3.5%
Vacancy Rate
$10.27
Average Rental Rate
6.1%
12-Month Rent Growth
489,700
SF Under Construction
1Q
2023
East Columbia Corridor
Overview
The East Columbia Corridor boasts a deep list of distribution and manufacturing-oriented tenants. The submarket saw more than one-quarter of Portland's industrial construction activity in response to growing synergy and strong fundamentals over the past decade. The furious pace at which properties have been acquired and developed has put a strain on available land. This could keep a solid floor in place for rent growth, as bringing more space online in large quantities will become increasingly difficult in the coming years.
A hefty share of the properties to deliver over the past few years have been speculative, but steady leasing has brought vacancies back to 3.5% after reaching a decade high of 9.5% in 2018 amidst the construction onslaught.
Asking rents remain just over $1.00 per SF below the metro rate, but this is likely due to the submarket's much larger building size. On average, assets within the East Columbia Corridor are more than 75% larger than a typical industrial property within the greater metro area.
In addition to development, investors have had the area on their radar, likely picking up on the notion that a dwindling land supply will restrict further competition to some degree. Asset sales volume over the past four years has generally exceeded historical averages, though headwinds in 2023 have already formed, as lending conditions remain less than favorable given high- level macroeconomic trends.
Rental Rates
Rent growth in the East Columbia Corridor has cooled, but remains above historical averages. Trailing four quarter growth within the submarket equates to 6.1%, versus the larger metro performance of 5.8%. Over the past five years, year-over-year rent growth has averaged 6.1%.
Supply pressure near term will be minimal, however, which could give rents a higher ceiling than competing submarkets. As of the second quarter of 2023, there is now just 490,000 SF of space in the pipeline, set to expand total inventory by just 1.6%.
Asking rents of $10.30/SF are historically lower than the metro average, which currently sits at $11.30/SF. Despite this, the submarket has seen strong growth this cycle, with cumulative gains of about 71.5% over the past ten years. This performance, in line with the cumulative gains of the metro of 72.9%, is especially impressive considering the glut of supply this submarket experienced in years prior.
Leasing Activity
Economic incentives have partially aided the submarket's robust pipeline and growth. A sizable portion of East Columbia Corridor is designated as an Opportunity Zone. Additionally, the northern and western portions are in the East Portland Enterprise Zone, an area designated for five-year tax abatements for firms that invest between $500,000 and $86 million in industrial operations. The program was established in July 2012 and is scheduled to expire in 2024. Amazon's new 857,000-SF fulfillment center in Troutdale is a beneficiary of a five-year tax abatement worth around $9.6 million, one of the major reasons for the e-commerce giant's site selection.
In addition, proximity to the airport and the Interstate 84 and 205 interchange have prompted expansions by retail tenants such as Grocery Outlet for logistics operations. The discount grocer took on just over 47,000 SF at the Birtcher Center park in 23Q1. Plexus, one of the largest direct-selling health and wellness companies in the nation, signed a new lease in 22Q3 to occupy the entire 91,000-SF logistics building located near the Southshore Commerce Center. The property was only on the market for four months.
Other corporate tenants dotting the area include Albertsons occupying a 924,000-SF distribution center near I-84. The grocery chain is one of the largest logistics tenants across Portland. Other sizable owner/occupants include manufacturing facilities for Microchip Technology (827,000 SF) and Boeing (800,000 SF). Automobile manufacturer Subaru occupies 600,000 SF at its distribution center in Gresham, delivered in 2016, and a 236,000-SF expansion delivered in July 2020. Within East Columbia Corridor, over 50 industrial and flex tenants have footprints over 100,000 SF.