Portlandia was a thing long before the TV show that lampoons its quirky residents. Also known as The City of Roses, Little Beirut, Bridgetown, Beervana and more, Portland is much more than a cool coastal halfway point between San Francisco and Seattle. And it’s getting all the love now from people, companies and investors because of it.
These days, people want to be in amenity-rich locations that are walkable and have good public transportation. In short, they want to live in “urbana,” a place that’s affordable and offers a great quality of life featuring fantastic restaurants, breweries, coffee and fun stuff to do. It’s work, live, play centered on a happening city. Portland, Oregon, really fits the mold.
In short they want to live in 'urbana'...
As a result, some of the nation’s brightest talent is moving there — along with top- tier tech (STEM) and creative (TAMI) firms that are following them and looking to escape the high costs of San Francisco, Los Angeles and Seattle by starting up or relocating to Silicon Forest. Throw in low-yield-suffering investors, who are likewise getting priced out of other West Coast markets, and you have a recipe for massive city growth.
With all this in mind, KBS is focused on buying assets on or near Portland’s vibrant Pioneer Courthouse Square, part of the city’s central business district and close to its Technology Triangle, a cluster of tech companies that include Google, Amazon and Airbnb. Three recent KBS acquisitions are the historic Meier & Frank Building, the historic Commonwealth Building and 6Y.
Meier & Frank Building
Built in 1909, the Meier & Frank Building sits at 621 SW 5th Avenue on a full city block — highly unusual for Portland — across from Pioneer Courthouse Square and Pioneer Place Mall. The size allows for very open and large floor places, making Meier & Frank ultra-appealing to space-efficient tech companies. Additionally, the property is conveniently located at the epicenter of Portland’s Public Transit System.
Originally designed to house Meier & Frank’s department flagship store and headquarters, the 15-story building was acquired by May department store in 1996, then by Macy’s in 2006, which sold the top ten floors to Pebblebrook and together underwent a $100 million building renovation.
Pebblebrook converted its top 10 floors to a hotel, which opened its doors as “The Nines” in 2007. Luxurious and stylish with art-filled spaces, fabulous dining and incredible downtown views, Portland’s only five-star hotel often accommodates teams that come to play the Portland Trail Blazers.
In fall 2016, Macy’s began selling some of its real estate, creating the opportunity for KBS to JV with world-class developer Sterling Bay to buy and reposition a nice slice of the storied Meier & Frank Building. In April 2017, KBS began demolition, moving forward with plans to reposition the first five floors as a best-in-class, mixed-use asset that includes street-level retail and creative office space.
With Meier & Frank, KBS not only acquired several floors in a rare full-city-block building, but in a building that has great character, history and arguably one of the best locations in the city. Additionally, the property has approximately 15,000 square feet of basement-level space that KBS is using to build a huge amenities center complete with a conference area, lounge, fitness center, yoga/spin room, bike parking, lockers and showers. Says KBS Senior Vice President and Asset Manager Clint Copulos, “It’s going to be very high-end and to a scale Portland’s never seen before.”
Recently, KBS signed its first lease for the entire second floor of Meier & Frank with Oregon State University. In a press release, OSU announced it was “looking forward to working even more fully with partners in education, industry and the community to serve unmet learner, economic and community regional needs.” In the meantime, KBS is continuing to negotiate leases for about half the retail space. It plans to deliver the space on April 1, 2018.
It's going to be very high-end and to a scale that Portland's never seen before.
The historic Commonwealth Building is located at 421 SW 6th Avenue. Built in the mid-1940s, the property was originally known as the Equitable Building and was designed by renowned architect and Portland resident Pietro Belluschi. Situated about a block and a half off Pioneer Courthouse Square, it’s in the heart of the Tech Triangle and fronts the Sixth Avenue transit mall.
While Commonwealth has always been a beloved Portland tower, KBS’s more than $3.5 million in tenant improvements, shared amenities and capital expenditures has helped turn it into a Class A, higher-purpose building that can claim even more. The 224,122-square-foot property offers a first-in-class tenant experience designed to attract TAMI clientele. Amenities include a rooftop deck, building conference room, tenant lounge, bicycle storage and a much-anticipated fitness center with locker rooms.
Says Copulos, “What we really like about Commonwealth is its great location. When we bought the building, it was 95 percent leased and had a large number of tech tenants. So much of it was already built for modern creative users with open ceilings and floor plans, concrete floors and very little office space. Since there were great tenants in place, we decided to concentrate on elevating the brand — to build on what existing tenants already like about the property and gain momentum.”
After discovering how much tenants loved Commonwealth’s sense of community, KBS started “Thirsty Thursdays,” a twice monthly, rooftop happy hour. The event regularly attracts 75-100 people who come to connect and socialize with tenant neighbors. Improvements were likewise geared toward helping tenants bond and enjoy the entire building. Continues Copulos, “We remodeled and expanded the lobby, added huddle rooms, bike parking and showers — and we’re doing a fitness center — all on the ground floor. The top floor has a great conference room with the nicest, largest deck in Portland — arguably, one of the nicest on the West Coast. As a whole, you could say the best amenity package in Portland is at Commonwealth.”
About its history, Copulos shares, “This building had a lot of cool firsts. It was the first glass-box building and the first to have central heating and air conditioning. But it’s also timeless. That was another reason we liked it. People in Portland love supporting locals. They love the history behind things. And they love having a building designed by a famous architect who also made Portland his home.
People in Portland love supporting locals.
Although built later than Meier & Frank and Commonwealth, KBS’s third Portland acquisition is likewise strategic. Located at 811 Southwest Sixth Avenue, and previously known as Sixth at Yamhill, “6Y” is one of only a few buildings that surround Pioneer Courthouse Square. It was constructed in 1955 and sits today at the intersection of Portland’s Technology Triangle and Retail Core — and where the city’s main MAX light rail lines meet. The prominent 11-story downtown office building has 116,244 square feet of Class A creative office space.
KBS partnered with True North Capital to purchase 6Y for $28.5 million last July. As a co-owner and manager for the property, KBS has been busy leasing and building out space on the fifth through seventh floors. An extensive renovation of the lobby, bike parking and elevator cabs was completed by the previous owner. Other amenities include a common indoor-outdoor patio on the fourth floor and local coffee scenester Water Avenue Coffee, which is off the lobby.
Besides being surrounded by great restaurants, shops, hotels and public transportation, the building is attractive because it offers tenants creative, customizable space. 6Y can provide suites ranging from 2,000 to 4,300 square feet with large, open floor plans as well as full-floor opportunities.
At the time of purchase, 6Y was 30 percent leased. That’s since climbed to 90 percent. As soon as it closed KBS, started building three floors of spec suites, and all three floors were leased before completion. Says Copulos, “Activity has been very strong. One company came in from Silicon Valley. It had just acquired a division of another company in Portland, which drove the need to be there. They’re growing, and our property really fit what they were looking for.” He concludes, “I think that’s just a testament to how KBS is not only buying in Portland, but in the right parts of Portland — and at the right locations within the downtown area.”
There’s no denying Portland is a hot market. The affordable, verdant, quirky city is a magnet for talent, companies and investors. And KBS is there, preparing places for them to put down roots in a growing Silicon Forest. Key acquisitions like Meier & Frank Building, Commonwealth and 6Y let KBS honor “Portlandia’s” past while taking it to exciting new levels. Perhaps most critically, as tech and creative companies continue to arrive and thrive, KBS buildings provide a new generation of tenants with the amenities and environment that inspire them to do their best work.