EOP Starts on Kruse Oaks II

LAKE OSWEGO, OR-Equity Office Properties Trust of Chicago has broken ground for Kruse Oaks II, its first new development on Kruse Way since 2003. The five-story 107,490-sf Class A office building will rise on a 4.89-acre site in the Kruse Woods Corporate Park. Kruse Oaks II is being constructed with a steel frame structure, steel and concrete decks, and will be clad in brick and a combination of strip and reflective curtain wall glazing. The lobby will feature classic stone, floor-to-ceiling glass entries, an atrium, hardwood paneling and a central staircase. EOP expects to deliver the building in the fall of 2006. Kruse Way is located immediately east of Interstate 5 about eight miles south of Downtown Portland. When Kruse Oaks II is complete, EOP will own and manage 1.6 million sf in 18 buildings in the Kruse Way submarket, giving it a 70% market share. Vacancy in EOP’s Kruse Way portfolio is about 6%, and the submarket as a whole is about 8%. The annualized asking rate for Kruse Oaks II is around $30 per sf, full service, which is $0.50 beyond the asking price for Kruse Oaks V, according to research by Grubb & Ellis. EOP’s Portland area managing director Matt Cole told GlobeSt.com earlier this year that the project is being built on a speculative basis, which is to say there are as yet no signed leases for the building. Of course, EOP has an idea about who is likely to fill the space. 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. A source associated with EOP tells GlobeSt.com the decision to move forward with Kruse Oaks II at this particular time is pent up expansion demand based on EOP’s internal surveying of current tenants.The general contractor for Kruse Oaks II 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.Kruse Oaks II is the first building to be built along Kruse Way since 2003, when Equity Office completed the construction of Kruse Woods V, a 184,000-sf office building. The building’s occupancy rise to 100 last month when the national nonprofit Northwest Evaluation Association, already a 92,000-sf tenant in the building, soaked up an additional 15,729 sf.