Portland Multifamily Still Has Room to Run

BEAVERTON, OR—Portland’s regional economy has been outperforming nearly all other large metros across the country, causing a net migration into the area and resulting in high demand for housing units of all types. Just as Portland’s economy still has room to run, so does its multifamily market.

Indeed, the Portland multifamily market continued its exceptional run during the third quarter, according to a report by Kidder Mathews. Although permit activity slowed since inclusionary zoning regulations commenced last year, the metro continues to experience one of the strongest building cycles in its history.

As a result, this robust activity translated into another multifamily purchase. This time around, Security Properties purchased Arbor Creek, a 440-unit class-B garden-style community, for $84.3 million. This is Security Properties’ ninth asset in the Portland MSA.

“The basis is excellent at only $191,000 per unit for well-located product in Beaverton,” Davis Vaughn, senior director of investments at Security Properties, tells GlobeSt.com.

The units at Arbor Creek offer a mix of 1×1 and 2×2 floorplans. Previous ownership renovated approximately 80% of the units with upgraded cabinets, resurfaced counters, new appliances and upgraded light fixtures.

The property will be managed by Security Properties-affiliate Security Properties Residential. Security Properties will be improving the units by installing vinyl planks throughout in addition to upgrading the countertops. Security Properties will also be updating the clubhouse, revamping the pool deck and improving the outdoor common spaces.

“Arbor Creek was a target for our portfolio because of the clear value-add opportunity,” says Vaughn. “Additionally, with a significant supply-demand imbalance due to the suburban Portland job creation, Arbor Creek is well-positioned for future growth. We look forward to implementing our business plan and creating value for our investors.”

Sitting 25 minutes west of downtown Portland, the area is best characterized by its suburban neighborhood feel and access to the largest employers in the Portland MSA. Arbor Creek benefits from its accessibility off of SW Tualatin Valley Highway, the primary thoroughfare connecting Hillsboro and Beaverton. Within a 10-minute drive, residents have access to an array of grocers, Regal Cinemas, a MAX line and the Tualatin Hills Nature Park. The park, sitting directly adjacent to the property, offers 5 miles of scenic wetland walking trails spread over 222 acres.

Beaverton is globally renowned for being the home of Nike, with its world headquarters located less than 10 minutes from the property. Nike has been drastically expanding its campus and its employment in Oregon has increased by almost 60% since 2007, bringing total employment in Beaverton to 8,500 and 56,500 worldwide. To accommodate the increased headcount, construction began on a $380 million 3.2 million-square-foot expansion in January 2015, and the project’s anticipated completion is slated for the end of 2018.

Additionally, the largest employer in Oregon, Intel, has four campuses within 15 minutes of the property. Ronler Acres, its most highly regarded campus, serves as its largest concentration of facilities and talent in the world.

As a result of the strong housing demand, rental rates and sale prices continued on an upward trajectory. With cap rates remaining steady at 5.3%, the median price per square foot was $189 and the median price per unit was $169,500 in third quarter, according to Kidder Mathews. Overall vacancies decreased 45 basis points through the year to 4.4% and rental rates rose to a market-wide average of $1.62 per square foot.