Demand is anticipated to be high among developers for the chance to build on the 14-acre U.S. Postal Service parcel in the Pearl District. (Sam Tenney/DJC)

With rents rising and vacancies remaining low in Portland, developers, architects and planners expect strong demand for the rare opportunity to build from a blank slate in the Pearl District.

If current trends persist, the 14-acre U.S. Postal Service property will open to developers amid a steadily growing economy and a shortage of urban office and residential units.

And unlike the South Waterfront, where one developer dominates the landscape, the Postal Service parcel presents new opportunities for a variety of firms.

Developers are enticed by the possibilities, although the Portland Development Commission won’t seriously entertain development proposals until 2018.

“I do think developers will be eager to get in there,” said Vanessa Sturgeon, president and chief executive of TMT Development. “They’ll end up partnering with institutional capital because of the size of the deal, and it will be several different developers and groups sharing the risk.”

Peter Grimm, a principal at Scott | Edwards Architecture, said developers he speaks with are seriously interested in the parcel.

“Economic cycles aside, you’re going to have tremendous demand to develop that property,” he said.

Grimm said the “rules of engagement,” including details such as bonus height, will influence demand. The PDC is also looking to include a significant chunk of affordable housing – perhaps 25 to 30 percent of residential units.

Housing expected to dominate development

The area’s impending opening to developers dovetails nicely with several economic trends, including a strong preference among millennials to work and live in central, urban locations; demand for creative office space; and the increasing attractiveness of Portland as a less-expensive investment alternative to Seattle and San Francisco.

The PDC anticipates 3.8 million square feet of development on the Postal Service property, along with streets and open space. A majority – nearly 2.1 million square feet – would be residential, as envisioned by the PDC’s Broadway Corridor Framework Plan released in October.

About 582,000 square feet would be office, and 194,079 square feet would be retail. The plan also calls for institutional, medical/research and parking uses.

The area should be redeveloped relatively quickly, Sturgeon said.

“It’s a big parcel, so I see a variety of different uses going in there,” she said. “I expect it to be more of a lifestyle play, faster developed” and built in consideration for its growth as a neighborhood.

The PDC has agreed to pay $88 million for the site and to help resettle the U.S. Postal Service in a new facility near Portland International Airport. The purchase agreement is not signed yet; both sides are negotiating over the details, said Patrick Quinton, executive director of the development agency.

Quinton said the PDC is open to a variety of proposals for the parcel.

“Different opportunities may present themselves,” he said. “It could be a single user that wants the site, or it could be job-specific, or it could be multiuse.”

The sprawling urban property is bordered by Northwest Broadway to the east and Ninth Avenue to the West, Hoyt Street to the south and Lovejoy Street to the north.

Connective neighborhood may stand on its own

Strong market fundamentals support development demand.

Portland had the nation’s fourth-lowest office vacancy rate in the nation during the fourth quarter of 2015. Only Salt Lake City, Nashville and San Francisco had a lower rate than Portland’s 8.9 percent, according to Jones Lang LaSalle.

Portland’s central city area is the most in demand, with a vacancy rate of 6.7 percent and average rent of $29.60 per square foot.

Residential rents have risen steeply as well. Portland had the nation’s biggest increase in rent for one-bedroom apartments from February to March – 14 percent to $1,303 – according to Abodo, an apartment-search firm.

The framework plan calls for a strong presence of residential units, including some rent-restricted affordable units. While the plan is flexible, and contemplates a variety of uses, housing is the city’s most pressing need, Quinton said.

“We’re a city that’s expecting a lot of growth,” he said. “We have a significant shortage of housing, and this is an area that can start off being dense from its inception.”

Planners also want to see the neighborhood pull together Old Town Chinatown and the Pearl District, and connect Union Station, the Park Blocks, the Willamette River and the Rose Quarter.

“Connectivity is a big part of what we’re trying to achieve here,” Quinton said. “We want people to view the site as part of the fabric of downtown on both sides of the river.”

There has been little discussion of creating an icon or signature attraction, leaving the property open to a variety of uses.

“The big bold idea didn’t really resurface in any of our discussions,” Quinton said.

The area also doesn’t have its own name. Most often, it’s referred to as the Post Office property, or for its proximity to Union Station.

Sturgeon said the area will reflect its neighborhood, but also develop its own identity.

“I see it playing off that Pearl District neighborhood, but the Post Office site is big enough that it will be a neighborhood unto itself, with its own characteristics,” she said. “You’re going to see a mix of different kinds of uses, different heights – the site’s just too big to be one of anything.”

Urban, vibrant area envisioned by PDC executive

From an urban design standpoint, the Park Blocks have long lacked a northern bookend, Grimm said. He would like to see an attractive civic plaza surrounded by retail and commercial uses.

“Some mid- to high-rise (building) consistent with our zoning envelope would be fantastic,” he said. “So you’re kind of creating a commercial office node there at the north end, and in the process you’re creating some really great civic space.”

Quinton also suggested that open space could be used to create a unique look in the area.

“A lot of cities now are emphasizing open space in ways to be distinctive,” he said. “It doesn’t have to look like the Park Blocks.”

Pedestrians should be able to walk seamlessly through the area, and the streetscape should be active, Quinton said. And the area should be attractive to people living and working in the neighborhood, he added.

“I would hope that it’s vibrant,” he said. “I would hope that it’s very urban. I hope that it feels connected to the train station area. This part of the city needs the most kind of reconnection to the city.”

The PDC is placing a massive bet that its purchase will pay off, especially in the face of media reports that the agency is set to pay an above-market premium for the Postal Service’s future home near the airport. Quinton defended the planned purchase of the Colwood property, saying few parcels fit the Postal Service’s stringent requirements.

“We really had to figure out a way to get the deal done within those constraints, and this became the most appropriate property to do that,” he said.

The Colwood property purchase will be included in the $88 million price tag for redevelopment, Quinton said.

“Ultimately, the investment we’re making, that’s the number we want to be judged by,” he said. “We’re confident we’ll be able to get that amount – if not more – out of the property during our ownership of it.”

Regardless of the deal’s fine print, industry professionals believe the Postal Service parcel provides an exceedingly rare chance to build something special.

“It’s a tremendous opportunity,” Grimm said.

 

Original Article

Title:  Eager to put a stamp on the pearl

Date: March 18, 2016

Author: Chuck Slothower

Publication: The Daily Journal of Commerce

Link: http://djcoregon.com/news/2016/03/18/eager-to-put-a-stamp-on-the-pearl/