Central Oregon Economy Trending Up

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CBN_Feb6_2013_ResidentialHome_Building

Positive Sign in Housing. Innovative Companies Creating Jobs.

Optimistic and Confident. This sums up what several local business and economic leaders have to say about Central Oregon’s prospects for the coming year.

Roger Lee, executive director of Economic Development for Central Oregon (EDCO), writes that Central Oregon is returning to month-over-month job increases and that manufacturing is leading all other employment sectors.

A report last week from Reuters confirmed that nationwide U.S. job growth picked up modestly in January and the unemployment rate held steady, supporting views the economy’s sluggish recovery was on track despite a surprise contraction in the final three months of 2012.

Non-farm payrolls are expected to have increased by 160,000 last month after rising 155,000 in December, according to a Reuters’ survey of economists. The jobless rate is expected to have held steady at 7.8 percent for a third straight month. The current Oregon unemployment rate is at 8.4 percent.

However, Central Oregon still has a ways to go: Crook County is at 13.3 percent, Jefferson 11.9 percent at and Deschutes adjusted unemployment rate (10.5 percent) showed only a modest decline from 10.7 percent in November, but improved by 1.3 percentage points from the year-ago rate of 11.8 percent in December 2011.

“Quietly, the Central Oregon economy has been diversifying – gradually replacing jobs lost in the recession and its aftermath – via a myriad of small companies doing really cool and amazing things,” noted Lee. “Many of them you’ve never heard of.”

Indeed, in this issue of Cascade Business News is a solid list of local innovative companies that are growing and adding jobs to the economy. These are the companies to watch in the coming year (if you have a company that should be added to this list please send a note to cbn@cascadebusnews.com, we would love to hear from you).

Tim Knopp, newly elected state representative and executive director of Central Oregon Builders Association, reports that a positive sign is that new home building is on the rise and housing prices are on their way up. He is also upbeat on the region’s efforts to diversify our economy “which is a positive trend with healthcare, high tech/software and tourism all headed in a positive direction.”

The building and real estate industry in Central Oregon have been hard hit by the recent economic challenges, but things may be looking up. Mike Hollern and Romy Mortensen of Brooks Resources Corporation expressed optimism about 2013. “The residential housing market is certainly stronger than it was a year ago, and will continue to improve as “shadow inventory” comes on the market, is purchased and removed from the marketplace,” they reported. “Sales prices are rising steadily, which is an indicator for a more stable and healthy market.”

Brooks Resources reported that as they enter 2013 they have only one remaining vacant lot in their sales inventory at NorthWest Crossing. They will be releasing a new phase this spring and have builders and potential custom homebuyers already eager to buy.

On the commercial real estate trend Brooks Resources is a little more tentative offering that the market is going to be slow to recover yet for another couple of years. Compass Commercial reports that for the second straight year, vacancy rates decreased in the industrial, retail and office markets, indicating a slow but steady recovery from the recent recession.

Brian Fratzke of Fratzke Commercial Real Estate Advisors expects 2013 to be a strong year for the absorption of multifamily, industrial, retail and medical inventory. “At the same time, competition is strong by buyers looking to acquire their own building and this will continue to drive prices up,” said Fratzke. “Demand for Central Oregon commercial real estate continues to increase with little new construction taking place.”

Fratzke explained that demand for clinical medical space is high and there is less than 10,000 square feet of clinical medical space for lease in Bend. Almost no new construction took place in the industrial sector in 2012 while companies were quietly purchasing existing inventory. Fratzke expects industrial lease rates to continue to increase three to six percent per year over the next 12-24 months for spaces ranging from 1,000 to 5,000 square feet. Larger industrial suites will begin to experience increased lease rates in 2013.

“Leasing needs by office users has changed and if you consider that the average IT room decreased by 400 percent over the past four years due to cloud based computing and outsourced backup service providers, office users have learned to work with less space,” he explained.

Fratzke also noted that the demand by investors to acquire multifamily properties will continue because rental rates are on the rise.

In the past 12 months, Fratzke said he has seen almost every restaurant space lease up and in some cases, the space was backfilled twice. “There is little to no retail space available for lease in Bend,” he concluded. “When one restaurant fails, another restaurant backfills the suite immediately.”

As the Bend City Council grapples with the issue of a possible increase in the local tourism tax (from 9 to 11 percent), Doug LaPlaca, executive director of Visit Bend, points out that “what was once a little-known regional gem, has evolved into an internationally recognized tourist destination that hosts over two million visitors annually, contributing over half a billion dollars to the regional economy.”

LaPlaca sees tremendous potential for the tourism industry in 2013. “As Bend turns the corner into 2013, it’s clear the year ahead will be critical for the continued evolution of the city’s tourism industry.  Our city is primarily a leisure and recreation-based destination, and the list of landmark recreational projects currently being planned will have a transformative effect on the future of Bend’s tourism industry.”  

LaPlaca adds that despite the strong performance of Bend’s tourism industry, there is substantial room to grow. “The primary growth opportunities exist in improving shoulder season and winter tourism, and diversifying the geographic origin of our visitors.”

As a new representative to Salem Knopp would like to see the state provide capital funding for the OSU four-year stand alone university. He views this as an essential component of Central Oregon’s economy.

“Lowering taxes and regulation on small business would also give a shot in the arm to our economy,” said Knopp. “Passing bills that begin to use our natural resources wisely would be an economic assist to all of Oregon.”

EDCO notes that 2012 was the best year on record for the regional economic development agency: closing 26 business deals with companies that are on their way to adding nearly 900 new jobs and investing more than $215 million in capital investment. The good news: “While it’s a bit early to tell, 2013 could keep pace with the record-setting year EDCO just concluded for job creation and capital investment,” said Lee.

It’s clear that Central Oregon is prime for improvement and the companies highlighted in this issue are testimonial to our diversified economy and potential. Here’s to crossing over from the dark side and setting in motion a year of success.

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