As C&W tracks it, the Portland CBD, including Downtown Portland, close-in Northwest Portland and the Lloyd District in close-in Northeast Portland, contains 9.45 million sf of class A space, which means a little more than 1.19 million sf is currently available.
Thanks to this month's completion of 1201 Lloyd, a 222,500-sf mid-rise office project that has yet to sign its first tenant, the Lloyd District's overall class A vacancy rate is the highest in the CBD, jumping from 3.75% at the end of 2001 to 20.5% near the end of the first quarter of 2002, according to the report.
The lowest overall vacancy in the CBD is in the Downtown core, north of Market Street and south of Yamhill, where there resides 15 class A office buildings totaling just over 5 million sf. There, the overall class A vacancy rate is still in single digits at 9%. North of Yamhill and east of Broadway, where just over 1.8 million sf of space is located in four buildings, the overall class A vacancy rate is 16.8%.
C&W senior director Tom Usher tells GlobeSt.com that he sees vacancy holding flat for the time being. He also sees activity picking up as many brokers around town have been telling GlobeSt.com since late January. Usher says he's tracking just less than 1 million sf of active users in the marketplace.
Despite the amount of space on the market, Usher says major users will have few choices for contiguous spaces over 25,000 sf. Small users, on the other hand, have myriad options. Of the 1.14 million sf of class A space available in the CBD, the vast majority is single floor availabilities in 15 different buildings.
The only buildings with large contiguous availabilities include the AT&T Building, Unico/US Bancorp Tower, 1201 Lloyd and the yet-to-be-delivered 218,000-sf Brewery Block #2 which, like 1201 Lloyd, has yet to snag its first tenant. Large users said to be looking at options include the law firm Schwabe Williamson & Wyatt, which currently leases several floors in Pacwest Center; AT&T, which currently leases several floors in AT&T Center, and; Wilshire Financial Services, which owns its location at 1776 SW Madison Street but is reportedly looking to grow.
The rise in class A vacancy has pushed down asking rental rates. The class A direct weighted rental rate, which dipped 1.3% from year-end 2000 to $24.90 per sf per year at the end of 2001, dipped 0.4% in the first eight weeks of 2002 and now stands at $23.87, according to the C&W report. Net effective rents, not addressed in this report, are estimated to be about 10% to 15% below asking rents, as owners dole out concessions to keep existing tenants and lure what new ones can be found.
Backing that up is a recent lease signed by HDR Engineering. The national firm stayed within Equity Office Properties' local portfolio but relocated and expanded from Lincoln Square in the suburban Washington Square area to the heart of Downtown Portland. HDR signed a seven-year, $2.3-million lease for 15,996-sf 18th floor of Equity's 1001 Fifth Avenue, a 372,000-sf office tower recently renamed Congress Center. Local sources say the negotiated lease rate was around $21 per sf per year, down from an initial asking rate of about $25 per sf. In addition to the low rate and possibly other concessions, EOP is giving HDR a $20 per sf tenant improvement allowance to redesign and redecorate its new space.
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