Landlords and tenants each earned a victory and a defeat last week in efforts to provide greater protections to renters.

Tenant advocates won a resounding decision from Judge Henry Breithaupt, who issued a ruling in Multnomah County Circuit Court upholding a Portland ordinance that requires landlords to pay relocation costs to tenants who are issued no-cause evictions or who experience steep rent increases.

The City Council had unanimously passed the ordinance in February. Landlords then challenged it, arguing the rules interfered with their contract rights.

Breithaupt stated in his ruling the Legislature has allowed cities to regulate rents in indirect ways.

“If the Legislature had intended to proscribe ordinances that had the indirect effect of controlling rents it could have done so,” he wrote.

Oral arguments in the case, Owen et al v. City of Portland, took place in April. Breithaupt held off on issuing his ruling while the Legislature considered bills that could have allowed local municipalities to enact their own rent control ordinances.

Breithaupt’s ruling was issued Friday, the same day the Legislature adjourned. The decision is a victory for Commissioner Chloe Eudaly, who ushered the relocation ordinance through the City Council.

John DiLorenzo, an attorney at Davis Wright Tremaine and a lobbyist for landlord groups, said the plaintiffs may appeal Breithaupt’s decision. The emergency ordinance will expire Oct. 6 unless extended by the City Council.

“We need to get a read from the City Council as to what they intend to do,” DiLorenzo said.

The council is likely to extend the ordinance, said Jamey Duhamel, Eudaly’s policy director.

“The council is definitely looking to utilize the only tenant protections we have in place because people are still in crisis,” she said.

The ordinance requires a landlord to pay a tenant relocation assistance of $2,900 to $4,500, depending upon the size of apartment being vacated.

Landlords at the state level were able to hold off new rent control legislation or any interference to property owners’ ability to issue no-cause eviction. House Bill 2004 stalled in the Senate.

“We truly feel that the housing advocates are choosing a course that will only exacerbate the housing crisis,” DiLorenzo said. “They say they know better, but they have no experience managing buildings.”

Tenant advocates don’t understand the housing market, DiLorenzo said.

“We have a group that has no experience signing the front of checks, only the backs,” he said.

Duhamel said DiLorenzo’s comments reflect the landlord lobby’s discomfort with tenants gaining protections.

“The landlord market and the rental market has been unregulated for decades, so messing with their ability to gouge tenants makes them uncomfortable,” she said. “I understand that.”

Duhamel noted Eudaly owned a local bookstore for 22 years.

“She certainly understands what it means to make a profit and pay employees,” Duhamel said.

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A company leasing space in a relatively typical suburban office building in Beaverton is taking advantage of the recent economic downturn to leverage sustainable construction.

New York-based , a manufacturer and distributor of medical supplies, has leased approximately 100,000 square feet in Beaverton since it acquired Protocol Systems in 2000. When the lease came up for renewal in 2009, company leaders knew that the weak economy put them in a unique position for negotiation. So they insisted that upgrades worthy of a Leadership in Energy and Environmental Design rating for existing buildings be negotiated into the new lease agreement. PS Business Parks, which owns more than 27 million square feet of office and industrial space throughout the country, even footed the bill.

Now, after nearly $1 million in building upgrades and months of energy-use monitoring, the team is almost ready to submit its paperwork to the U.S. Green Building Council. It may even exceed its original goal for a silver rating in the Existing Buildings – Operations and Maintenance category.

“It was the worst business climate possible (in 2009), so building owners everywhere had to be as receptive to the terms in a long-term lease as they would ever be,” said Peter Murray, vice president of operations at Welch Allyn and site executive for the Beaverton location. “They knew they’d have to make these investments, even though getting a client to stick around for a certain price level is not a straightforward (return on investment).”

After Welch Allyn built a LEED-certified addition to its New York headquarters in 2008, Murray teamed up with Len Harjala, facilities supervisor in Beaverton, to see if they could follow the corporate example. In 2009, they hired consultants from Bainbridge, an interior design firm with LEED expertise to conduct a feasibility study of the main building.

“In Portland, people might be tired to death of hearing about sustainability and LEED; frankly, every project we do is LEED now,” said Andrea Bainbridge, who founded the interior design firm in 1983. “But this project is different because it was tenant-based; they normally don’t care or can’t do much about it.”

Major upgrades included replacement of a 28-year-old HVAC system, an overhaul of lighting systems, and bathroom remodels that will save approximately 465,000 gallons of water per year.

The team also worked to convince employees to change their behavior in order to reduce energy consumption.

“It’s easy to assume that everyone knows how to recycle in the Portland-metro area, but there are apathetic people everywhere, and we had to get after them,” Harjala said.

The team installed kilowatt meters and monitored the use of everyday office supplies, and then presented the information to employees. Harjala was most surprised by the amount of energy-drain caused by personal space heaters, which added nearly $20,000 to electricity bills each year.

“Money was just flowing out the door,” Murray said.

Now a “green team” helps monitor the utility bills, come up with project ideas and encourage behavior changes.

The Welch Allyn project benefitted from a cooperative building owner and a favorable economic climate, but other companies may be able to achieve a similar outcome, according to Sermin Yesilada, a senior designer at Bainbridge and a LEED accredited professional.

“In Oregon, what people are already doing may comply in a lot of cases,” she said.

For example, Yesilada cited the landscaping at Welch Allyn’s Beaverton facility, which earned points in the rating system without any changes.

“That project will provide a good example that it’s possible to achieve LEED as a tenant-driven project.”

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The Ziba headquarters building is completely leased for the first time since the building was completed in August 2009. The -designed building at 1044 Ninth Ave. in the Pearl District was completed as a headquarters for . The building is 76,000 square feet, mostly occupied by Ziba.

The building now has two new tenants, however. has recently completed a build out in a 12,500-square-foot ground-floor space, and has leased 8,900 square feet of office space on the third floor, according to Murin M. Lesewski of Apex Real Estate Partners, which finalized the leases on the office space.

Jama Software is a Portland-based software company that was recently placed on a list of “America’s Most Promising Companies” by Forbes. SKB is a real estate private equity firm.

A lot across the street from the Ziba building is currently under consideration to house a new Marriott Residence Inn Hotel designed by .

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I’ve recently started the oh-so-fun process of purchasing a house. Considering I just don’t make that much money, and my friends don’t either, I am going to lease out a floor in the house I ultimately purchase. As I’ve begun to dive into the uncharted territories of being a landlord I have come across some rule changes that serve useful to both landlords and homeowners looking to sell their homes.

Starting July 1, landlords in Oregon who enter into new rental agreements with a new tenant are required to verify that the properties have fully-functioning carbon monoxide alarms within 15 feet of each sleeping area if there is carbon monoxide present anywhere on the property site. Carbon monoxide is often found in garages, heaters, furnaces, fireplaces and cooking sources.

In April 2011 the law will take a step up, requiring that landlords verify that all rental units have a carbon monoxide alarm within 15 feet of each sleeping area. Also, anyone looking to sell a home or any level of multifamily dwelling will have to install a properly functioning carbon monoxide alarm within 15 feet of each sleeping area.

Last month the Portland City Council approved a three year fee holiday for system development charges associated with homeowners building detached living units on their property. These system development charges can cost between $7,000 and $15,000.

The system development charge waiver is especially useful during this economy. If you are looking to rent out a portion of your property and don’t have the space, this fee holiday can potentially cut your construction costs in half.

Another thing to keep in mind if you are looking to become a landlord is taking the time to fully assess potential tenants. Renters don’t need to be exactly like the landlord, and it is probably better that they are not. But, take the time to assess the financial situation and the character of each potential tenant. Conduct interviews, check credit, get feedback from references and put everything in writing. Nothing would be worse than building an addition to your home, installing a bunch of carbon monoxide alarms and being swindled by a tenant.

The post A few things to bear in mind when becoming an Oregon landlord appeared first on Daily Journal of Commerce.

I’ve recently started the oh-so-fun process of purchasing a house. Considering I just don’t make that much money, and my friends don’t either, I am going to lease out a floor in the house I ultimately purchase. As I’ve begun to dive into the uncharted territories of being a landlord I have come across some rule changes that serve useful to both landlords and homeowners looking to sell their homes.

Starting July 1, landlords in Oregon who enter into new rental agreements with a new tenant are required to verify that the properties have fully-functioning carbon monoxide alarms within 15 feet of each sleeping area if there is carbon monoxide present anywhere on the property site. Carbon monoxide is often found in garages, heaters, furnaces, fireplaces and cooking sources.

In April 2011 the law will take a step up, requiring that landlords verify that all rental units have a carbon monoxide alarm within 15 feet of each sleeping area. Also, anyone looking to sell a home or any level of multifamily dwelling will have to install a properly functioning carbon monoxide alarm within 15 feet of each sleeping area.

Last month the Portland City Council approved a three year fee holiday for system development charges associated with homeowners building detached living units on their property. These system development charges can cost between $7,000 and $15,000.

The system development charge waiver is especially useful during this economy. If you are looking to rent out a portion of your property and don’t have the space, this fee holiday can potentially cut your construction costs in half.

Another thing to keep in mind if you are looking to become a landlord is taking the time to fully assess potential tenants. Renters don’t need to be exactly like the landlord, and it is probably better that they are not. But, take the time to assess the financial situation and the character of each potential tenant. Conduct interviews, check credit, get feedback from references and put everything in writing. Nothing would be worse than building an addition to your home, installing a bunch of carbon monoxide alarms and being swindled by a tenant.

The post A few things to bear in mind when becoming an Oregon landlord appeared first on Daily Journal of Commerce.

When McCormick & Schmick’s moved its corporate headquarters from the Portland waterfront to an office building in the Pearl District, the company did not only change its address. It also boosted its image, trading class-B space for a class-A suite in the Pearl while paying the same in monthly rent.

The move reflects what local real estate brokers say is a growing trend they refer to as “flight to quality.” Businesses are choosing to move into higher quality spaces as rents for those spaces continue to drop – and concessions packages continue to be sweetened.

Jeff Borlaug, vice president and director of brokerage with NAI Norris, Beggs & Simpson, has seen the trend before. He said it tends to occur at the end of a rough economic stretch, when some sectors begin to recover.

“We see this happen in most real estate cycles,” he said. “We’re at the brief point right now where business has generally picked up and businesses are feeling a sense of urgency to take advantage of the bottom of the market. But real estate lags the economy, so landlords are still willing to make good deals.”

Average monthly rent for class-A space in the city’s Central Business District is currently $26.21 per square foot. If a business signed a lease six years ago at the peak of the market, it paid approximately $23 per square foot, plus a 3 percent annual increase, for class-A space. That firm would be paying $26.79 per square foot by the end of that lease. With a fair concession package, the business would be paying about the same, if not less, for a higher quality space.

Eric Haskins, vice president of Grubb & Ellis, said the businesses that are taking advantage tend to be locally owned and have matured during the recession. They aren’t necessarily booming, but they do realize they have weathered the economic storm. And these businesses want to lease a space that reflects the quality of their products and services, he said.

Haskins cited the Portland Dermatology Clinic as another example. He recently represented the property when the clinic signed a new lease at the MachineWorks Building, at 1414 N.W. Northrup St. With lower operating costs and several months of free rent, the company ended up paying less per month than at its former class-B space.

Image is a big reason why businesses move to higher quality spaces, but there are other reasons as well. Scott Andrews, president of properties with Melvin Mark Cos., said a better space comes with on-site parking, better security, more amenities and more efficient operations.

“Even if rent is a little higher in a class-A space, the net present value might be better because of lower operating costs and not having to provide additional security or parking reimbursement,” he said. “You have to take that all into account when signing a lease.”

Andrews said a reason this trend might be more apparent than in the past is because the highest quality class A spaces tend to be in the newer green buildings. Businesses want their offices to reflect their employees, and sustainability is a big part of the Portland culture, he said.

Andrews used the SAIF Corporation, an Oregon-based nonprofit workers’ compensation insurance company, as an example. SAIF moved to a class-A space last month at the Crown Plaza Building, at 1500 S.W. First St. The move has spurred an $800,000 energy efficiency retrofit the building owners completed recently.

“It was a high priority for them to get into a green space because that is what the employees wanted,” Andrews said. “The company was very impressed with our sustainability program, but also with the cost savings that came with more efficient operations.”

Currently, the vacancy rate for class-A office space in the CBD is 8 percent, compared to 10.8 percent for all office space in the CBD. Andrews said the trend will persist until the overall vacancy rate for the CBD reaches approximately 6 or 7 percent. Lease rates will go up and a flight to economics will take place, he said. The trend will be reversed and businesses will start downgrading to cheaper spaces.

Borlaug said that while there is definitely a trend, each lease is circumstantial and it really comes down to the value proposition of the space.

“Businesses are willing to pay more for their spaces if they are going to get better performance from the employees and the building,” Borlaug said.

The First & Main Building, for example, offers the newest and most premium space available. Simple logic might suggest that high vacancy rates in the market and high costs associated with moving into a new building would render the space unleasable. But the building is in the mix of existing class-A spaces because of the value proposition associated with occupying a new, efficient building, Borlaug said.

The trend is most noticeable in downtown office space, but it is emerging in other sectors as well.

Haskins said a Beaverton-based research, development and manufacturing firm, Biamp Professional Audio Systems, took advantage of this trend. The company moved from an old warehouse to a new flex space in Beaverton. With a package of concessions, Biamp is paying less on average per month than at its old location.

“The company needed a new space that reflected the quality of its products,” Haskins said. The two spaces differ like night and day, he said.

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As strides are made toward increasing energy efficiency in buildings, architects and contractors and developers are taking a closer look at buildings’ most unpredictable element: the tenant.

“Tenant engagement is the next big thing,” said SERA Architects’ Clark Brockman, who is working on planning for the Oregon Sustainability Center. “When you design a super-efficient building, sitting down with your tenants and getting them engaged is key.”

But the average tenant often isn’t overly concerned about things like plug loads and net-zero energy use, which is why some architects, engineers and even contractors are looking at new ways to reach out to tenants so that their buildings perform the way they were designed.

“I remember living in an apartment with free steam heat in college,” said Isaac Johnson, senior associate with Ankrom Moisan Associated Architects. “Rather than turning it down, we’d open the window. If you want an envelope to perform the way it was designed, tenant engagement becomes important.”

Johnson is the project manager for developer Ed McNamara‘s Pearl Family Housing project. With data on energy usage in constructed buildings sorely lacking, McNamara plans to install electrical dashboard meters on one floor of the development so tenants can see, in dollars as well as kilowatts, how much energy they consume daily. That data will be compared to energy usage on floors without dashboard meters.

“Getting controlled situations where you can isolate one variable is tough to do,” McNamara said. “The other thing that’s important with this data is to monitor it over time, to find out whether different things increase or decrease because (tenants) change their behaviors, or whether (the meters) become invisible after a certain amount of time.”

All of the Pearl Family Housing apartments are wired for the dashboard meters, so they could be installed on other floors later. Johnson said the idea of monitoring energy usage is fairly new. Because tenants generally pay their own electrical bills, there is little incentive for developers and building owners to spend $400 to $500 on each meter. But the data that McNamara is tracking could change that.

“If a developer can demonstrate from data that these measures will reduce renters’ electrical bills, you could advertise that,” Johnson said. “But at this point, metering is not purely a business decision. Ed is doing this because it’s an issue that’s important to him.”

McNamara performed a similar experiment with water metering at his Sitka affordable housing development.

Despite Portland’s leadership in sustainable design, Brockman said it’s difficult sometimes to get people excited about saving energy because it’s cheaper in the Pacific Northwest than other U.S. regions.

“It’s harder for us to show payback and get people amped up about energy use,” Brockman said. “I’m afraid that a $4 or $5 increase or decrease in day-by-day energy use won’t be enough incentive for some.”

Ben Walsh, president of Green One Construction Services is constructing an 18-unit subdivision in Washington County called Sage Green. The homes there are designed to produce more energy than they consume, through the use of roof-top solar arrays, efficient HVAC systems and a high-performing thermal envelope. Walsh doesn’t expect tenants to drastically change their lifestyles to make the units operate as designed, but he does plan to pay first-year energy bills of any buyer who produces more energy than they consume.

“I don’t have an appetite for a business model that relies on reeducation,” Walsh said. “If someone wants to take 75-minute showers and doesn’t mind paying for those, that’s their decision. But if they are interested to look at what mindful behaviors would relieve them of energy bills for the year, then I have at least one supporter of the model.”

But for the Oregon Sustainability Center, every tenant needs to support design goals for net-zero energy use. Brockman and other project partners have been working with tenants, such as the Oregon Environmental Council and Earth Advantage Institute, to determine what is to be expected of tenants to make the center operate as designed.

“We started with a survey and asked some loaded questions about how comfortable they would feel with expanded temperature ranges or janitorial work occurring during work hours,” Brockman said. “Initial reactions from them showed some trepidation, but we walked through each issue and by the time we were done, everyone was on board.”

Though details are still being worked out, leases at the Oregon Sustainability Center could include rules regarding temperature ranges and per-capita energy and water budgets for each tenant, Brockman said. A large reader board displaying the center’s energy stats in real time could potentially be installed on the outside of the building.

Walsh said that tenant agreements like the one being considered for the Oregon Sustainability Center could run into trouble, however.

“What if you have an employee with a vascular condition that needs a space heater to be comfortable in a mandated 68-degree office?” Walsh said. “That space heater would blow the contract. Here in Oregon, we already have a cultural foundation for many of these things, but I say we leave this behavioral stuff to psychologists and cultural anthropologists.”

Another issue, according to McNamara, is tenant turnover. The people living or working in a building may change day to day, and the owner is responsible for educating new tenants. If the owner were to sell the building to someone uninterested in energy consumption, the whole thing would collapse, McNamara said.

Until an energy-saving ethos becomes commonplace, craftsmanship in building design and construction remains the industry’s largest tool in meeting challenges like Portland’s Climate Action Plan.

“I try to build as efficiently as possible so tenants don’t have to be so involved to make it operate correctly,” McNamara said. “If the envelope is tight, people won’t be tempted to turn up the heat. But (tenant engagement) is a real puzzle and I’d love to hear more ideas about what I can do.”

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