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Industrial Property, Freight Movement
and the Livability Plan

by Tom Dechenne
Daily Journal of Commerce, January 22, 2010

Are these assets in sync for our future?

When a business looks for land to expand, or considers leasing or buying an existing facility, two questions arise. First, are affordable properties available? And second, will one of them work? Decisions we make today will irrevocably affect the answers.

About 40 years ago, Oregon revised its land-use laws. The goal was to manage growth while avoiding congestion and urban sprawl, and to enhance Portland's famous livability. Through 2000, plenty of land was available to accommodate industrial growth, as well as commercial and residential development. As growth has continued, available and affordable land has dwindled, driving prices beyond the balancing point. While the concept of "growing up, not out" has merit, there are distinct differences between uses and what will physically work.

Residential, retail and office mixed-use developments can coexist effectively. Recent examples include the Pearl District and other neighborhoods, as well as Beaverton, the Gateway District, the Clackamas Town Center area and others.

Industrial uses, however, don't mix well with retail, office, residential or institutional uses. As such, industrial areas must be distinct and separate. While the planning effort acknowledges this concept, the execution often is disjointed. Zoning in parts of the Columbia Corridor industrial area, for instance, makes provisions for dense residential and commercial development to "serve the area."

These are not compatible uses in this district. And light industrial campus zoning in Happy Valley will adversely affect adjacent

schools and the planned medical campus.

The metro area has traditionally been a distribution center due to its favorable geographic location. It's on the river, offers access to the ocean, sits at the convergence of major railroad lines and two major freeways, and has an international airport. This has meant easy distribution of goods and services not only locally and regionally, but globally.

Today, the ability to provide multimodal distribution services is a competitive advantage; but are Portland firms effectively providing this service? It's hard to say, as companies like container shippers gradually retract, the two major railroads spend less on infrastructure in secondary markets like Portland, and local distributors' alternatives shrink due to congestion, higher occupancy costs and lack of available land. A recent example is the reduction of goods being moved through the Port of Portland in favor of the more economical Puget Sound or California ports. The other primary industrial use is manufacturing, which is decreasing here. Production of goods such as footwear, outdoor wear, food and many others have gradually moved to other regions. Until recently, the original use/growth plan seemed to work pretty well, and Portland's implementation of new, innovative growth plans has caused it to become a "planner's mecca." The challenge is that as it becomes denser, there's more pressure to meld different uses into a compact area. That basic concept radically affects the area's ability to compete with others on the West Coast.

During the last 30-40 years, industrial land and buildings in Portland typically have cost less than comparable property in Puget Sound, the Bay Area and Los Angeles; Portland prices have been comparable to secondary markets like Salt Lake City, Denver, Phoenix and San Diego. But in recent years, land and building prices have increased more relative to these markets to the point where pricing matches larger markets.

Consequently, we're losing our competitive advantage for industrial business growth for the short and long term. Today, Portland and Seattle have similar rental rates and land values, due in part to this region's lack of available, developable properties.

With studies showing specific limited amounts of land available for different uses, and present decisions being made about long-term land availability, it doesn't appear the area will compete. That factor, coupled with the cost of primary and secondary road infrastructure costs specific to movement of goods and freight, paints a dim picture. The area's population is expected to increase by about a third over the next 25 years. Many studies project a shortfall of several hundred acres to meet the potential industrial-use needs (this assumes several hundred acres of brownfields and redevelopment of underutilized properties takes place). With approximately 15 to 20 percent of the workforce employed in distribution, manufacturing and other traded-sector jobs, this region is jeopardizing its ability to effectively compete and grow.

The city of Portland and Metro recently completed master freight plans for the respective areas. The plans, while separate, attempt to address the same challenges of providing a system of smooth movement of freight throughout the area. One of the major problems is finding consensus in identifying the major bottlenecks (or choke points), and prioritizing where limited transportation dollars are spent. The present transportation system, the potential funding sources and the ongoing decisions are very complex. It is essential that Portland doesn't become an even less affordable area for large and small companies and family-wage jobs.

The balance of competitively priced industrial real estate, a good functioning freight movement system, and an effective land-use system is presently out of balance and could become more so if not adapted to changing market conditions. It's important to promote the "greatest place to live," but the business community has to step up and participate, even more than it has in the past, in regard to land-use decisions, road improvement decisions and decisions affecting living-wage jobs.

There has been great work done on projects like the River Plan, freight plans and on Metro's zoning change recommendations, but overall, the business community has had a weak voice when it comes to votes that count. The Joint Policy Advisory Committee on Transportation, the Metro Council, and the many city, county and state bodies that influence and determine the region's future need your voice.

Tom Dechenne specializes in leases and sales of industrial and land properties as an associate vice president at NAI Norris, Beggs & Simpson, a real estate brokerage and asset/property management company.
Industrial Property, Freight Movement and the Livability Plan
Daily Journal of Commerce, January 22, 2010

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