A major Midwest industrial developer is looking to make its mark on the Portland-metro market with a speculative project in Hillsboro.

Scannell Properties plans to seek bids in the coming weeks for construction of a 126,000-square-foot industrial structure with a 32-foot clear height. Mackenzie is designing the project for Scannell, and CBRE will search for a tenant.

The developer, based in Indianapolis, saw opportunity in the Portland market after completing two build-to-suit projects in Salem, said Mohnish Narlanka, a Scannell senior development manager who oversees the company’s Pacific Northwest projects.

Scannell built approximately 1 million square feet of logistics space for Dollar General and 300,000 square feet for Gensco after approaching the city of Salem to forge a land agreement to develop an industrial park.

“That was kind of our first dive into the greater Portland market,” Narlanka said. “As we got some positive momentum in the region, our next mandate was let’s go find that speculative deal that we like and plant the flag.”

Narlanka said he’s not among those investors turned off by the “optics around downtown Portland.” The developer said his wife grew up in Beaverton, and he’s become familiar with the area.

“Yes, there are challenges for downtown Portland, but it’s not indicative of what’s going on in Clackamas or Hillsboro or these submarkets that are doing really well,” he said. “So, we’re going to continue to invest where there’s demand. Our broad thesis is the Portland area is an area where there’s durable demand.”

Scannell develops some $4 billion in industrial real estate annually, split between speculative and build-to-suit projects. The privately held developer has in-house construction managers, along with accounting and legal staff, and typically works with local architecture firms and contractors.

In Hillsboro, Scannell was encouraged by limited land availability and activity from Washington County users.

“What we really liked about Hillsboro is it’s kind of a captive demand audience where people want to be close to those they serve, whether that’s Intel or someone else,” Narlanka said.

The developer is investing in a market that has seen its share of ups and downs in recent years. A spate of speculative construction led to higher vacancy rates and softening rents in some submarkets.

In the second quarter, leasing activity grew 25 percent compared to a year earlier, and leasing was up 7 percent compared to the previous quarter. That led to net absorption of 508,147 square feet.

Vacancy rose as new projects opened with limited preleasing. “Despite these headwinds, demand for modern Class-A space remains strong in select submarkets, particularly the Sunset Corridor, where premium facilities command some of the market’s highest rental rates,” CBRE stated in the quarterly report it released last week.

Vacancy in the Sunset Corridor remained low at 4.2 percent, compared to the market average of 7.7 percent.

An undisclosed tenant signed the quarter’s largest lease at Prologis Park Clackamas for 304,000 square feet. Consolidated Supply Co., Nuna Baby Essentials and Ferguson Enterprises also signed major leases, according to CBRE.

The construction pipeline remains robust, with nearly 3.5 million square feet on the way. Developers have delivered 1.6 million square feet year to date in the Portland market.

Scannell will seek one or two tenants for the Hillsboro speculative project, Narlanka said. The development is located at Northeast Starr Boulevard and Meek Road in Hillsboro, just south of U.S. Route 26 and near a cluster of new construction, including an Amazon fulfillment center and data centers.

The warehouse “theoretically could demise into two suites,” Narlanka said. “Many users prefer (an) entire building.”

Scannell is in the final phases of permitting and expects to begin clearing and grading the site in late September, Narlanka said. The company expects a 10-month construction phase, with availability in summer 2027.

Correction: An earlier version of this story incorrectly stated that Mohnish Narlanka leads Scannell Properties’ West Coast projects. Narlanka is in charge of the Pacific Northwest for Scannell.

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