strong job” meeting public realm guidelines, Livingston said. The project would be a positive example for future design review applicants, she added.

The design was tweaked from the original proposal. The main entrance will face 10th Avenue instead of Alder Street. A decorative white band running around the corner of the hotel was removed. A light-colored vertical “fin” that will frame views from the hotel facing east toward the Willamette River and Mount Hood remained in the final design.

DLR Group principal Tim Ganey presented the design along with Graves Hospitality executives.

The design features brick masonry columns and glass on what promises to be an active ground floor. The design also accounts for a steep grade change on the property. Canopies were lowered to provide a better pedestrian experience.

“This is a space that I could see coming to and hanging out with friends, so I think it’s great,” Commissioner Andrew Clarke said.

Commissioner Tad Savinar said he was initially concerned the brick would be too dark, but was persuaded otherwise by samples of the material that were shown to the Design Commission. “You’ve convinced me with your sample that it’s not black,” he said.

No citizens testified regarding the proposal.

“Oftentimes we get folks from out of town who don’t get it, and you did get it,” Savinar said.

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A proposal for an 11-story boutique hotel continued its journey on Thursday, when the Portland Design Commission gave the project team some advice.

Plans call for building the hotel at 539 S.W. 10th Ave., at the northwest corner of Southwest 10th Avenue and Alder Street. The new structure would replace existing food carts and a parking lot.

The proposed 120-foot-tall hotel would have 71,232 square feet, including 7,500 on the first floor. Each of the 10 floors of guest rooms would have 5,784 square feet.

“This is a huge improvement from my perspective,” Commissioner Jessica Molinar said.

Commissioners praised DLR Group‘s response to comments they gave previously concerning the structure’s facade. The architects now propose using alternating colored bricks to tie the facility to the color of the natural environment. Also, the bricks’ textures would alternate between smooth and rough.

Windows would be positioned to give a feeling of rain coming down the building’s sides.

“It is nicely done,” Molinar said. “It has a lot of scale, lot of texture, material elegance. Well done.”

One area of concern for the commissioners surrounded designers’ efforts to incorporate four food carts inside the structure. The team is seeking to activate the ground floor and tie the area’s history to the building. The problem is that the Portland Bureau of Transportation (PBOT) requires two loading bays for a building as large as proposed. Developer Graves Hospitality hopes to get a modification from PBOT, but if the bureau refuses, the area now occupied by food carts would have to become a loading ramp.

The food carts’ long-term subsistence also was raised as a concern.

“These (food carts) may or may not pan out,” Molinar said. “They seem to be driving this entire floor play, so if these go away at some point in the future, what happens?”

The hotel’s planners were hopeful that the food carts would be incorporated into the design, but believed the layout would work with or without them.

“If it did go away, it would be used as space within the hotel – probably lounge space,” said Ben Graves, president and chief operating officer of Graves Hospitality. “The driving factor is more circulation of active zones within the hotel.”

Some commissioners were nevertheless skeptical.

“I think it’s a great aspiration,” Commissioner Samuel Rodriguez said. “I am not sure it’s a phenomenal idea. I am not sure how compatible it is.”

Another concern for commissioners was the possibility that the grade on Southwest 10th Avenue would create too tall a wall for the proposed active use. To facilitate a Southwest Alder Street entrance, the height of the ground floor was raised approximately 3 feet above the sidewalk.

Designers hope to include large operable windows that allow patrons to engage with the streetscape.

“I don’t want pedestrians to be staring at people’s ankles,” Commission Chairwoman Julie Livingston said.

Another hearing before the Design Commission has not been scheduled yet for the project.

Also on Thursday:

1732 N.E. Second Ave.

A prefabricated, modular project designed by Works Progress Architecture was approved by the Design Commission with a 4-0 vote. Parker McNulty’s limited liability company, ENT Ventures VI, is planning a six-story mixed-use building with 10,475 square feet of retail space, a residential lobby and an outdoor plaza. The structure will also have 74 market-rate apartments and 50 parking spaces.

1126-1134 N.W. 18th Ave.

The Design Commission needed just 25 minutes to approve GBD Architects‘ plans for North 18 – a six-story mixed-use building on a half-block site – with a 4-0 vote. The structure, which is being developed by Hirschberger Family LLC, will include 107 market-rate units over ground-level retail space, one live-work unit, five townhomes and 50 parking spaces.

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Portland’s hotel industry is in the midst of a booming expansion that is raising concerns that developers are arriving late to a long period of economic growth.

A Travel Portland tally of the hospitality development pipeline shows 2,728 rooms on the way. If built, the hotel developments would expand Central Portland’s room count by 35 percent by 2020 – an amount that one hotelier warns will be a “shock to the system.”

“I worry about the market’s ability to absorb the supply medium-term,” said Bashar Wali, president of Provenance Hotels, which owns several boutique hotels in Portland. “Long-term, the supply momentum is going to slow down. It doesn’t make sense anymore.”

Projects including the $50 million, 204-room AC Hotel Portland have opened in recent months, yet more hotel developers are looking to jump in with proposals that have yet to enter the city’s design review hearing process, according to stakeholders.

Brisk hospitality business in Portland is being supported by strong population and job growth. Portland hotels were 82.3 percent occupied in March, up 4.1 percent from March 2016, and 74.4 percent for the year, according to research firm STR.

As average daily rates and occupancies showed impressive strength, hotel groups began rushing into the market. National brands including Hyatt, Hampton, Hilton, Marriott and Radisson all wanted to be in Portland. That supply is on track to be added to the market in the next two to three years.

The flood of new rooms is prompting some people to question whether developers could overbuild. Already, signs suggest that some hospitality chains are looking to exit the market. The Porter Hotel, part of Hilton’s Curio brand, is on the market, Wali said. The 299-room hotel, under construction at 1355 S.W. Second Ave., hasn’t even opened.

“That was another indication that says to us the market is definitely turning,” he said.

Provenance is evaluating the offering, but so far, it has been unable to come to terms with the developer, The Widewaters Group of Syracuse, N.Y.

“I don’t know if we’ll get to where they want to get in terms of pricing,” Wali said.

The Widewaters Group did not return a message seeking comment.

Even as some companies are looking to reduce their exposure to Portland’s hotel market, others are considering getting in. Plans for an 11-story, 171-room hotel at Southwest 10th Avenue and Alder Street in downtown’s West End were revealed in April public notices. The project is from Graves Hospitality, based in Minneapolis, and design firm DLR Group‘s Portland office.

The property, home to a number of popular food carts and a surface parking lot, is owned by the Goodman family.

Benjamin Graves, president and chief operating officer of Graves Hospitality, visited Portland on Tuesday to meet with city officials, food-cart operators and others near the proposed project site.

“We’re hearing what everyone’s wants and needs are in the neighborhood, and hopefully we can do something the neighborhood can be proud of,” Graves said.

Graves said he’s interested in accommodating the food carts at Southwest 10th Avenue and Alder Street as the hotel proposal goes forward.

“That’s definitely something that we’re considering and exploring at the moment,” he said.

Graves Hospitality develops, owns and manages hotels across the country. The company works with several major hotel brands, and is a preferred developer for Moxy, a Marriott brand.

Graves said he’s interested in bringing a hotel to Portland, but the project on the Goodman family lot isn’t set yet.

“We’re just in the exploration phase, but we’re spending real time, energy and money in this process,” he said.

New projects must contend with costs for land and construction that have grown along with the economic cycle. Yet for a prospective developer such as Graves, Portland’s strong fundamentals continue to beckon, and costs remain below those for comparable West Coast markets like Seattle and San Francisco. Prices for steel, for example, have moderated and are below year-ago levels.

“From a relative perspective, if you’re looking at other markets, cost to build in Portland is still achievable,” Graves said.

Portland’s hotel development pace is similar to those in other fast-growing cities, and more growth is supportable, Graves said.

“We don’t think there’s a bubble right now,” he said. “I don’t believe Portland’s as frothy. There are markets we feel could use some breathing room – New York comes to mind.”

For developers and investors, a project’s success depends in part on when they intend to sell. Developers looking to flip a hotel project in the next few years may be in for a tough exit, Wali said.

“If you are a short-term investor for private equity, any of the traditional Wall Street investors, your hold horizon is typically three to five years,” Wali said. “We’re in the fifth, sixth year of our run. You’re now starting to come into the market. It’s going to take you two to three years to build, and if you’re going to hold for another two to three years, your contemplated sale of the asset to realize your returns is essentially at the bottom of the next cycle. If you don’t think it through that way, and your intent is to flip, you’re going to be hurt on your exit.”

Graves Hospitality holds its properties for five to 25 years, Graves said.

“It really is just a function of market conditions, our partner and how we feel about the marketplace itself,” he said.

Another new proposal calls for demolishing an existing quarter-block building at 600 S.W. Fourth Ave. to construct a 15-story, 215-room hotel. SERA Architects was listed as the applicant for an early assistance meeting, but the meeting was canceled. The identity of the developer was not listed, and the architect did not return a message seeking comment.

By far the largest hotel in the pipeline is the Hyatt Regency due to be built near the Oregon Convention Center. The hotel, expected to open in late 2019, will bring 600 rooms to market. How that hotel will affect others is among the most important questions looming over the local hospitality industry.

The Hyatt Regency may draw primarily from special events held at the Convention Center and nearby Rose Quarter. Only time will tell if the hotel creates its own demand, or as Graves said, “if it’s just going to suck demand from the existing hotels.”

Airbnb and competing services add another wrinkle.

“Airbnb is essentially the equivalent of an 1,800-room hotel in the market, day in and day out, competing with us,” Wali said. “Anyone who thinks Airbnb is going away has their head in the sand, because they’re not going away.”

In today’s hotel market, local and national developers alike are pushing boutique brands.

Provenance is expanding downtown with construction of the Woodlark Hotel at Southwest Ninth Avenue and Alder Street and a renovation and rebrand of the Westin, built in 1998 at 750 S.W. Alder St., into a new offering called Dossier.

Woodlark construction has been slowed by issues in the historic buildings. The project combines the Cornelius Hotel, built in 1908, and the Woodlark Building, an office and retail building built in 1912.

“It would be a lot easier if it were ground-up (construction), but that’s not what we do,” Wali said.

The Woodlark is now on track to open in spring 2018. The hotel will offer 150 rooms and an East Texas-meets-Portland restaurant from Doug Adams, the chef at the well-regarded Imperial restaurant in Provenance’s Hotel Lucia. Another bar is also planned.

Dossier will relaunch in August with 205 rooms.

Hotel developers are focused anew on drawing in customers with attractive lobbies, restaurants and other ground-floor amenities as distinguishable features.

“I can’t tell you that the guest room at my hotel is better than the guest room at the Hampton Inn,” Wali said. “Everybody has a comfortable bed and great Wi-Fi and a great shower. We think what really creates the experience now is it’s all about the public spaces, the social spaces, the restaurant, the bar. We’re spending a lot of money, focus and effort on those to give a true Portland experience, elevated.”

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