Portland Industrial Vacancy Rises in Second Quarter, NAI NBS Report Shows

Overview

Industrial vacancy increased nearly a percentage point during Second Quarter to 13.87%, with 515,518 sf coming back on the market. Vacancy in North/Northeast increased substantially to 17.51%. Although there was one major lease, Ernest Packaging took 62,150 sf at PDX Corporate Center South. Vacancy in Vancouver also increased substantially, to 12.30%. Several tenants left Columbia Business Center. Vacancy in Southeast decreased by a percentage point to 10.17%, largely due to Leverage 2 Productions leasing 62,765 sf in two buildings at Clackamas Commons Phase II.

Flex vacancy rose to 15.11%, with a loss of 159,633 sf, and much of the movement in small spaces. The Southwest 217 submarket saw vacancy increase nearly three percentage points to 17.49%, with more than 20,000 sf becoming available at both Creekside Corporate Park and Nimbus Corporate Center. However, Kleinfelder West leased 13,319 sf at Nimbus Oaks – Building C.

Market Trends

Metro, the area’s regional government, released a preliminary urban growth report this quarter suggesting that the Portland Metropolitan Area will require up to 82 million sf of industrial space by 2030, though it also expects manufacturing jobs to continue to decline.

Industrial projects under construction have decreased significantly in recent months, but work continues on one long-awaited project: the FedEx Ground facility in Troutdale. The three building, 415,000 sf facility is expected to be finished in July 2010 and should create 650 new jobs.

Jobs are also being created by adding lanes on nearby South Frontage Road and some additional road projects to prepare for the increase in truck traffic in that area. Transaction volume has slowed considerably, and many industrial sales today are in the $1 million to $5 million range. But Second Quarter had one large, standout transaction: SEH purchased the Vancouver Hewlett-Packard campus for $55 million. SEH, which makes silicon wafers, employs more than 800 people in Vancouver and will use the 4-building, 694,000 sf campus to expand. HP will lease back part of the complex for at least three years. In the works since late 2008, and area leaders hope the sale/expansion will create local jobs.

The full report is available on our Web site.