The Pandemic Boosts Portland Office Space

Businesses turn their interests into suburban markets for more space and to be closer to their employees.

In the third quarter of 2020, the amount of office space in Portland has increased compared with the previous quarter as a result of the pandemic, causing companies to reevaluate the location and space they need for their employees. In the second quarter, total office space has increased from 15.5 percent to 17 percent; The commercial real estate firm says that although this dip is abnormal, it has grown due to more companies subleasing their office space or not renewing leases. 

The nature of office work has been influenced completely by the COVID-19 pandemic, with many employees working from home and fewer workers going into the office due to social-distancing requirements. Some businesses have chosen to get rid of the office altogether, resulting in all employees working from home. 

“The trend has profound implications for Portland downtown businesses that rely on foot traffic from office workers, such as restaurants and retailers, and hotels that rely on business travelers” (Moore, 4).

The pandemic draws more attention to the suburban market for offices, leading to a renaissance of suburban-office markets. The vacancy rate for office space in the suburbs was 10.7% in the third quarter, virtually unchanged from the previous quarter – this includes Beaverton, Hillsboro, Clackamas, and Tualatin.

The trending increased interest in the suburban market has stood out for tenants interested in more space and being closer to their employees. 

Although downtown had the largest increase in vacancy rates, the three biggest deals of the third quarter were located in the downtown area. 

Tenants have leaned towards flexible or short-term leases due to the uncertainty that comes with the coronavirus and how the office market will adapt.

 

Agent Website Photos-KristaThis blog post was written by Krista Pham, our intern.

The article that inspired this piece can be found, here.

Oregon Announces Two-Week ‘Pause’ on Social Gatherings in 5 Counties

This past Friday, Governor Kate Brown and the Oregon Health Authority (OHA) announced new COVID-19 restrictions on five counties: Umatilla, Malheur, Marion, Jackson, and Multnomah. After several weeks of unprecedented spread, stricter measures have been placed since the initial “stay home, stay safe” measures were implemented in March. Though Oregon has been doing better limiting the spread, Brown says we need to go back to our offensive strategies against the virus. The biggest challenge is the increasing outbreak is not due to school or workplace gatherings, but small social gatherings and one-on-one meetings.

Due to the increasing COVID-19 rates, counties with exceptionally high cases will be put on a two-week pause for social gatherings, starting November 11th to November 25th. “Businesses in those counties are encouraged to have employees work from home when possible, restaurants and bars are asked to limit dining to outdoor seating or take-out whenever possible, and businesses are asked to cap their total capacity at 50” (Ross, 3). In addition, visits to long-term care facilities will also be paused and private social gatherings are asked to be limited. 

Governor Brown is frustrated at the number of Oregonians not taking restrictions seriously. Looking at the data, it is clear that not everyone is listening to the suggested guidelines. “Let me be very clear: For this two-week pause, please, please, please limit your social interactions to your own household,” Gov. Kate Brown expresses. If cases continue to rise, Brown will increase restrictions. 

The two-week pause is intended to be either a wake-up call or call to action, for those who aren’t taking COVID-19 seriously. If people do not change their behavior, COVID-19 will grow out of control.

Once a county has a rate of 200 infections per 100,000 residents, new restrictions will come into effect for two weeks or more. “There are separate metrics for smaller, rural counties. Currently, five counties — Umatilla, Malheur, Marion, Jackson, and Multnomah — have crossed the 200-case threshold and will be put under the increased restrictions” (Ross, 7). Washington, Baker, Clackamas, Union, and Linn counties are also seeing cases rise at a rapid rate and are on the border of being added to the pause list; OHA plans to reevaluate its numbers today.

It is important to remember that just because a county is not currently on the pause list, does not mean people should continue their lives as normal. 

These policy changes are also hoped to be reflected in social gatherings as well for all Oregonians. Previously, officials have raised concerns that looser COVID-19 restrictions in public could potentially result in people taking fewer precautions in their private/social lives. These new public restrictions are hoped to convince people to take more daily precautions.

“The new call for action comes as cases climb across Oregon, with a record of 805 new cases reported Thursday. On Friday, 770 new cases were reported” (Ross, 14). Oregon reported 3,542 new COVID-19 cases from the week of October 26th-November 4th; The highest number yet, 34% higher than the previous week. 

In terms of exponential growth, the rate is incredibly concerning. The numbers Oregon is seeing are far beyond what OHA expected, even in the worst-case scenario projected. The worst-case scenario presented in the new model assumed that transmission would rise by 5%, and Oregon would be seeing 520 newly diagnosed cases each day by November 19th. Increased numbers were expected in the past, but not this high. 

Oregon’s epidemiological models, predicting the increase of rates, also serve to predict hospital capacity needs; But with cases rising exponentially, models can be outdated by the time they’re published, posing additional challenges for public health officials who want to increase needed restrictions before hospitals are full, which may be inevitable.

Oregon officials think there may still be time to slow the progression of the pandemic, but with little ICU capacity left, results need to be seen fast. 

 

Agent Website Photos-KristaThis blog post was written by Krista Pham, our intern.

The article that inspired this piece can be found, here.

Office Real Estate Market Predicted to Return to Pre-COVID Level in 2025

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Vacancies caused by Covid-19 will result in over 200 million of net negative square footage in the office real estate market, but the growth of professional services sector jobs will help lead to a recovery over five years, says Cushman & Wakefield. Thomas Barwick | Getty Images

For the past six months, working from home has become a permanent trend during this pandemic. Ultimately, we will all return to our workspaces and the number of people will match up to what we had pre-COVID. The question remains as to when things will finally return to normal. According to a news forecast from Cushman & Wakefield, it could take five years.

Global office vacancies aren’t projected to return to their pre-Covid peak level until 2025, resulting in the loss of 215 million square feet of office vacancy due to the pandemic. Between the start of COVID-19 in the United States and 2021, the net-negative office square feet damage will reach approximately 95 million square feet, topping the financial crisis trough by 10 million square feet.

During the financial crisis, Canada, Europe, and the U.S. reported a combined decline of 120.5 million square feet occupancy from peak-to-trough. This evidence proves that the situation will most likely be worse in the west.

The work from home trend is present in most companies operating through the pandemic. Cushman & Wakefield studied some of the most extensive companies around the world about the future of the office and ventured to weigh both the cyclical results of the Covid recession and structural impacts regarding a tremendous increase in work from home. Two key verdicts arose from this study; Office leasings fundamentals will be significantly impacted, and vacancies will increase to an all-time high. Secondly, the office real estate market will fully recover immensely due to employment growth and the continuous shift in the U.S. economy’s concentration in certain types of professional jobs.

An estimated 82% of the damage in real estate firms will be related to cyclical factors such as permanent job losses and the growth of coworking. The other 18% is due to structural factors like assumptions about permanent remote workers and hybrid workers. Work from home will double, and those who are working both from home and at the office (hybrid) will increase. “The study estimates that the share of people working permanently from home in the U.S. and Europe will increase from roughly 5-6% pre-Covid-19 to between 10% and 11% post-Covid, while the share of hybrid — also referred to as agile workers — will increase from between 32% to 36% to just under half of all workers (Para 8).

Levi Strauss & Co recently shut down any new commercial real estate during the crisis. The CFO states, “The myth that work from home is not productive has been busted.”  The CFO believes that society will eventually settle into a culture where working from anywhere will be the new norm. As for Google, they will be trying out a hybrid plan of work since most employees don’t want to be in the office every day. Young workers are taking advantage of the remote working shift to travel, embracing a new lifestyle full of voyage and technology. This is a transformation that could become permanent for a new generation of workers.

Many workers still do not feel comfortable returning to their offices. After one study, only 14% of workers claimed they felt trusting enough of their CEOs and managers to safely lead them back to work. As for now, working from home is the new norm for our society.

Agent Website Photos-KristaThis blog post was written by Krista Pham, our intern.

The article that inspired this piece can be found, here.

Homes in Rural Oregon are Selling During the Coronavirus to Buyers with Cabin Fever

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Rural Oregon estates find buyers wanting to escape the big city.

“Stay-at-home orders to reduce the spread of the coronavirus made this clear: Few people want to experience being locked in for months in a small space.

Since March, home shoppers have been targeting properties in Oregon with acreage, a work-efficient Zoom room for private teleconferencing, extra living quarters for family members and a large, relaxing backyard to replace weekend getaways.

City dwellers who can’t see a future in which they will start going to indoor entertainment venues again question the value of an urban lifestyle.

Also driving up desire for suburbs and rural communities are the realities that kids are attending web academies instead of neighborhood schools and parents are authorized to work at home.

 “Home shoppers are asking, ‘How can I live while lessening my contact with other people?’” says Israel Hill, the office leader of John L. Scott Real Estate’s Portland Northeast office.

Since April, we’ve been profiling new homeowners who escaped dense cities to live more remotely. Many want a vegetable garden and other ways to ensure self sufficiency.

Despite stay-at-home orders, the coronavirus pandemic, high unemployment and an unsure global economy, people are buying homes in Oregon. The motivating factors: Historically low mortgage interest rates and the realization that shuttered offices and schools require more living space.

After adjusting to restaurants closing, people are cooking more at home, making the already important “gourmet” kitchen even more of a priority.

The right house on the market is selling fast and sometimes a bidding war breaks out, due to low inventory and pent-up demand.

“People are willing to overpay for what they want because of lending rates,” says Hill.

He estimates $10,000 added to the cost of a house breaks down to $50 more a month with a 30-year fixed mortgage. “If I’m saving $300 to $400 a month not eating out, I can buy a lot bigger house with a nice kitchen,” he says.

Oregon has small rural towns most people have never heard of but these are new addresses to a growing number of homebuyers who want acreage, self-sufficiency and a place to live with extended family members. The desire to be outside the city was heightened by stay-at-home orders to curtail the coronavirus.

Josh Lydon, who is selling his 66.68-acre property at 167 Waterfall Lane in Glide outside of Roseburg, says a place in the country is a “blank canvas” in which to create the life you want. You can have a garden and horses, and raise livestock and chickens, without butting up against city ordinances or homeowners association rules.

Instead of traveling through traffic to reach a scenic spot, just step outside, he says.

“You can also sit back on your porch and observe what nature creates,” says Lydon, who accepted an offer on his property after 12 days on the market. He listed it for $790,000 without a real estate agent.

“Rural living abundantly gives moments of peace and a freedom to simply be,” he adds.

The property has marketable timber and views of rolling hills. “Own your own park-like setting filled with wildlife (elk, deer, turkeys, owls, hawks and bald eagles) and a little river frontage as far as the eye can see,” states the listing.

The coronavirus pandemic instantly shifted many homebuyers’ desires. Suddenly, there’s less interest in walking to downtown eateries and more willingness to live remotely and with extended family.

Brokers Chris Martin and Wes Walton of Land and Wildlife, a partner of LandLeader, specialize in high-end houses on vast acreage that offer “self-sufficiency and a lifestyle that rejuvenates,” says Martin.

His clients are “discerning buyers” who want luxurious rural living where they can grow fresh food and “take a break from the fast-paced world.”

“I can tell you that it’s a 100 percent lifestyle decision to get out of a bigger city and onto a piece of property, with freedom, gardens and animals,” says Martin.

He says buyers at the top of the market are also looking for riverfront land.

The desire for an in-law flat to house more relatives was made clear during the coronavirus pandemic. Many young adults who lost their jobs when businesses were shut down and college students sent away when campuses closed returned to their family home.

During the health and economic crisis, some people preferred to have elderly parents live with them rather than in assisted living facilities that were in lock down.

These realities prompted more homeowners to get serious about wanting a self-contained, accessory dwelling unit (ADU), sharing a lot with an existing house on their property.

Advocates and real estate agents say a compact second home can add to the property’s resale value and pay for itself over time, by consolidating family finances or generating rental income.

An in-law suite could allow an aging parent to be close to family rather than spending what could be $72,000 a year for assisted living, says Portland ADU expert Kol Peterson, who interviewed hundreds of sources for his comprehensive book, “Backdoor Revolution-The Definitive Guide to ADU Development.”

Some new houses include a flexible living space with a separate entrance that grants privacy to a member of a multigenerational family or tenant.

In March, people were able to find remote homes at bargain prices.

Guy Therien saw a house on a five-acre property outside of Sherwood last year that he says was beyond his wildest dreams. The Parrett Mountain estate was for sale, but he couldn’t afford it. This year, he owns the place.

It’s not that his finances skyrocketed, though he did receive a promotion at work. Instead, the high-end house, like many others priced at the top of the market, was being sold at a huge discount after waiting years for a buyer. The coronavirus pandemic added more uncertainty to the economic situation.

In the end, Therien was able to quickly sell his old property in Beaverton, purchase the hilltop home for less than half the price of the original owner’s investment and finance his new mortgage at 3.5 percent. “It was in the stars,” he says.

Terry Sprague of Luxe Christie’s International Real Estate in Lake Oswego calls this “special pricing,” based on the owner’s motives and timeline.

“There has been an attempt to look for one answer for the marketplace but the reality is each seller, each buyer, each location, each home and each transaction is so different,” he says.

He adds there’s a large number of buyers who are eager to lock in a loan while employed and mortgage rates are low. Other buyers who have relocated here are in desperate need of housing and are facing few ideal options due to the Portland metro’s chronically low residential real estate inventory.

In Therien’s case, the original owners were motivated to move and there was a new addition to Therien’s family, resulting in a need for more space: His 90-year-old uncle now lives in the multi-level main house with Therien, his wife and children. His mother-in-law resides in the detached guesthouse.

The family moved in on March 25 and have been safely sheltering in place ever since. Everyone’s enjoying privacy on the acred estate during the day but gather together for family dinners.

If months of staying at home during the coronavirus pandemic taught us anything, it’s that we need more space to live, work, exercise and relax at home.

Interior designers and remodelers are working with people who can’t wait any longer to spread out into underused areas of their home or add a sheltered extension, inside or out.

There is also increased interest in bringing extended family members together under one roof, especially older adults. Basements, attics, garages and parts of the backyard are being converted into compact living quarters, or accessory dwelling units (ADUs).

“People are desperately looking for additional living space,” says Barbara Miller, design director for the Neil Kelly design and remodeling company.

Builders, designers and real estate agents report that other COVID-19 inspired home projects, big and small, include installing easy-to-clean materials and surfaces; touch-less faucets, especially at the kitchen sink; self-cleaning, wall-mounted toilets; and improved fresh air systems such as heat recovery ventilators.

“People want a healthy home with wool or natural materials that can be cleaned,” says Miller.

In any size home, people are placing even more value on storage space, in the garage or pantry, to keep surplus food and water. The push for self-sufficiency in case of a full shutdown promoted more people to plant a vegetable garden.

And although it might not be called a hygiene station, builders are putting in a powder room close to the entry so visitors can wash their hands and a mudroom with a sink and shelves to sanitize delivered or store-bought items.”
You can view the original article by Janet Eastman, here.

Mortgage Rates Hit Another All-Time Low

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“Mortgage rates have slipped even deeper into record territory and may fall more, possibly even under 3%, before the year’s end as the economy navigates the effects of the coronavirus.

The average 30-year fixed-rate mortgage fell to a record low of 3.07% this past week, according to Freddie Mac. That’s the lowest level in the nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.56%.”

Continue reading, here.