Portland’s Towne Storage building has earned a record price on a per-square-foot basis.

The building traded for $62.75 million, according to Multnomah County records. The sale was recorded April 23.

The sale equated to $630 per square foot for the approximately 100,000-square-foot building, beating the previous record for Portland office space of $565 per square foot for Pearl West, according to Jones Lang LaSalle research.

CBRE Global Investors purchased the building from an entity of Westport Capital Partners. NKF Capital Markets represented Westport, while CBRE represented itself.

The high price reflects the strength of the tenant, said Patricia Raicht, senior vice president for research at JLL. The building is fully leased by Autodesk, a software maker for architecture and engineering, construction and entertainment applications. The company moved into the building, near the Burnside Bridge’s east end, from Lake Oswego.

“They have a credit tenant with an 11-year lease in there,” Raicht said.

Investors have been willing to pay a premium for buildings with long-term tenants. The Wieden + Kennedy building sold for $103.25 million, or $556 per square foot, last year to an institutional buyer.

The sale also shows bustling office demand in the Central Eastside industrial District. Developers are rushing in with projects such as Platform by Project^. That proposal calls for new construction of 140,000 square feet of office space.

The Towne Storage building originally opened in 1916 and was once home to a wholesale paper distributor. LRS Architects designed an adaptive reuse project to update the unreinforced masonry building, and Bremik Construction served as the general contractor. Sentinel Development was the developer.

Fortis Construction performed the tenant improvements for Autodesk, with design by Mackenzie.

Editor’s Note: This article has been corrected from an earlier version that misstated the price per square foot.

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Wells Fargo has sold the 40-story Wells Fargo Center in downtown Portland to an affiliate of Starwood Capital Group, the bank announced Tuesday.

Terms of the deal were not disclosed.

Wells Fargo plans to lease back space and continue to anchor the building, which will retain its name, the bank said in a news release.

Wells Fargo announced in June the listing of the tower at 1300 S.W. Fifth Ave. At the time, Wells Fargo was leasing out more than 40 percent of the 689,840-square-foot building to other tenants.

The bank has also signed an agreement to lease space at 23175 N.W. Bennett St. in Hillsboro starting Jan. 1, 2018. The company will operate a retail banking call center in the building. It can accommodate up to 900 employees, and Wells Fargo plans to relocate some employees there.

Wells Fargo plans extensive renovations at the Hillsboro site, and will start moving employees in during summer 2018, the bank announced.

Portland office space sales have repeatedly reached new highs per square foot in recent years. The current record holder on a per-square-foot basis is Pearl West, which sold in July for $87.5 million, or $563 per square foot.

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The Pearl District‘s Wieden + Kennedy building has sold for $103.25 million to a San Francisco investment firm.

The buyer of the 185,809-square-foot office building was a limited liability company managed by Stockbridge Capital Group, according to state and Multnomah County records. Stockbridge is an investment firm with broad holdings across the U.S.

The price of the Wieden + Kennedy building equates to $555.68 per square foot, near a record for the Portland office market. The current record holder is Pearl West, which sold in July for $87.5 million, or $563 per square foot.

The deal offered the buyer predictable, long-term cash flow, said Paige Morgan, an executive vice president with Jones Lang LaSalle in Portland.

“Investors currently are targeting and liking those long-term leases in Portland,” Morgan said. “They’re paying for that stability.”

Prices per square foot are expected to continue trending upward as buildings with newer, market-rate leases sell, Morgan said.

“I think we will continue to see new price-per-foot records, mostly because the rents have gone up dramatically here in the past few years,” she said.

The sale also reflects a tidy profit for seller JPMorgan Chase Bank. The New York-based bank acquired the building, via a limited liability company, for $65 million in 2012, according to government records. The bank made a 58.8 percent return on its original investment.

Like much of the Pearl District, the building at 224 N.W. 13th Ave. was originally constructed as an industrial warehouse in 1908. It was renovated into modern office space in 2000 from a on behalf of Wieden + Kennedy.

Locally, Stockbridge also owns the Tualatin Corporate Center, a 401,670-square-foot, multi-tenant industrial park, and Lloyd Safeway Center, a 205,173-square-foot retail property in the Lloyd District. Stockbridge did not return a call seeking comment Wednesday.

Wieden + Kennedy, an advertising firm that has created national ad campaigns on behalf of Nike, Coca-Cola and other major brands, is the primary tenant in the Pearl District building. It’s also home to Bluehour restaurant. Wieden + Kennedy has a long-term lease.

“It’s a very iconic building with a sort of iconic company in there as well,” Morgan said.

In total sale price, other Portland office buildings have sold for more. The U.S. Bancorp Tower, better known as “Big Pink,” sold for $372.5 million in 2015. The Block 300 building sold for $155.2 million in 2015, the PacWest Center traded for $170 million in 2016 and Pioneer Tower sold in 2016 for $121.7 million.

Currently, the most notable office property on the market is the 689,840-square-foot Wells Fargo Center, Portland’s tallest skyscraper.

The Wieden + Kennedy building transaction was recorded in Multnomah County records Sept. 8.

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The rise of the Pearl West mid-rise building heralds the arrival of new office space in Portland.

The nine-story building will have 156,000 square feet of leasable office space and 10,000 square feet of retail space over three floors of underground parking. The half-block site is at the corner of Northwest 14th Avenue and Irving Street. Construction is approximately 60 percent complete and scheduled to finish in July 2016.

Tenants have secured 60 percent of the space. The project’s general contractor, Howard S. Wright, will occupy the fourth floor. Wacom Technology Corp., which is relocating its headquarters from Vancouver, Wash., will occupy 55,000 square feet as well as a retail space.

Rent will be $31.50 per square foot, triple-net, according to the Pearl West website. Real estate firm JLL last week reported that the average rent for Class A office space in Portland was $31.22 per square foot – a 5.9 percent increase over last year, and a new record.

The site was vacant for 15 years. For many decades it served as the parking lot for the warehouse serving the Meier and Frank retail store next door. At various times, it was considered a possible home for urban time-shares and a hotel.

GBD Architects collaborated with Hacker on the design. Window space was maximized, and the building is being finished with gray-black brick. A Leadership in Energy & Environmental Design gold rating is being pursued by the project team.

Brian Owendoff, a representative of owner Walter Bowen and BPM Real Estate, was proud that the project team navigated the design review process in “one-and-done” fashion.

“Part of this was a challenge because you’re selling an intangible good,” he said.

The third quarter saw a burst of activity in Portland’s office sector, with $623 million in transactions, JLL reported. More than $958 million has been invested in Portland office space this year.

Demand is strong for office and industrial space, economist Jerry Johnson said. That’s good, he added, because it’s one of the truest signs of a healthy economy.

“It’s the canary in the coal mine,” he said.

Office is also often one of the last sectors to recover from a downturn, Johnson said, as it was this time. Companies that fold or downsize leave inventory that must be backfilled when a recovery occurs.

One interesting thing about the office market rebound is the nature of the new tenants. Many are tech firms, rather the usual finance, real estate and insurance companies.

“It’s kind of a lifestyle thing,” Johnson said. “There’s lots of younger guys downtown these days.”

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Construction crews are busy doing subgrade work on the Pearl West office building at Northwest 14^th Avenue and Irving Street in Portland.  Howard S. Wright is the project’s general contractor; crews with Coffman Excavation are removing dirt from the site, while DeWitt Construction and Northwest Cascade are driving augercast piles and installing soldier pile and lagging.

The 9-story building was designed in collaboration between GBD Architects and THA Architecture for developer BPM Real Estate Group. Work on the project began this past summer, and is slated for completion in early 2016.

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A corner office was once the mark of success in the professional world, but employees today are less interested in such a perk than amenities like fitness centers, bike repair areas and rooftop decks.

It’s this shift in employee preferences that’s driving up rents and driving down vacancy rates in Class B buildings in Portland’s Central Business District, according to Patricia Raicht, vice president of research for Jones Lang LaSalle.

“In the Class B and Class C buildings where owners have done something to upgrade the space in terms of infrastructure – (removed) dropped ceilings, exposed brick walls, done lobby renovations – the vacancy rates there are 200 points lower than in non-improved buildings,” she said. “We’ve seen a 20 percent increase in rent in buildings with creative spaces.”

Data compiled by JLL indicates that, in Class B and C properties, creative space has outperformed total space – and the gap is widening.

Between the second quarter of 2012 and the third quarter of 2014, vacancy for creative space fell 280 basis points to 6.1 percent, while vacancy for total space fell 230 basis points to 8.4 percent. Average rents for creative space increased 29.7 percent to $28.10 per square foot during the same time period, while average rents in total increased 13.3 percent and are now at $23.40 per square foot, according to the data.

When researching, JLL defined creative spaces as those that are usually older, and with open floor plans, high ceilings, exposed brick walls and good natural light. These types of spaces make up slightly more than 30 percent of the 10.9 million square feet of Class B and C inventory in the Central Business District.

Todd Gooding, ScanlanKemperBard‘s president, said his firm first noticed tenants’ desire for creative office space in 2012 after purchasing The Round in Beaverton. After renovations, SKB was able to charge $2 more per square foot for space in The Round than in other, similar spaces, he said.

Gooding said his firm recently completed a lobby remodel of the building that houses the Portland office of engineering firm CH2M HILL, at 2020 S.W. Fourth Ave. He believes it’s a good example of the type of space that tenants want.

“We’re moving toward creating collaborative buildings where tenants from each space have a common area to collaborate in,” he said. “While the number of square feet per person in an office space is shrinking, if you look at the space as a whole, more area is being dedicated to common areas for workers versus individual space.”

He compared the shift in the way employees occupy office space to the increase in the market for micro-housing, saying that as millennials move to Portland to take jobs in the growing high-tech industry, they’re requesting a new work environment.

“People want a bike storage and repair area; they want a couch and a keg, a TV room or a building that’s dog-friendly,” he said. “In Portland, everybody is ripping out ceilings, creating roof decks and remodeling lobbies.”

Brad Christiansen, a Colliers International vice president, said three buildings being developed in Portland – Pearl West, one at 1241 N.W. Johnson St. and one at Southeast Third Avenue and Clay Street – are designed to “look like a converted warehouse.”

“There is a shift in the workplace because the millennials want to go to work in these types of spaces,” he said. “In a macro sense, there is a great demand for the type of finished work environment that speaks to a collaborative work space.”

Christiansen said he believes it’s in a developer’s or business owner’s best interest to put the money into a remodel to attract tenants, pointing out that the amount a remodel costs is easily offset by the increase in rent the new space will command.

“The last lease in the Yeon Building – considered historic, creative, Class B space – was above $26 per rentable square foot,” he said. “At present, there are ‘traditional’ Class A buildings that are having a difficult time securing $26 per rentable square foot. Currently, there is more demand for creative/redeveloped historic buildings.”

With the shift in preferred work environments, Christiansen said traditional perceptions of office buildings are becoming less relevant.

“Is it Class A, Class B, C, creative, historic? It almost doesn’t matter,” he said. The classification of buildings is becoming archaic.”

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Limited available office space and rising rents in Portland’s Central Business District are forcing some law firms that historically have gravitated toward downtown to lease in outlying areas such as the CBD’s West End and the Pearl District.

Vacancy overall in the Portland-metro area is about 10 percent, according to data released recently by real estate services firm Jones Lang LaSalle; in downtown, it’s 7.7 percent. Vacancy for Class A office space has dipped to 7.1 percent.

Asking amounts for Class A office space in the CBD are up 8.3 percent this year over last, with tenants paying $29.28 per square foot annually, according to JLL Vice President Andrew Rosengarten.

“I’ve seen deals struck with landlords for less,” he said. “But that’s a pretty solid number.”

For comparison, average asking amounts in the CBD rose just 2.7 percent in 2013 from 2012, according to JLL Vice President of Research Patricia Raicht.

With space becoming scarce, JLL predicts that the CBD rental market, which in 2014 was neutral, in 2015 will favor landlords. In 2016, when large blocks of space become available in new buildings like Park Avenue West and Pearl West, the market is expected to swing back in favor of tenants, Raicht said.

JLL data indicates that 7 percent of Portland’s office space is occupied by law firms. Six of those firms require more than 50,000 square feet.

“Large firms that are looking for big blocks of space – 100,000 to 150,000 square feet – may have zero or one options open to them right now,” Raicht said. “But smaller firms that need 25,000 square feet have several full-floor options still.”

Stoel Rives LLP will relocate its Portland office to Park Avenue West – between Southwest Park and Ninth avenues, and Morrison and Yamhill streets – when construction wraps up in 2016. The law firm plans to lease almost 132,000 square feet of space. Perkins Coie renewed its lease at 1120 N.W. Couch St.; the firm occupies 60,000 square feet of office space.

Meanwhile, law firms are competing with high-tech firms, which are increasingly looking at Class A office space. For example, when U.S. Bank earlier this year gave up more than 200,000 square feet of space in the U.S. Bancorp Tower, tech companies like New Relic, Survey Monkey and Webtrends stepped up to fill the space.

Some of Portland’s large law firms have taken advantage of their lease-renewal cycles to rightsize their operations.

“In the last two or three years we’ve seen several larger firms renew their leases,” Raicht said. “To become more efficient they’ve done things like make office spaces the same size for all attorneys. Or, because everything is going digital, they’ve been able to reduce their needs for library space.”

For big firms, rightsizing sometimes means giving up 10 percent of space – perhaps 10,000 to 15,000 square feet. But for smaller firms, a reduction in space occupied often can’t be justified.

“For a firm that occupies 15,000 square feet of space it doesn’t make sense, economically, to give up 1,500 square feet,” JLL Vice President Andrew Rosengarten said. “It just doesn’t make the needle move enough to make a difference.”

Many of the larger law firms in Portland renewed their five- to seven-year leases around the same time a few years ago, Raicht said. Smaller firms at that time had the opportunity to backfill space given up by the larger firms that required less space.

Many law firms are hiring new attorneys, and competition is fierce, Raicht said.

“Pretty much everyone is in competition for intellectual talent these days,” she said. “Some firms use their office space as a recruiting tool for new talent and as a way to retain current employees.”

While some firms focus on space to attract talent, others are taking a more creative approach.

“Sometimes it’s office size, but often it’s the type of space – cooler, more modern – a firm offers,” Rosengarten said. “But there are other types of amenities, like showers or coffee bars.”

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A chance meeting during a tour of Franklin High School in Southeast Portland for architects interested in a campus modernization project led to a first-time partnership.

While walking through the school, SERA Architects associate principal Alene Davis and Dull Olson Weekes-IBI Group Architects associate principal Karina Ruiz saw an opportunity for the firms to work together.

“We started talking and immediately saw synergy,” Ruiz said.

Davis and Ruiz realized they could leverage DOWA-IBI Group’s extensive experience designing K-12 schools and SERA’s expertise in historic restoration for the $80 million update of 99-year-old Franklin High School. The strategy paid off when Portland Public Schools hired the two firms to design a project to preserve and modernize the school’s historic buildings, as well as construct additions that respect the existing architecture.

Combining design talent is becoming increasingly common in the Portland area. These local partnerships allow firms to better meet client needs.

“More and more of our clients are demanding a level of expertise and collaboration,” Ruiz said. “I think more and more this is going to be the model where you bring together experts no matter what firm they’re with.”

Besides Franklin High School, recent collaborations involving Portland architecture firm partnerships include LEVER Architecture and LRS Architects for the ArtHouse mixed-use building on the North Park Blocks, and GBD Architects and THA Architecture for the Pearl West office tower under construction in the Pearl District.

There are many advantages to partnering with nearby firms, GBD President Phil Beyl said.

“In our industry, it’s really challenging for us to line up the right talent at the right time for the right project,” he said. “Depending on when a project comes in the door, a firm can be in great shape to respond or not so great shape.”

Instead of hiring more staffers to take on Pearl West, GBD partnered with THA, which has offices just blocks away, Beyl said. The firms have collaborated in the past on the Multnomah County Library‘s Hollywood branch and two condominium projects in the South Waterfront District.

“We didn’t have the right people available, and we just had the perfect opportunity to get the right people from THA,” he said. “We proposed a team approach to this building and it worked really well. What’s wonderful about Portland is there is a tremendous amount of collegiality. We believe in sharing people.”

Collaboration between DOWA-IBI Group and SERA staffers with different perspectives and experiences has been one of the greatest benefits of the design partnership for the Franklin High School modernization, Davis said. Although technology allows the firms to easily share digital plans, the project team’s greatest design solutions have come out of face-to-face meetings, she said.

“You just want to sketch something real quick and show it to the person next to you,” she said.

That is one reason why two SERA employees have spent the past nine months working out of DOWA-IBI Group’s office. The arrangement has helped the team work to ensure that the remodeled and expanded school can reopen in fall 2017, Davis said.

“If time is no object, it doesn’t matter if you’re together or not,” she said. “But when you need an innovative solution quickly, you need to get everybody together.”

SERA associate Craig Rice said his workstation at DOWA-IBI facilitates collaboration between the two firms by allowing him to lean over his shoulder and quickly confer with team members.

Early delegation of each firm’s part in the project has smoothed the process, Rice said. SERA staffers are responsible for preservation and restoration of the existing school building while DOWA-IBI staffers design the expansion.

“We’re not overlapping,” he said. “Because of our clear delineation of scope it’s easy to work independently.”

Delegating a highly detailed and complex project with so many different facets among staffers from both firms has been helpful, Ruiz said.

“I think that delineation of tasks is really critical,” she said.

For Pearl West, THA staffers took the lead in the initial design of the building skin. Then GBD staffers gradually became more involved in other details of the project, THA principal Will Dann said.

Partnerships are especially helpful for the smaller firm, he said.

“It’s like having more employees,” he said. “It allows smaller offices to do bigger projects. It’s the wave of the future.”

Increased partnership between Portland architecture firms fits into a larger industry trend, Dann said.

“The work that we do as architects has gotten considerably more collaborative over the years,” he said. “We realized that we all collaborate in our offices and there are creative people in other offices we can collaborate with.”

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