Portland Commercial Real Estate Update | Joe Kappler

Justin Stoddart
Welcome back to The Think Bigger Real Estate Show, I am your host Stoddart, here to talk all about the Portland commercial real estate market. Eyeballs have been on our commercial market for some time because, in 2020, it seems like we got hit from all sides. Both the pandemic well as social unrest has caused there to be some question marks as to what are the risks? And what are the opportunities with commercial real estate I have with me today, an expert in that field who's going to share with us some great details that will be very helpful for you, and someone who you will want to know before I introduce him.

Justin Stoddart
Let me remind you that inside of that Think Bigger Real Estate Group on Facebook, you're gonna have the opportunity to go deeper on this topic and others, I believe that the best way to learn is to be engaged in the learning. in that group, you get engaged in the learning you will have the opportunity, to grow yourself, which is my passion. So again, about today's guests, his name is Joe Kappler. He is the vice president of Macadam Forbes excited to have him here. He's become a good friend of mine, someone who I really respect admire, both in things business as well as in things personal. And we're gonna jump right in here. Joe, give us an update.

Justin Stoddart
In fact, let me do this. Because this show is all about thinking bigger. I know you're a family man, also a man of faith. Talk to me, Joe, what's your favorite part about being a dad?

Joe Kappler
A favorite part about paying dad he does have all evolved days actually today I got my oldest is now at a new school West Hills Christian, they had a deal in which you come in and talk about what you do. And it was neat to see you know, my kid at a school where he's you know, you said blocks in positions and goals in life, your kids to be successful and easy only at second grade but seeing him in school loving where he's at thriving.

Joe Kappler
You know, we got sports coming up, there's been no see them failed to be able to have the mindset that picks themselves back up in a COVID world that they have a good attitude, being stuck at home and just seeing the positive signs alive. So saying, watch our kids as they grow up right now from babies to little people right now it's fun to see them react to challenges or react to even just be trying to instill the humbleness and inside of things when they go really well.

Joe Kappler
Because obviously things cannot go Well, you've been through this pandemic, I'll probably be mixed reviews on this by took my kids downtown, walk the streets during Christmas time. And with my little girl, she's four older sons eight. And walking in seeing this is life on the other side if you will. And obviously, you know, it's the social unrest is one thing, but also just the homelessness and seeing that this is a stark difference to where we're out in the suburbs, we don't really see much of that and seeing them interact and reaching out their hand not being afraid to go talk to these people and hand out a blanket or some clothes. And I think for kids to see that. For our kids at early ages, see them thrive in those situations where it's uncomfortable, but they can become comfortable with making sure that there are It doesn't matter what the person looks like, smells like anything else. They're human, they're a child of God, and they deserve to be loved. So been through this challenging time to see them be excited about those sorts of opportunities.

Justin Stoddart
So I love that Joe. That's one of the reasons why I admire you again and the way in which you would still great values in those with whom you work as well as with those with whom you live and get the raises as children. So great job on you.

Justin Stoddart
Let's talk about let's get into the commercial real estate market. And that's why people are here. That was a little added. You're welcome to all the guests. I want to hear really quickly. Just kind of a state of the market. Right. Obviously, there, there have been a lot of changes, you know, the past 12 months, right? A lot of obviously, people are now working remotely. Maybe let's just start with this question of Is there any sort of statistics are let's just talk about the impact so far. What's happened to the maybe downtown market as a result of the pandemic? Maybe it's hard to separate between the pandemic and the other things that have been going on downtown. But what has been the result of everything that's happened in the past 12 months?

Joe Kappler
Yeah, I mean, certainly a good question. A lot of people have seen it in the news. I mean, the Portland Business Journal does a pretty good job of staying on top of the commercial real estate market. And you saw there are some rumors about midsummer that there's gonna be about a million and a half square feet of either new inventory of tents, walking away from leases, or sublease spaces coming online. And we did see that happen. Some massive shifts from you know, it's been a mixed bag of for focusing just on the downtown core Obviously you have COVID people working from home, the social unrest, they have had the city's new tax policies and you kind of have a three-way punch there that now here we are in March of 2021. And we're seeing a push of people moving out of downtown, the suburbs have largely missed the run-up, you know, going back to 2010, we bottomed out in the commercial real estate world. And then we've been on a tear since then. And COVID kind of knocked downtown off of that pedestal because you saw office lease rates, you know, crews weigh, you know, they are upwards of 3836 35 to $36, a square foot full service in 2009. Right now, they're at $39 a square foot where you go downtown, and you've seen these Class C buildings undergo massive renovations lease rates downtown, over $40 a square foot. But what you're seeing now are companies realizing what can we do space-wise to have employees work remotely? You know, Google has been really the only major tech company saying I want you back in the office come September, but most of the others were kind of allowing folks to work remotely.

Joe Kappler
What we're seeing for downtown, you know, vacancy rate wise in the general office market is over 15 to 17% vacant, you know, the Portland metro area. In some cases, it's showing 10.6 it's a mixed bag downtown 17.6 right now according to costar, which is kind of our main bread and butter we go to for stats. But you've had a lot of these small companies, the mom and pops of the Portland area, that one's kind of keeping the lights on that one to 5000 Square feets kind of your staple lease rate range, but the company's I one company that was down on macadam Avenue, we looked at doing a renewal they actually grew through this, we moved him over to Lincoln Center.

Joe Kappler
And so that was a good deal for them went from seven to like 9000 square feet, getting out of the city of Portland, which wasn't primarily a big push for him and his company. But now with these professional service firms like CPAs, and attorneys looking at the increased taxes by doing business in the city of Portland, and they live in the southwest, there's this kind of migration out of their pockets and brokers.

Joe Kappler
We all look if you're an office broker, you kind of looked at crews way it's kind of your epitome of the nicest office space and what is going on there to kind of direct activity lease rates there at the top end at 35 to $39 a square foot full service through COVID. They got hit pretty hard, they crept up, I think they're about 20 just about 21% vacant right now. You drive these buildings right now you're probably telling me, Joe, why isn't it 50% because I see like six cars in there.

Joe Kappler
But p...