A team of Portland State University students has unveiled its ideas for developing more than 4 acres of land near the east bank of the Willamette River.

Prosper Portland is preparing to issue a request for qualifications from developers to build on the property. The agency in November agreed to purchase 2.19 acres along Southeast Water Avenue, and lease an additional 2.18 acres, from the Oregon Department of Transportation.

The ODOT blocks, as the properties are known, are in one of the hottest areas for development in all of Portland.

Developers have rushed into the neighborhood with projects such as Killian Pacific‘s Goat Blocks, Clay Creative and Clay Pavilion, Capstone Partners‘ Custom Blocks and Beam Development‘s 811 Stark building.

For office projects, the Central Eastside Industrial District offers an evolving neighborhood with some of the city’s hottest restaurants, bars and coffee shops, proximity to downtown and plentiful transportation options.

Zoning in the area is restricted to encourage office and light-industrial uses. As part of Portland’s 2035 Comprehensive Plan, zoning limits retail spaces to 5,000 square feet per site and allows a new category: industrial office use.

The zoning seeks to preserve the district for use as an employment center, said Debbie Kitchin, who served as co-chairwoman of the Southeast Quadrant Plan committee and is a board member of the Central Eastside Industrial Council.

“We just don’t have much availability of land for that type of development,” said Kitchin, who was speaking as an individual.

The CEIC pushed for the zoning to preserve an employment center and resist turning it into another close-in neighborhood given over to housing and retail.

“I think we came to a good compromise for the Central Eastside,” Kitchin said. “There are already areas that are zoned for residential and retail,” concentrated around the East Side’s bridgeheads.

The city is also interested in adding to its property tax rolls. Under ODOT ownership, the parcels generated no property taxes for the city.

PSU graduate students were asked to evaluate development possibilities for the three blocks owned by Prosper Portland. They presented their proposals at a NAIOP Oregon meeting held Sept. 21 at the Multnomah Athletic Club.

The three Water Avenue blocks owned by Prosper Portland are individually 34,800 square feet between Taylor and Salmon streets, 34,800 square feet between Salmon and Main streets and 25,600 between Main and Madison streets.

The PSU students were asked to weigh in on the ODOT blocks as an academic exercise. Ultimately, a developer will come up with a separate proposal for the site.

The students unveiled a concept for what they called the Portland Innovation Center, consisting of two massive buildings joined by a sky-bridge. The two buildings would consist of the five-story Idea Factory and nine-story Perch. The latter building would have industrial office and “maker” space of floors five through nine. Floors two through four would consist of a parking garage with ramps in a central atrium that would be removable in case demand for parking slackens in the future.

A Dutch-style “Woonerf” – a narrow street that’s friendly to bicyclists and pedestrians – would run beneath the sky-bridge.

The student proposal met with some skepticism amid encouragement from a panel that included developers Kira Cador of Rembold and Brad Malsin of Beam Development.

One of the students, Andrew Crampton, acknowledged that sky-bridges are typically discouraged by city regulators.

“In Portland, establishing a sky-bridge is a herculean task,” Crampton said.

A sky-bridge at the site would maintain existing view corridors and break up an imposing “superblock feel,” Crampton said.

The zoning allows for a 3-to-1 floor area ratio (FAR) and a 1-to-1 bonus. The students said to make the project work, the site would need a FAR of more than 5-to-1. The students said the buildings would be filled with long-term tenants.

But long-term leases can be difficult to fill, said Paige Morgan, an executive vice president at Jones Lang LaSalle.

Malsin added that he had filled Central Eastside leases in part by using creative leasing structures.

“A lot of early-stage companies are not going to sign 10-year leases,” he said.

The panelists’ criticisms were fair, said Jamison Loos, one of the students.

“I’m glad that the panelists agreed that our proposal reflected the Innovation Quadrant and (Central Eastside Industrial Council’s) goals,” he stated in an email message. “Prosper Portland will ultimately decide what gets built, but the right development will align the interests of the city with key stakeholders in the business community.”

The choice of developer will be key to successfully building on the site, according to Loos.

“They’ll need to find the right developer who understands the context and can bring their own creativity to site-specific challenges,” he said.

Prosper Portland paid $2.485 million for the ODOT blocks. The state agency is retaining 94,000 square feet on the western portion of the parcels for future construction staging.

The PSU students also evaluated development options for two downtown parcels near the university. The first is a 0.69-acre property at 424 S.W. Mill St. The existing tenant, St. Michael the Archangel Catholic Parish, is interested in moving into a new building and adding development on the parcel. The existing church dates to 1901 and is made of unreinforced masonry.

“Currently, the church lacks the capital to seismically upgrade the building,” said Dawson Marchant, a PSU student on the downtown team.

To finance a new church, the students proposed to sell part of the property for hotel development.

The other parcel is a 0.92-acre lot bordered by Mill and Market streets and Fourth and Fifth avenues. The property is one of the last surface parking lots left in south downtown.

The students proposed a senior housing development on that parcel, which is owned by Willing Co., a foreign real-estate investment group. (The students cheekily referred to their concept for the twin parcels as the God-Willing Development Plan).

Industry experts on the NAIOP panel questioned several aspects of the students’ development proposal, including their concept to demolish the church, a historic landmark, in favor of a new building. The professionals also questioned whether the senior housing project would work if it’s subject to Portland’s inclusionary housing rules.

“The long-term value is not there,” Cador said. “I know your investor is looking for a low-risk project. I think this is a high-risk project.”

Editor’s Note: This story has been corrected from an earlier version that misattributed a quote from Andrew Crampton to another student.

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Political uncertainty was foremost on the minds of developers and real estate investors at NAIOP Oregon‘s development forum on Wednesday.

Locally, Mayor-elect Ted Wheeler’s incoming administration was the source of hope among developers. But the election of Chloe Eudaly as city commissioner was cited as an uncertainty. And a raft of city policies, including inclusionary zoning and rent control, loomed over the discussion held at the Sentinel Hotel.

“We left the meeting feeling very hopeful about his administration moving forward,” Barragar said.

Portland’s city leaders need to provide a more business-friendly environment, said Jordan Schnitzer, president of Harsch Investment Properties.

“From my perspective, we haven’t had business-friendly leadership statewide or citywide in many years,” he said.

Schnitzer’s comments came despite a development boom that has reached a fever pitch this fall.

He also waded into the City Council race that bounced incumbent Steve Novick. Schnitzer referred to Eudaly as “that gal that beat Steve Novick.”

“We have someone on City Council not a lot of folks in this room have a relationship with or know,” he said. “Is that good or bad? Time will tell.”

Eric Clapp, managing director of Westport Capital Partners LLC, said Portland is friendlier to development than some markets in California. He said he’s worked in places such as Laguna Beach, California, and Napa Valley that “make Portland look business-friendly.”

Rob Hinnen, founding partner of developer Cairn Pacific, said President-elect Donald Trump’s pledges of new infrastructure spending “could certainly be good for our business.”

The pace of multifamily development in Portland is unsustainable, Hinnen said.

“I’ve felt like it’s been overheated for a while,” he said. “I might be wrong about that – eventually I’ll be right.”

Wood-frame apartment construction in particular has seen sharp increases in construction costs, Hinnen said.

“I do think the cycle is mature,” he said. “It’s time to be careful in how deals are structured. Understand your debt, understand your equity, understand your covenants.”

Developers have less exposure than before previous recessions, Hinnen said, minimizing the downside risks if the market turns south.

Cairn Pacific is busy transforming the Slabtown area of Northwest Portland with a mix of multifamily, office, retail and parking development.

Westport Capital Partners is at work along with Sentinel Development on a renovation of the Towne Storage building at the east end of the Burnside Bridge. The seismic retrofit of the 101-year-old building is complete, and construction is under way, Clapp said.

Westport Capital Partners was persistent in looking for a Portland property to develop, Clapp said.

“It’s an emerging city with a lot of good fundamentals,” he said.

Harsch will start construction this month on a nine-story creative office and retail building at 151 S.E. Alder St. in the Central Eastside, Schnitzer said. The 90,000-square-foot building is being designed by Works Partnership Architecture.

Looking outside the Portland market, Harsch has in recent months bought up industrial properties in Nevada and California.

Schnitzer said Harsch is holding off on building a multifamily tower at 18th Avenue and Alder Street, near Providence Park, to wait on Portland’s market to absorb recent multifamily construction.

“If we get started on this, it’ll probably be (2019),” he said.

Hinnen said that timing makes sense. Cairn Pacific also has plans for projects to begin then, he said.

“That sounds like the right timeframe when the construction industry will be hungry again,” he said.

The developer is pursuing city approval for a multifamily project at the George Morlan Plumbing building, at 2222 N.W. Raleigh St. Construction could begin around 2019.

Rents may be flat or falling at the moment, and more buildings are offering concessions, Hinnen said.

“Long-term I’m very bullish about apartments in Portland,” he said. “I might be cautious in the short term, but bullish in the long term.”

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