Portland Area Moves Up in National Retail Index

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PORTLAND-The Portland area moved up five spots to 25th in this year’s National Retail Index, a report by Marcus & Millichap Real Estate Investment Brokerage Company that ranks 41 retail markets based on a series of 12-month forward-looking supply and demand indicators. San Diego topped the 2005 index, rising two places to overcome last year’s top dog, Orange County, CA, which came in at No. 2. Seattle came in at No. 15.Along with the index comes M&M’s National Retail Report, which forecasts high retail sales per capita and limited new construction for the Portland market this year. “Throughout the well-documented economic struggles of the past several years, the Portland metro area retail market has remained vibrant,” says M&M’s Portland-area regional manager Gary Lucas in a prepared statement. “National retailers continue to show interest in the Portland market.”The report indicates the following for the Portland retail market in 2005:–Portland’s construction levels will decrease slightly in 2005, to 1 million sf. Kohl’s department store chain has identified three locations in the metro area to develop its first stores in Oregon, and a mix of big-box retailers and multi-tenant properties are scheduled to come online this year in the region. The 465,000-sf Bridgeport Village open-air center in Tigard, recently acquired by CalSTRS for $170 million, will open in May. As well, activity is picking up at Cascade Station, a 120-acre commercial area near Portland International Airport that is now seeking destination big-box retail anchors like Ikea.–The retail vacancy rate in the metro area will decline by 30 basis points in 2005, to 6.2%. New centers will open nearly fully leased, according to the report, while existing centers will find it challenging to attract strong local and regional tenants.–The average asking rent rise 2% in 2005, to $19.39 per sf. New development in The Pearl District will allow the Northwest/Downtown submarket to continue to land lease rates approximately 11% higher than the average, at $21.50 per sf, while outer Southeast/Gresham submarket will have the lowest lease rates, averaging about $13.75 per sf. –Diminishing land reserves, national retailers’ desire to enter the market and a lack of quality retail space will all put upward pressure on Portland retail property prices in 2005. Single-tenant net-leased properties, grocery-anchored centers and strip retail with a strong tenant mix will remain the investments of choice in 2005, according to the report.