1.8%
Vacancy Rate
$10.75
Average Rental Rate
5.7%
12-Month Rent Growth
6,792
SF Under Construction
1Q
2023
Clackamas / Milwaukie
Overview
Despite a long list of larger industrial tenants, deliveries over the last decade of 530,000 SF in Clackamas/Milwaukie have been limited. Most of the recent builds have featured footprints under 30,000 SF.
However, the tide could be shifting, as logistics giant Prologis recently announced a major land acquisition for a multi-building industrial park.This project aside, a lack of competing supply has allowed vacancies to compress since the end of the recession, which has boosted rent gains of 68.0% in the last ten years. This performance runs congruent with metro level gains of 72.9% over the same period.
Sales volume posted a five-year high in 2022, but the submarket doesn't frequently see more than $100 million in annual trades. Activity has slowed in early 2023, given tight credit conditions in the face of historic inflation.
Rental Rates
Market rents of $10.70/SF currently sit below the metro rate of $11.30/SF. Nonetheless, year-over-year rent growth posted gains of 5.7%, in comparison with the larger metro's gains of 5.8%. Low vacancies could add an elevated floor to rent growth near-term, at least until the Prologis project delivers and attempts to draw some tenants from more mature properties.
In the past few years, rent growth for specialized industrial and flex space has been particularly volatile, given some larger moveouts. Clackamas/Milwaukie posted 10-year cumulative rent growth of 68.0%, versus metro gains of 72.9% over the same timespan.
Leasing Activity
Generally low vacancies have been driven by dependably shorter lease-up periods of new product, as well as steady backfilling of some sporadic larger move- outs over the past few years. Trailing four-quarter net absorption totals 370,000 SF, with logistics space taking 210,000 SF of that total.
Clackamas/Milwaukie is bound by Southeast Holgate Boulevard to the north and the Clackamas River to the south, stretching eastward from the Willamette River to Damascus. Interstate 205 bifurcates the submarket running north to south, with much of the logistics inventory located in Clackamas proper near the freeway and the Union Pacific Railroad.
In 2001, Clackamas County instituted urban renewal areas that reduced the number of places zoned for industrial buildings, and these areas now contain many of the largest industrial projects. The North Milwaukie Industrial Area (NMIA), designated by the City of Milwaukie as a regional asset for manufacturing, transportation, and jobs, is another hot spot for logistics space.
Large tenants in the area include Bob's Red Mill Natural Foods (490,000 SF) and Oregon Tool (320,000 SF). In the NMIA, food manufacturer Alpine Food Distribution owns and occupies 120,000 SF.