Compass surveyed 196 buildings in the Bend Office Market for the fourth quarter 2011 office survey. The buildings in the sample totaled 2,360,843 square feet. The citywide office vacancy rate started at 22.1 percent at the beginning of the year, and rose ever so slightly from 21.1 percent in the third quarter of 2011 to 21.2 percent at the end of the fourth quarter. The survey results show that about 500,000 square feet of space is now available for lease. There was almost 27,000 fewer square feet of space available at the end of 2011 than 2010.
This quarter, 4,699 square feet of negative absorption took place, compared to 6,294 square feet of negative absorption in the previous quarter and 55,616 square feet of negative absorption in the fourth quarter of 2010.
Compass notes that we are now 24,766 square feet ahead of the end of 2010 thanks to positive absorption in the two out of four quarters of this year. Of note, 2010’s total was 51,129 square feet of negative absorption, so things are looking up in the vacancy arena for the office sector.
Bend Downtown submarket
Compass surveyed 47 downtown office buildings totaling 480,779 square feet for this quarter’s survey. The downtown office vacancy rate remained statistically unchanged at 17.3 percent during the quarter, due to a slight net loss of just 2,921 square feet. The biggest vacancy resulted from a 3,500 square foot loss in the Alexander Drake Building and no significant leases were reported. There were just four small leases signed in the Downtown area, while six spaces went dark over the three-month period.
Bend Hwy 97/3rd Street submarket
The Hwy 97/3rd Street corridor showed a significant gain, recording 20,631 square feet of positive net absorption in the fourth quarter, due mainly to the VA (Veterans Administration) leasing over 25,000 square feet on Courtney Drive in Bend’s east side medical area. The vacancy rate fell from 29.1 percent to 25.7 percent compared to the third quarter of 2011, with six buildings showing higher vacancies than previously reported and nine buildings showing positive absorption out of the 55 buildings surveyed.
Bend West-side submarket
The west-side submarket was the biggest loser in the third quarter, again, mainly due to one significant vacancy of 26,665 square feet on Emkay Drive, when the U.S. Forest Service moved to their new location on Deschutes Market Road. Overall, the west side saw 22,409 square feet of net negative absorption, so without the large loss of the USFS, the submarket would have only lost 4,256 square feet, or a change of less than 0.3 percent. But because of the large vacancy, the rate subsequently rose nearly 2 points from 18.6 percent to 20.4 percent. Out of the 94 buildings surveyed, 10 reported new leases signed during the quarter while 12 showed more vacancies than the third quarter of 2011.
Asking rents during the year seemed to stabilize somewhat. Triple-net rents continued to range from $.75 to $1.75. Like 2010, the majority of the completed transactions took place in the $.90 – $1.35 range. This could be the year for tenants to try to lock in their rates for as long as possible to hedge the consumer confidence that appears to be building, which could result in higher lease rates in the next couple years.
Several commercial land sales took place in 2011, particularly in the fourth quarter. The Bend Parks and Recreation District purchased the 11.04 acre former Mt. Bachelor Park and Ride property for $2.5 million in December. However, the seemingly inexpensive $5.20 per square foot sale price is also attached to a significant amount of off-site improvements required by the City of Bend, including a roundabout at the corner of Simpson Ave. and Columbia St. Nonetheless, this former bank-owned property should be a jewel for Bend’s west side, with plans to partner with the OSU-Cascades campus for future recreational development. Also, at the very end of the year, a private investor snapped up the former Crane Shed property in the Old Mill District on Industrial Way, for $1,425,000. Once slated to be a mixed use retail development known as the Mercato, this 4.31 acre site traded for $7.60 per square foot to a local developer who currently has no immediate plans for development. Both of these properties were bank owned REOs, which dominated the sales of larger transactions in 2011, both for commercial land and office building sales. This was true with residential development land sales as well, as evidenced by the large inventory of opportunities at the beginning of the year compared with just a small handful of tracts available at the end of 2011.
There were at least nine significant office building transactions in 2011, with sale prices ranging from $87 to $138 per square foot. Five of the buildings were sold by a bank and the rest by private parties. The highest priced sales were also in the second half of the year, when a local investment group purchased the Deschutes Ridge Business Center for $5,155,000. This 6 building, 60,000 square foot complex on 7.85 acres overlooking the Deschutes River traded for $87.00 per square foot. Also, in Q4 the aforementioned OSU-Cascades University purchased a 28,000 square foot building in the Mill Point Business Campus for $3,880,000, or $138.00 per square foot. To demonstrate the discrepancy of prices for these two transactions — literally across the street from each other — the former mentioned building was bank owned, while the latter was privately owned.
Bend Retail Market
Compass surveyed 249 retail buildings totaling over 4,391,000 square feet for the 2011 fourth-quarter retail survey. The three-month period dropped for the third quarter in a row to a vacancy rate of 8.2 percent compared with 8.5 percent for third quarter 2011 and 9.7 percent against the fourth quarter of 2010.
The market absorbed 14,756 square feet in the fourth quarter after gaining 24,836 square feet for the previous quarter and gained a total of 62,193 square feet for all of 2011. This continues to show us that the retail market is recovering, now having seen positive gains in six out of the last seven quarters.
Three of the seven retail market areas surveyed experienced positive absorption over the quarter, while two lost ground, and two remained the same. The Downtown and West-side submarkets showed the best absorption of just over 14,000 square feet, led by Rescue Consignment shop, an upscale second hand clothing business formerly on Newport Avenue which will be relocating in half of the 7,200 square foot Boomtown Building in downtown Bend, and Brother John’s new Ale House signing a lease in the former Bond Street Grill, (originally The Decoy) space on the corner of Bond St. and Wall St. A new pie and frozen custard store called Sweet Home Alamode is remodeling and will open soon in the former BackPorch Coffee space on Newport Ave. and a 5,290 square foot lease was reported in the College Park Plaza which will be the new home of the Broken Top Bottle Shop and the Roy Dean Academy, a Brazilian Jiu-Jitsu martial art school.
The South 97 and East-side submarkets lost ground with just over 4,000 square feet of new vacancies reported, skewing the city-wide vacancy numbers with a 17.2 percent and 9.9 percent respective vacancy rate.
In the North Hwy 97 submarket, 4,857 square feet of positive absorption was recorded, all of which took place in one lease of the former Shanghai Restaurant on Division Street, which will be the home of an as of yet undisclosed restaurant. The vacancy rate now stands at 3.9 percent, second lowest in the surveyed area.
No leases or losses were reported in the Old Mill or Central 97 submarkets and the vacancy rate remains at 3.5 percent and 5.8 percent respectively.
Rumors continue to swirl surrounding Market of Choice Inc.’s purchase of 3 acres of land between Colorado and Arizona Avenues this past year. The upscale Corvallis based supermarket says they have no plans yet as to when they will develop the site.
Also, in sales news, the 3,160 square foot Player’s Restaurant and Lounge on Century Drive was sold for $600,000 in October, or nearly $190.00 per square foot.
Bend Industrial Market
Compass again surveyed 293 buildings for the fourth quarter 2011 industrial review. The buildings in the sample totaled just under 4 million square feet. The citywide industrial vacancy rate decreased from 17.6 percent to 16.7 percent over the last quarter. Just over 665,000 square feet of space is now available for lease.
The positive absorption for the fourth quarter of 2011 reversed 2 previous losing quarters that had followed two quarters showing positive gains. The fourth quarter positive absorption was 36,426 square feet, with three of the four submarkets gaining ground. The year recorded a net positive gain of 37,140 square feet in 2011, mirroring public sentiment that we are on a recovery, albeit a slow one, with 2 submarkets showing significant gains, and 2 submarkets showing moderate losses of occupancy.
The southeast submarket recorded 7,477 square feet of positive net absorption in the fourth quarter. The vacancy rate fell slightly from 17.3 percent to 16.9 percent as a result. There were no significant leases signed in the southeast submarket in the third quarter, with just 4 new leases signed and 3 vacancies reported out of 132 buildings surveyed.
The northeast submarket recorded positive net absorption of 25,005 square feet in the fourth quarter, the first positive gain since Q1 2011. This resulted in the vacancy rate falling from 17.6 percent to 17.0 percent.
There were six reported losses and 9 gainers in the submarket for industrial buildings.
The central submarket also reported a gain in the fourth quarter, recording 9,230 square feet of positive net absorption after losing 1,700 square feet in the third quarter. The vacancy is now 21.1 percent, down from 23.7 percent at the end of the third quarter. Three leases were signed and only one vacancy was reported in the central submarket.
And finally, the west-side submarket lost 5,286 square feet of occupancy, the only industrial loser, and typically a stable yet small submarket, making the total vacancy in that area 3.9 percent, the highest vacancy since the third quarter of 2009. The Sunbeam Building in NW Crossing reported a vacancy of 4,860 square feet, one of two losses on the west-side. No leases were noted in Q4.
And in December, the Bear Creek Storage facility on Purcell Blvd. changed hands for $3,380,000. The 4.02 acre facility was just partially built out in 2008.
Redmond Industrial Market
The third quarter Redmond Industrial survey included 75 buildings totaling 1.45 million square feet. The vacancy rate fell again for the second straight quarter to 27.8 percent, compared to 29.1 percent in the third quarter of 2011 but up slightly from 27.1 percent at the end of 2010.
Move-ins exceeded vacancies by 18,196 square feet over the last 90 days, continuing a two-quarter trend. Currently, approximately 404,000 square feet of space is available.
Leasing activity appears to have picked up with eight buildings reporting new leases signed and only two reporting additional vacancies.
Rental rates remained steady in the $.25 – $.45 per square foot per month range.
Three Redmond industrial lots were reported sold in Q4 of 2011, ranging from $1.30 to $2.22 per square foot. And an 8,332 square foot industrial building on 1st Street was sold for $400,000.00, $48.00 per square foot.
Compass Commercial: Top 21 deals of Q4, 2011
Compass closed 80 deals in the fourth quarter with a total consideration of nearly $13.6 million. Below are the some of the significant transactions for October through December. This is a sampling of their deals.
1) Former Mt. Bachelor Park & Ride lot, Bend, commercial land sale, $2,500,000
Seller: Banner Bank, represented by Erich Schultz, SIOR and Darren Powderly, CCIM
Buyer: Bend Metro Parks and Rec District, represented by Howard Friedman, CCIM
2) 721 SW Industrial Way, Bend, commercial land sale, $1,425,000
Seller: PremierWest Bank
Buyer: Crane Shed, LLC represented by Darren Powderly, CCIM, and Erich Schultz, SIOR
3) 4586 SW 21st St., Redmond, industrial building sale, $782,500
Seller: Fairgrounds Plaza LLC, represented by Marlo (Wilson) Devir, Broker and Steve Toomey, CCIM
Buyer: Ponderosa Holdings, LLC
4) 25 SW Century Dr., Bend, retail building sale, $600,000
Seller: Players Restaurant & Lounge
Buyer: Joshua G. Maquet represented by Marlo (Wilson) Devir, Broker
5) 61105 Ferguson Rd., Bend, commercial land sale, $550,000
Seller: Home Federal Bank represented by Darren Powderly, CCIM, Bruce Kemp, CCIM, Erich Schultz, SIOR, and Peter May, CCIM
Buyer: Kevin Vergho
6) 625 North Arrowleaf Trail, retail lease, $549,200
Lessor: Taylor Pickhardt Development, represented by Steve Toomey, CCIM and Russell Huntamer, Broker
Lessee: Subway, represented by Steve Toomey, CCIM and Russell Huntamer, Broker
7) 1745 NW Steidl Rd., Bend, residential building sale, $483,000
Seller: Home Federal Bank, represented by Bruce Kemp, CCIM, Erich Schultz, SIOR, Darren Powderly, CCIM, and Peter May, CCIM
Buyer: Malcolm Cleary
8) JC’s Bar & Grill, 642 NW Franklin Ave., Bend, business opportunity sale
Seller: Jeremy & Chris Cox
Buyer: Stephen Reiner, represented by Peter May, CCIM and Russell Huntamer, Broker
9) 302 E. Main St., Sisters, office building sale, $365,900
Seller: CDF Holdings, LLC, represented by Robert Raimondi, Broker and Marlo (Wilson) Devir, Broker
Buyer: Stephen Jaqua
10) 319 NW Greenwood Ave., Redmond, multi-family building sale, $345,000
Seller: Bayview Loan Servicing, LLC, represented by Darren Powderly, CCIM, and Erich Schultz, SIOR
Buyer: Leo Stoddard, represented by Ron Ross, CCIM
11) 62080 Dean Swift Rd., Bend, retail building lease
Lessor: West Coast Bank, represented by Darren Powderly, CCIM and Russell Huntamer, Broker
Lessee: Southern Oregon Federal Credit Union
12) 1470 & 1480 NE Third St., Prineville, office building sale, $275,000
Seller: Home Federal Bank
Buyer: Steve Myrin
Both represented by Darren Powderly, CCIM, Peter May, CCIM and Erich Schultz, SIOR
13) 20 NW Greenwood Ave., Bend, office building sale $275,000
Seller: Pat Gisler
Buyer: Peter Carlson
Both represented by Peter May, CCIM, Darren Powderly, CCIM, Erich Schultz, CCIM, Bruce Kemp, CCIM and Marlo (Wilson) Devir, Broker
14) 1051 Bond St., Bend, retail building lease
Lessor: 1051 Bond St., LLC, represented by Darren Powderly, CCIM and Peter May, CCIM
Lessee: John Machell & Steve Barnette,
15) 705 SW Bonnett Way, office lease $240,318
Lessor: Deschutes Properties, LLC
Lessee: Director’s Mortgage, Inc., represented by Marlo (Wilson) Devir, Broker
16) 4651 SW 43rd St., Redmond, residential building sale, $220,000
Seller: Springer Development, LLC, represented by Darren Powderly, CCIM, and Erich Schultz, SIOR
Buyer: Paul & Caelli Edmonds
17) Chase Road, Bend, residential land sale, $208,000
Seller: Home Federal Bank, represented by Pat Kesgard, CCIM and Peter May, CCIM
Buyer: Tennant Developments, LLC, represented by Erich Schultz, SIOR, and Howard Friedman, CCIM
18) 1051 NW Bond St., Bend, office lease
Lessor: 1051 Bond St., LLC, represented by Darren Powderly, CCIM and Peter May, CCIM
Lessee: Capstone Wealth Management Group, LLC, represented by Erich Schultz, SIOR
19) 404 SW Columbia St., Bend, office lease
Lessor: Vision Plaza, Inc., represented by Erich Schultz, SIOR and Darren Powderly, CCIM
Lessee: Farmers Insurance Exchange, represented by Ron Ross, CCIM and Robert Raimondi, Broker
20) Southern Pines Subdivision, Bend, residential land sale, $179,500
Seller: Home Federal Bank, represented by Erich Schultz, SIOR, Darren Powderly, CCIM, Bruce Kemp, CCIM and Peter May, CCIM
Buyer: Building Partners for Affordable Housing, represented by Pat Kesgard, CCIM
21) 15-13-15CB TL 400-1100, Redmond, industrial land sale, $165,000
Seller: High Desert Bank, represented by Stephen Toomey, CCIM and Marlo (Wilson) Devir, Broker
Buyer: Nathan & Nicole Becker
