EOP Prepares for Next Kruse Way Development

LAKE OSWEGO, OR-In need of some vacant space to offer new and expanding tenants in the Kruse Way submarket it dominates, Equity Office Properties has filed for building permits to develop Kruse Oaks II, a five-story 107,490-sf office building slated for 4.9 acres along Meadows Drive, which runs parallel to Kruse Way. The Chicago-based public company expects to break ground in June and deliver in the fall of 2006. The annualized asking rate for Kruse Oaks II is expected to be at least $30 per sf, full service, which is $0.50 beyond the asking price for its youngest existing Kruse Way product, Kruse Oaks V, completed in 2003, according to research by Grubb & Ellis. Kruse Oaks V is home to the only full-floor availability in EOP’s 18 building, 1.5 million-sf Kruse Way portfolio and is one of only two full-floor availabilities in the entire submarket.Kruse Way is located immediately east of Interstate 5 about eight miles south of Downtown Portland. The entire Kruse Way submarket totals about 2 million sf, which means EOP has a 70% market share. Vacancy in EOP’s portfolio and the submarket as a whole is about 8%. A submarket is said to be at equilibrium when availability is around 9%.EOP’s Portland area managing director Matt Cole tells GlobeSt.com that the project will be built on a speculative basis, which is to say it has no signed leases. As has been the case with other EOP development along Kruse Way, Cole says he expects demand to come from existing Kruse Way tenants–and those in neighboring submarkets such as Washington Square–that want to grow while remaining in the area. Other sources tell GlobeSt.com that, despite having no signed leases, EOP would not be moving forward unless it has a line on users for at least half of the building.The general contractor for the project is C. Schiewe & Assoc. of Portland. The architect is Group Mackenzie. EOP has two remaining development sites in the Kruse Way submarket. They are located immediately west of the Kruse Oaks II site and can hold similar size buildings.