By Jon Peterson
The Portland region has seen a good amount of interest from investors in its commercial real estate market in the recent past. This is driving existing owners to consider placing their properties up for sale, and Newport Beach, Calif-based Bixby Land Company is one of those property owners. The company has put up for sale the 263,931 square foot office asset it owns in Portland called The Crossing at First. The pricing guidance on the property is in the low $40 million range, according to sources familiar with the property.
The seller has hired CBRE to be the listing agent on the sale. Those working on the transaction include Charles Safley, senior vice president, and Paige Morgan and Tom Pehl, both executive vice presidents with the firm. CBRE declined to comment for this story.
The three-building urban campus has a significant amount of vacancy—the current occupancy totals just 37 percent. The reason for this amount of availability is that current ownership had acquired the last of the three buildings, Building A, in 2017 and there were some tenants on short-term leases that left the building. The investor was not able to have a full marketing campaign to re-lease the property after a renovation in 2019 due to the challenges posed by the COVID-19 pandemic.
The Crossing at First has a total of three office buildings. Building A totals 74,657 square feet and is located at 2501 SW 1st Avenue. This is a four-story building that has a current occupancy of 26 percent. Buildings B and C are located at 2525 SW 1st Avenue and total 189,274 square feet. Total occupancy in these buildings is 41 percent. The property also has a parking garage located at 2715 SW 3rd Avenue. It covers four stories and a total of 415 parking spaces.
If the pricing guidance on the property is reached, it would come in well below replacement cost, according to sources that track this information in the Portland market. Replacement cost for like-kind office product is pegged at over $500 per square foot. The replacement cost for the 415-stall parking garage alone is $20 million, before considering recent inflation in materials costs.
The current owner invested a total of $14.8 million to renovate the property, and this work was completed in 2019. Of the total amount, $3.5 million was spent in Build A for building systems upgrades, $7.2 million was spent in all three buildings for common area upgrades and tenant improvements and $4.1 million went to exterior site improvements in all three buildings.
The Crossing at First is located in an area with many notable employers. It is in close proximity to both Portland State University and Oregon Health Sciences University. The area has also seen recent investment in office properties—Under Armor expanded its regional headquarters there, and Amazon grew its offices in this submarket, as well.
The office campus up for sale is located within Portland’s South CBD district. It has a first-quarter 2022 vacancy rate of 13.7 percent. It has a total rental rate growth of 0.6 percent during 2021.