Portland’s low retail development profile, an effect in large measure of Oregon’s strict Urban Growth Boundary (UGB) land use policies, has posed challenges over time to both retailers and developers. The exception is Clark County, WA, where the UGB laws do not apply and where 61.1% of all currently planned-proposed metro area retail space is located. In any case, however, the totals are not high. Reis’ September report on individual construction projects reports the total of planned and proposed retail development at 1.3 million square feet in only 11 projects, six of which are found in Clark County.
In the community-neighborhood shopping center category, the completion of 705,400 square feet all told in 2011 will be followed by only 200,000 in 2012, all in the Fred Meyer-anchored Old Town Square neighborhood center from Gramor Development, which delivered in south suburban Wilsonville (Clackamas County, OR) in March. Gramor also is at work on the New Seasons Market-anchored Progress Ridge in Beaverton, the Portland Business Journal reported in July. Other projects underway as reported by this source include developer EDENS’s rebuilding of the Jantzen Beach Super Center along I-5 in Portland (on Hayden Island in the Columbia River) “in favor of more large-format retailers, new visitor amenities and approximately 50,000 square feet of retail space housing up to 25 new retailers.”
The shortage of recent construction allowed the community-neighborhood shopping center market to enter the recession period with low vacancy in hand. Subsequent positive absorption accompanied by prudent additions of new supply have allowed vacancy to stabilize and descend. Thus the delivery of 200,000 square feet year-to-date (all in a single project during the first quarter, as noted) was accompanied by 262,000 square feet of positive net absorption (the second quarter total was negative 1,000 square feet). Thus Reis put second quarter vacancy in this sector at 8.7%, same as the quarter before, down 80 basis points year-over-year. Rents are showing recent, if small, signs of life. At $20.17 psf and $17.45 psf, asking and effective averages for the second quarter were up 0.3% each for the period and were up 0.1% and 0.2% year-to-date—following gains of 0.5% for each rate in 2011. The 7,000 square feet of positive net absorption in July left the vacancy rate down 10 basis points as the average asking rent edged down by a penny.
Among planned projects is found only one power center—the $80 million, 439,000-square-foot Walmart-anchored Eastgate Plaza in Vancouver, WA. The project is part of the 250-acre Birtcher Business Center. The local power center market, meanwhile, also out-performs the nation. At 4.0%, the Portland area rate power center vacancy rate was up 60 basis points for the quarter but was unchanged year-over-year—and stood 230 basis points below the second quarter national power center rate. At $25.83 psf, the local average asking price for non-anchor power center space was up 0.4% for the quarter and was up 0.6% year-over-year.
Reis expects modest positive net absorption in the community-neighborhood shopping center market over the remainder of the year. Vacancy should shed 10 basis points by year-end. Gains of 0.4% are projected for both mean rents for the year all told.