0401_Creative_Office_01In 2006, the city of Portland created a new zoning category – industrial office use – for the area around Southeast Water Avenue in a bid to encourage transformations of sparsely used industrial spaces into creative offices.

A decade later, the area has blossomed into something like an urban planner’s dream. Creative companies such as Uncorked Studios, which works on systems for Google and other clients, mix easily with old-school industry companies like Empire Rubber & Supply, which sells belts and pulleys for industrial use.

The city is now preparing to build upon that success and broadly expand the zoning that made it possible. A proposal that’s part of the 2035 comprehensive plan update would add industrial office use as an allowable use across a broad swath of Southeast Portland.

That would likely spur accelerated redevelopment of industrial spaces into offices, with limited retail supporting the office workers, said planners and industry officials. Residential use would not be allowed under the zoning, to preserve the opportunity for an employment corridor.

“This ‘upzoning’ will allow that trend to continue and have this part of the central city continue to lead in job creation,” said Leonard Barrett, project manager with Beam Development, a local firm at work on several adaptive reuse projects.

City officials estimate that the zoning change would spur creation of 9,000 to 14,000 jobs in the next 20 years.

Currently, the industrial office use zoning is limited to the area from Southeast Water Avenue to Third Avenue, and from the Banfield exit to near the Hawthorne Bridge. The proposed changes would extend the zoning east to 12th Avenue, and south to Powell Boulevard.

City staffers plan to present the changes to the Planning Commission this summer, and then the City Council in early fall.

“There’s a lot of support for it, and we’re hoping to get those zoning changes done this year,” said Troy Doss, senior planner for the city of Portland.

The proposed zoning rules would replace the existing limit of 60,000 square feet of office use per building with a floor-to-area ratio of three-to-one. That would expand available space for adaptive reuse and provide more flexibility, Doss said.

Retail space would be limited to 5,000 square feet per building as part of an effort to accommodate the area’s longtime industrial companies.

Demand driving development

The proposed zoning change reflects abundant demand for creative office space. Killian Pacific’s Clay Creative is nearly fully leased, although the building will not be finished until May. The new construction project includes many of the hallmarks of creative office space: high ceilings, abundant natural light, roll-up garage doors, exposed timber and amenities such as in-floor heating and cooling vents controllable at individual desks.

Simple, a Portland online banking startup, will be a major tenant at Clay Creative. Today’s employers are looking at their workplaces as a key part of their identity, driving demand for adaptive reuse and creative new construction.

“They’re looking for a space that is not the same old, same old,” Killian Pacific Vice President Noel Johnson said. “That’s a pretty broad definition, but it’s actually hard to find.

“Tech firms and creative firms, they’re trying to attract and retain talent.”

Developers are responding by offering differentiated offices in both new construction and adaptive reuse.

“The adaptive reuse buildings, people love because they’ve got some character to it,” Johnson said. “They’ve got some really unique reason to be in that building.”

Doss said small tech and creative companies are clamoring for interesting office space in Portland, which is growing costlier but remains more affordable than other West Coast cities.

“We’re seeing a ton of startups – people who have left companies in Seattle and San Francisco,” he said. “What we’re hearing is a lot of these people are finding it more affordable both to lease space and buy space, and to live.”

A warehouse transformed

When Vibrant Table Group, a catering and event management company, was looking for a space, the owners settled on a 16,690-square-foot warehouse built in 1965 at Southeast Eighth Avenue and Harrison Street.

For more than three decades, the building housed Fashion Tech, a manufacturer of window shades and blinds. Then the business closed in 2012. The building has since been something of an artists’ colony, hosting photographers, art shows and others.

The Vibrant Table Group partners purchased the property for $2.5 million in April 2015, according to Multnomah County records. The new owners transformed the building into a catering and event space with tasting rooms and a large commercial kitchen. The partners, Art Fortuna and Kurt Beadell, are planning a second phase to add more event space.

The renovation even encouraged a neighbor, boutique wooden bicycle manufacturer Renovo, to spruce up its building with fresh paint.

Peter Grimm, a principal with Scott | Edwards Architecture, designed Vibrant Table Group’s redevelopment. Grimm is busy with a spate of similar projects in historic Eastside buildings.

“We’re talking to some creative agencies that are going to want to lease up these amazing buildings,” he said.

Dramatic renovations of historic buildings for creative office use are happening all over Portland, but particularly in the Central Eastside and Old Town Chinatown. Relatively affordable property, rising rents and fast absorption are driving the market.

Such redevelopments don’t come cheap.

“It takes a lot of resources to convert those,” Grimm said.

Creative office space played a role in a San Francisco firm’s recent purchase of three historic buildings in Old Town Chinatown for $10.9 million. The buildings’ tenants include professional service, art and fashion companies, according to CBRE, which secured financing for the deal.

Also in Old Town Chinatown, at 222 N.W. Fifth Ave., Beam Development has secured a permit to renovate three floors of the Mason-Ehrman Building annex, above the Portland Development Commission’s offices.

Next door, at 208 N.W. Fifth Ave., Beam is converting 30,000 square feet of a warehouse, built in 1928, into creative office space. Both projects involve seismic retrofits.

“We’re generally seeing a lot of demand,” Barrett said. “I think you’re seeing it all over the city, for open floor plans with a few offices (and) smaller, break-out spaces, lounge spaces, well-appointed kitchenettes, bike parking, showers.”

Rents are rising, supporting the development trend. Barrett said rents have risen 20 to 25 percent in the past three to four years.

“A lot of that’s just a function of the broader Portland market and the companies expanding within the market, but there are a lot of companies moving in from outside the market,” he said.

Preserving an industrial/creative mix

The zoning change to encourage industrial office use came as part of a gradual realization that empty or underutilized Central Eastside warehouses offered strong redevelopment potential.

“The case that was being made was there was a lot of multistory development that was basically not being utilized, or being inefficiently utilized as storage,” Doss said.

Portland is facing growing demand for office space as the population booms from in-migration. Larger demographic trends are driving young, creative workers to Portland as they continue to move from rural areas to cities, and find themselves priced out of Seattle and San Francisco.

“We have to increase our job densities in the city, because we don’t have any land to grow on,” Doss said.

Many longtime industrial businesses in the Central Eastside own the buildings they inhabit, insulating them somewhat from growth around them, Doss said.

Industrial businesses are keen to avoid a repeat of the Pearl District, where some manufacturers found themselves priced out in favor of high-end residential units.

Gentrification is happening rapidly in the Central Eastside, with craft breweries, third-wave coffee roasters and trend-setting restaurants planting their flags in the industrial neighborhood.

The zoning rules aim to maintain that balance.

“It’s going to stay a real mix of uses,” Grimm said. “There’s going to be forklifts driving down the street, and you’ll have to watch the hell out.”

 

Original Article

Title:  Eastside transformation extended

Date: April 1st, 2016

Author: Chuck Slothower

Publication: The Daily Journal of Commerce

Link: http://djcoregon.com/news/2016/04/01/spark-of-creativity-igniting-change/