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Industrial Market Enjoys Exceptional Year, With High-Tech in the Driver's Seat

PORTLAND-Oregon's traditional industries--timber, wood products and agriculture--have taken a back seat, as high-tech zooms to the forefront. Tech companies predict robust growth in the coming years, if the economy holds.

By Patricia L. Kirk | Updated on February 15, 2001

PORTLAND-Driven by expansion of high-tech manufacturing industries, the year 2000 marked a dramatic shift for the region’s industrial real estate market, which saw the vacancy rate drop to 7%–its lowest in five years, according to a new year-end 2000 report from Grubb & Ellis. A record five million sf of industrial space was absorbed last year, and rents rose for both standard industrial, to 35 cents per sf, and for R&D/flex space from $1.10 per sf to $1.15 per sf.

Fast becoming the hottest product type, class A flex, or high-tech space, gave the office market “a run for it’s money last year,” says report author Patricia Raicht, client services manager for Grubb & Ellis, attracting both high-end industrial users, who desire “glass and grass,” and office tenants seeking relief from high rents. With nowhere to build, infill gained popularity among developers, who increasingly are looking to the city’s core for underutilized buildings and warehouses to convert to new uses. Rising land prices and the location of obsolete buildings near or on fiber-optics lines are fueling this transformation of the city’s industrial ugly ducklings.

New construction starts also rose, the majority of it in owner-occupied and pre-committed build-to-suits. Meanwhile, spec building screeched to a halt, as land became scarce and prices soared as high as $7 per sf. Raicht says this shouldn’t change unless rental rates for shell spaces rise to 37 to 40 cents per sf.

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