commercial real estate

Restoring the Reputation of Downtown Portland

Wendell Cox — Wed, 21 May 2025 17:02:08 -0400

The Wall Street Journal reported on May 20 that “Big Pink,” the 42-story pink skyscraper in downtown Portland (photo below) had been offered for sale for a price 80% below what the present owners paid for the building ten years ago.

U.S. Bancorp Tower, a.k.a. "Big Pink" in Portland, Oregon. Source: Cacophony, via Wikimedia under CC 3.0 License.

The Journal repeated criticisms of downtown Portland in an article entitled “A Fire Sale of Portland’s Largest Office Tower Shows How Far the City Has Fallen,” with the following subtitle: “The once-premier building is now over half empty, reflecting how the Oregon city’s downtown is struggling with crime and other quality-of-life issues.”

The Journal reported that downtown Portland has the highest office vacancy rate of any of the nation’s 25 largest central business districts. Former tenant Digital Trends said that it left because the building was afflicted with “vagrants sleeping in hallways of vacant office floors” and that they were “starting fires in stairwells, smoking fentanyl and defecating in common areas” These allegations were contained in the Digital Trends lease termination lawsuit.

Digital Trends’ added that Big Pink became a “cesspool of criminal activity and vandalism.”

Big Pink had been built for US National Bank four decades ago. US National is in the process of leaving the building. The Journal article noted that a number of firms have moved out of Portland, which before the pandemic was considered to be among the most favored of cities among urban planners.

New Portland Mayor Keith Wilson is considered to be pro-business. Downtown newspaper, Willamette Week reported that the Mayor responded in an email to constituents: “I wish they’d covered our rapid improvements in public safety, new residents, business opportunities, regional destinations, and creatives,” Wilson wrote. “Instead, they focused on the upcoming sale of ‘Big Pink,’ an iconic part of the Portland skyline, and a business tenant who left over safety and livability concerns.”

The Mayor (who was not Mayor when the problems were the worst) is right to be concerned. Restoring a reputation for central city safety is difficult, as decades of less than desirable results have shown around the country. We wish him well.

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a Senior Fellow with Unleash Prosperity in Washington and the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985), which was a predecessor agency to the Los Angeles County Metropolitan Transportation Authority (Metro). Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Hudson’s Bay, Vancouver: Mostly Empty, with Elevator and Escalator Problems.

Wendell Cox — Fri, 03 May 2024 19:02:08 -0400

The Vancouver Sun reports that downtown Vancouver’s Hudson’s Bay Department Store, a unit in what has been one of Canada’s strongest national retailers is “mostly empty” and needs working elevators and escalators. But things may be worse in the US. Downtown department store closures have occurred in many US metropolitan areas, and especially on the West Coast. Seattle’s Bon Marche has now been closed two decades, Portland’s Meier and Frank, nearly a decade later and Macy’s Union Square in San Francisco is now slated for closing in increasingly desolate San Francisco.

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Largest San Francisco Shopping Center Sheds Value, Tenants

Wendell Cox — Mon, 15 Jan 2024 13:13:59 -0500

A San Francisco Chronicle article (“S.F.’s biggest mall lost nearly $1 billion in property value after retail exodus”) indicates that the San Francisco Centre, the city’s largest shopping center, has been appraised at a value of $290 million, down from $1.2 billion in 2016. The Centre now has a vacancy rate of about 50%, having seen recent store closings such as Nordstrom’s (a 35 year tenant).

Meta (Facebook) Leases All Office Space in Austin's Tallest

Wendell Cox — Wed, 12 Jan 2022 19:13:58 -0500

The Austin Business Journal reports that Meta (former Facebook) has leased all 33 office floors of the under construction Sixth and Guadeloupe Tower, which is due to open in 2023. The building will be Austin’s tallest building, at 66 floors and a height of 873 feet and is located downtown.

This will make the building the fifth tallest in Texas, behind the Houston’s JP Morgan Chase Tower (former Texas Commerce Bank), the Wells Fargo Plaza, and the Williams Tower, the tallest building in the United States outside a central business district (located in the Houston Galleria). One downtown Dallas building is also taller, the Bank of America Tower, which ranks third in the state, following Wells Fargo Plaza.

The building is mixed use and will have 349 residential units. It will be interesting to see how many Facebook employees will be able to afford living in the building, which would eliminate physical commuting almost as much as remote work.

Downtown Austin is developing rapidly and now is indicated by Cushman and Wakefield to have about 13 million square feet of office space (before Sixth and Guadeloupe), about equal to Cincinnati’s strong central business district. In this regard, Austin is following earlier models of dense downtown development in Calgary and Charlotte.

Downtown Austin is experiencing a building boom, which as of 2022 will have opened 15 buildings 400 feet high or more since 2010, when there were only four. In addition to the Sixth and Guadeloupe Tower, there are a number of new residential buildings planned for the Rainey Street District, adjacent on the east to downtown.

Austin was the fastest growing among the 56 major metropolitan areas (more than 1,000,000 population) in each of the last two decades. From 2010 to 2020, Austin added 567,000 residents, a 33% increase. Austin attracted 337,000 net domestic migrants between 2010 and 2020. This is more than all major metropolitan areas except for Dallas-Fort Worth, which is three times as large, and Phoenix, which is twice as large. Most of the new Austin residents settled in the suburban counties, which accounted for about two-thirds of the metropolitan area’s net domestic migration.

For decades, Austin has been playing a larger information technology role. Meta lease, and the new downtown “Google Tower” (Block 185) add significantly to this development.

Downtown Calgary: Not Overbuilt, But Under-Demolished?

Wendell Cox — Mon, 10 Jan 2022 20:02:24 -0500

North America’s largest post-World War II central business district has just received unwelcome news (Note). Writing in the Calgary Herald, columnist Chris Varcoe (“Staggering $17B drop in value of downtown towers fuels search for solutions”) reported that downtown property assessments were down C$1.1 billion in a single year. This is a continuation of a long term trend, in which values of 160 properties dropped by more than two-thirds since 2015. Calgary, headquarters to much of Alberta’s oil industry, has been hard hit by the decline in oil prices and provincial oil production. Over the past year, part of the decline seems likely to be related to lockdowns and the general movement of many people to exurbs and farther.

Varcoe reported the present vacancy rate to be 34%, with five buildings “completely empty.” Ominously, an industry professional said: “The problem is we’re not overbuilt; we are under-demolished.”

Read entire article here.

Note: With the decline of transit and increased auto use, emerging large metropolitan areas have generally not built dense central business districts similar to their World War II predecessors. There are two notable exceptions, Calgary and Charlotte. Cushman and Wakefield indicates that downtown Calgary has about 44 million square feet of office space. This is about twice that of the second largest post-WW2 CBD, in Charlotte. Downtown Calgary has slightly more office space than downtown Philadelphia, with a metropolitan population about four times that of Calgary.

Virtual Town Hall: The Future of Residential and Commercial Real Estate

Rhonda Howard — Thu, 04 Jun 2020 12:13:21 -0400

What is the future of real estate after Covid-19? If you were unable to join Richard Florida, Joel Kotkin, Marshall Toplansky and other leading experts to see where the real estate market is going, you can still listen to the discussion at the link below.

Topic: The Future of Residential and Commercial Real Estate
Date: Jun 2, 2020 10:00AM -12:00PM Pacific Time (US and Canada)

Meeting Recording: Chapman Virtual Town Hall

The Undead Suburban Office Market

Wendell Cox — Mon, 18 Nov 2013 15:04:46 -0500

The restoration of central city living and working environments has been one of the more important developments in the nation’s metropolitan areas over the past two decades. Regrettably, a good story has been exaggerated out of all proportion in the print, electronic and online media.

Exaggerating Core Population Increases: The rise of population in urban cores has been important, but it has too often been used to suggest the apparent, but fallacious opposite, suburban decline. In fact, the suburbs are hardly in decline, with 93.5 percent of major metropolitan area growth outside a 10 mile radius from city hall between the 2000 and 2010 censuses (See: Flocking Elsewhere: The Downtown Growth Story).

Exaggerating CBD Office Space Gains: Similar misinformation had been circulating about office space outside the nation’s CBDs (central business districts, or “downtowns”). Commercial real estate information company Costar’s Randyl Drummer recently described suburbia’s improving fortunes (See: Once Left for Dead, Suburban Office Making a Comeback).

“Some analysts wrote the obituary of the suburban office campus as downsizing companies shed millions of square feet, in many cases consolidating into buildings closer to public transit in urban centers.”

It’s just not happening, according to Costar research:

“Overall, the suburbs have garnered more than their usual share of leasing demand over the past two years, according to an analysis by CoStar real estate economists. Since the beginning of 2012, suburban markets have accounted for a whopping 87% of office demand -- which is 13% more than their 'fair share' based on the total market size compared with CBD office markets, according to data presented at CoStar’s recent third-quarter office review and forecast.”

Indeed, CBD leasing, at 13 percent of the total, is a full 50 percent below their current share of inventory (Figure 1). As of mid-2013, the suburbs accounted for nearly three quarters of the nation’s office inventory (Figure 2).

Costar cites strong suburban development in Raleigh’s Research Triangle, and further notes that:

A diverse set of markets that include Sacramento, San Jose, Austin, Kansas City and Charlotte have posted some of the strongest net office absorption among suburban markets.

This is despite the glowing publicity being given to core area development, especially in places like Charlotte and Austin.

The reality is that the monumental CBD towers dominating metropolitan skylines do not indicate downtown dominance. In fact, throughout the high income world, most metropolitan employment is outside CBDs. In the United States, typically 90 percent of employment is outside the CBDs. The suburban employment (outside the CBD) share is a bit smaller in Western Europe, Canada and Australia, but still averages approximately 80 percent or more.

The good news is that neither suburbia nor downtown is dead.

Commercial Real Estate Bust of 2010

Susanne Trimbath — Fri, 16 Oct 2009 16:41:30 -0400

Coming soon to a market near you: a bust in commercial real estate that will make the subprime mortgage crisis look like a picnic. The other shoe drops in 2010.

Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate committee on October 14 that commercial real estate loan losses between now and the end of 2010 pose the most significant risk to U.S. financial institutions. Although you can’t read it online, on October 7, 2009 Wall Street Journal reporters Lingling Wei and Maurice Tamman (Eastern edition, pg. C.1, Fed Frets About Commercial Real Estate) reported on a presentation prepared by an Atlanta Fed real-estate expert who is worried “about the banking industry's commercial real-estate exposure.”

Since July, the Federal Reserve has been pumping billions of dollars into commercial-mortgage-backed securities (CMBS, same things as the residential-MBS I’ve written about before in this space, only for shopping malls instead of houses). To accomplish this, the Fed uses the Term Asset-Backed Securities Loan Facility or TALF program. It is one of several alphabet-soup programs the Fed is using to pass a couple of trillion dollars to the stock market through private corporations (not just regulated banking institutions). For example, between March and July 2009, Harley-Davidson Inc. and other non-banks raised $65 billion in sales of bonds backed by everything from motorcycle loans to credit card debt. The Fed made $35 billion in TALF loans to investors buying those securities, which sparked a market rally. That market rally, however, is not in the commercial real estate market – it’s in the securities market. Since its inception, TALF has put between $2 billion and $11 billion per month into the securities market.

TALF lends money to anyone willing to buy CMBS (or student loans, car loans, etc.). The Fed reasons that, as long as banks can move loans off their books by repackaging and selling them as bonds, they will make more loans. So they justify giving money to non-banks to buy the bonds because the money will go to the banks. Get it?

Unfortunately, as vacancy rates rise, banks are increasingly reluctant to make new commercial real estate loans. This is obviously the case since Office of Thrift Supervision deputy director Timothy Ward told Congress this week that they will be issuing guidelines on doing loan workouts. A loan work out is what industry experts call “extend and pretend” – extend the terms and pretend like they are paying you. CRE loans, furthermore, are shorter in duration than home mortgages – typically 5 years instead of 30 years. That means a lot of loans will be coming due before the economy picks up enough to fill all those offices with rent-paying businesses. The value of commercial mortgages at least 60 days behind on payments jumped sevenfold in September – to $22.4 billion – or almost 4 percent of all commercial mortgages repackaged and sold as bonds. That’s about the same as the 90 day past-due rate seen for all residential mortgages (including those not sold off by the banks) in the first quarter of 2009.

As of October 14, 2009, the TALF balance is $43.2 billion and growing. From what we are hearing now, it may not be enough.