Increased demand, low interest rates and renewed optimism look to be a winning combination in the local commercial real estate market this year, said John Brown, a broker with the Eugene firm of Evans, Elder and Brown.
"The outlook is quite good," he said. "Overall, I'm as optimistic as I've ever been."
He and broker Tim Campbell, of Campbell Commercial Real Estate in Eugene, said the recovery coming out of the Great Recession has been slow. But that's largely good, they said.
"It's a gradual improvement," Brown said. "It's not a mad rush, which is really good. In any major cyclical swing, it's fun to ride the wave going up, but coming down hurts.
"This one I think it's recovering the right way," he said. "People are much more cautious now, and they do much more due diligence. It sometimes makes the transaction more challenging, but at the end of the day you get more consumer confidence, you get more lender confidence, and you get a better product."
Campbell said the recovery has been very slow and modest, adding, "I think that's healthy. Everybody is cautious about it, but prudent, as well, and optimistic."
Demand for all types of property - office, retail, industrial - is picking up, Brown said.
"There's a shortage of inventory of good investment property to purchase, and that's a good sign because that means people respect that there's an upside," he said.
Prices already have hit rock-bottom and should start rising, Campbell predicted.
"I think you're going to see pricing go up across the board," he said. "We've seen it start happening in office, retail, even industrial. As demand gets bigger and product starts tightening up, you see it go up."
An interesting trend in this recovery, Campbell said, is that the sales and leasing activity is radiating from the city core out, instead of the other way around.
About 15 years ago, "when we were avoiding the downtown ... everything was happening outside and maybe trickling in (to the city core.)"
Today, with the redevelopment and new energy downtown, "everything people said they wanted (10 to 15 years ago) is starting to happen," Campbell said.
"If there's someone to 'blame,' I think it's the high-tech companies. They love being downtown; they love the culture of being downtown."
Brown said he also has noticed a different downtown since several buildings were renovated and new businesses began popping up.
"I got a reality dose looking at the demographic change downtown," he said. "I've lived here for 60 years, and you don't recognize anybody anymore, which is good. They're startup companies. They're young. They're innovative. They're kind of breathing fresh air into the community."
As firms have moved into the newly renovated space at Broadway Commerce Center and the Woolworth Building near Broadway and Willamette Street, they've left vacancies elsewhere downtown. But Brown said the older space will be repurposed, or demolished and redone.
"There's always a market for that space unless it's so challenged that the economics of renovating it doesn't make any sense at all," he said.
Campbell said he was surprised that the local office market didn't start to recover sooner.
"I thought it would be here last spring, but it's just now starting to pick up steam," he said. "Part of the reason is it's the first time in a long time we've had new product on line."
Another strength for the downtown is that it continues to be a center for local government, Campbell said.
"I think it was a huge plus with City Hall electing to stay downtown because that will be a huge nucleus of workers," he said.
Retailers continue to be interested in downtown and the University of Oregon campus area, Campbell said.
"Retailers are really circling the area right now wanting to be as close to the university as possible," he said. "In the past, it's been more of the chain-type food (outlets) that want to service the UO students. Now it's any and all retailers."
But the blockbuster retail news so far this year is Nordstrom Rack's plans to open at Oakway Center on Coburg Road this fall.
"The addition of Nordstrom Rack is huge to the area, and that will have a trickle-down effect of more nationals looking to come," Campbell said.
"That's a top-notch name in our community that typically doesn't go into our community, so it says Eugene has the buying power to shop there," he said. "It also adds a dimension to men's clothing we haven't had here since Steven J left."
Brown likens Nordstrom's arrival to Cabela's opening at Gateway Mall in Springfield in 2011.
"It's a huge draw," he said. "These guys don't make mistakes. When Cabela's and Nordstorm come in what does that tell you about our purchasing power? At Cabela ... it's all about a want, not a need. That's similar to Nordstrom. We need clothes, but it's more satisfying a want, and that signifies discretionary income."
Without sharing any details, Brown said, "we're not through seeing major development announced on Coburg Road. I think you're going to see more positive things."
Interest also is picking up in industrial properties throughout the Eugene-Springfield area and in some outlying areas, the brokers said.
Companies that needed more space and could afford to expand took advantage of the opportunities during the downturn, Campbell said. Others have held on, making do in cramped space, until the recovery seemed more certain.
"We saw this in the fourth quarter," Campbell said.
Brown said he sees promise in Coburg and Junction City, in addition to the industrial properties in Eugene and Springfield.
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|Title Annotation:||Business Focus; Commercial real estate's slow climb out of the recession continues as demand rises|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Mar 1, 2013|
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