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East Oregonian
Saturday, July 22, 2017
21 cranes, 15 hotels, 10,000 jobs: Inside Oregon’s development spree
By JEFF MANNING
and ANNA MARUM
The Oregonian/OregonLive
John Killin pressed the
panic button in February amid
a multibillion-dollar tsunami
of real estate development.
The
building
frenzy
that lit up the Portland-area
economy and changed the city
irrevocably has depleted the
pool of skilled construction
workers. In a letter to fellow
contractors, Killin warned of
a “new normal” of chronic
labor shortages.
“There are probably
10,000 open jobs out there,”
said Killin, executive director
of the Associated Wall and
Ceiling Contractors of Oregon
and Southwest Washington.
“We need 800 carpenters, we
need about the same number
of electricians. And there are
20 more trades.”
Nearly a decade after the
Great Recession, the long and
frustratingly slow recovery
has morphed into a barrage
of development that by
some measures surpasses the
mid-2000s housing bubble.
The city issued nearly 12,000
buildings permits through the
first 10 months of its current
fiscal year for a record $2.5
billion in projects, easily
eclipsing the previous high of
$1.9 billion set the year before.
Interviews with dozens
of developers, construction
company executives and
union officials reveal a boom
that includes all real estate
categories, from high-end
apartments in Portland’s urban
core to enormous data centers
in the eastern Oregon desert.
Fueled by strong in-migration
and job growth, Portland
should remain red-hot in the
near-term, they predict.
Twenty-one construction
cranes currently dot the
metro-area’s skyline, the fifth
most in the country and more
than either San Francisco or
New York. The development
mania extends north to Seattle,
where a nation-leading 64
construction cranes are in
action.
“This boom is unprece-
dented; it’s absolutely unlike
anything else I’ve seen in
50 years,” said Bob Walsh
Rhianna Gelhart/The Register-Guard via AP
In this July 19 photo, children and adults alike dangle from the high rise swing ride
at the Lane County Fair in Eugene. Oregon is the midst of a massive building and
development spree.
of Walsh Construction in
Portland.
But it’s not all roses for
the real estate set. Demand
has slowed for the thousands
of pricey apartments recently
developed in the city. But
most industry players remain
confident the industrial and
commercial sectors will
compensate for the multi-
family lull. The deals come at
a furious pace:
Developers continue to
make inroads in Northwest
Portland’s industrial sanc-
tuary. Cairn Pacific is pushing
ahead with its Slabtown
development, a $1.4 billion
reboot of the former Con-Way
Trucking property. Nearby,
under the shadow of the
Fremont Bridge, Portland
developer Project^ is building
two enormous office buildings
totaling 300,000 square feet.
Mortenson Construction will
break ground next month on
a $220 million Convention
Center hotel in Northeast Port-
land, one of 15 hotels in the
works in the city.E-commerce
titan Amazon has agreed to
lease more than 1.1 million
square feet of warehouse space
— think 15 football fields —
in Troutdale and Hillsboro in
the past year. It also intends
to complete three new data
centers in the eastern Oregon
towns of Boardman and
Umatilla, which could exceed
$1 billion in cost. Google and
Facebook are also finishing
up their own new data centers
in The Dalles and Prineville,
respectively. Oregon Health
& Science University, the
University of Oregon and
Portland State University are
at work on or planning expan-
sions worth more than $700
million. Multnomah County
is breaking ground on a $300
million courthouse, the city
of Portland is gearing up for
a $195 million renovation of
the Portland Building, and the
Port of Portland is launching
the first stages of a $2 billion
renovation and expansion at
Portland International Airport.
Labor shortage
The University of Oregon
Foundation last fall embarked
on a $70 million renovation of
Hayward Field, the Eugene
university’s famed track and
field venue. It was a plum
job for a high-profile client
— worthy of any contractor’s
portfolio.
And then, nothing. Subcon-
tractors weren’t interested.
“We had difficulty finding
any bids,” said Paul Weinhold,
chief executive officer of the
foundation. “They were too
busy. The bids we got were
10-15 percent higher than
we’d anticipated. It’s a little
spooky.”
The Great Recession
that took hold in 2008 was
particularly brutal on real
estate and construction. The
workforce plummeted from
about 100,000 to 60,000 in
Oregon, as workers retired or
found other occupations.
When the slow recovery
transformed into a storm of
development, no one was
prepared. Crews today are
working six and seven days
a week. Contractors have
scoured other states looking
for qualified labor. “The local
union is recruiting from all
over the country in an effort
to meet demands, but their
out-of-work list (of available
workers)
is
essentially
empty,” Killin told contractors
in his letter.
“Unfortunately, this spring,
summer and likely fall will see
a new normal of previously
unconsidered
workforce
shortages.”
Oregon Labor Commis-
sioner Brad Avakian blames
schools that eliminated voca-
tional classes and a society
enamored of all things digital.
“We were no longer
teaching young people that
this is a great career path,”
Avakian said. “We completely
ignored that people can earn
$60,000 to $150,000 with
benefits in these trades. These
are the people who built
Oregon.”
And though aggressive
recruiting has landed 830
people in the local electricians’
apprenticeship
program,
it’s not enough to cover
looming retirements, said Carl
Redman, president of Bear
Electric of Portland.
“I think it is fair to say that
if you want to work, there is
zero unemployment for elec-
tricians,” he said.
Much the same is true
for carpenters, excavators,
plumbers and the other skilled
trades. Steve Simms, who
oversees the construction
trade apprenticeship programs
for Avakian, said he knows of
1,000 jobs that could be filled
tomorrow.
The labor shortage has
led to delays and helped feed
rising construction costs.
Some developers allege it’s
also contributed to lapses in
quality.
Last month, Portland
developer Tom Brenneke’s
company sued Andersen
Construction, claiming it did
shoddy work on his Oxbow 49
apartment building in Johns
Landing. The problems stem,
in part, from the pressure to
work fast and move on to the
next job, Brenneke alleged.
“I paid Andersen $28
million, and what I got was
a bunch of quality-control
problems,” he said.
Andersen officials in a
written statement said “there
are different perspectives to
every story and since this has
moved into legal action we
would prefer not to try and liti-
gate this matter in the public
nor through the media.”
Exit strategy
Another powerful force
could counteract the apparent
residential slowdown and
encourage
even
more
development. Some of the
world’s most deep-pocketed
Institutional investors have
“discovered” Portland and are
eager to buy in.
These investment bankers
and pension fund managers
have trillions of dollars to
invest. Developers lucky
enough to attract their attention
are making small fortunes.
The Yard
apartment
building at the east end of
the Burnside Bridge took all
sorts of heat from critics who
thought it was too big, too
dark, too monolithic. But the
developers had the last laugh.
They had barely leased half
the Yard’s 284 units late last
spring when a Thai invest-
ment trust swooped in with an
offer to buy the building for an
eye-popping $126 million.
The developers, who spent
$84 million on the project,
quickly accepted.
Seattle-based
Urban
Renaissance sold the former
home of The Oregonian/
OregonLive in April for $95
million, six times its purchase
price for the downtown
Portland building. Last week,
Specht Development sold the
sprawling Northeast Portland
warehouse it built just two
years ago for $56 million.
Both deals were record-
high purchase prices in Port-
land, noted Chris Nelson, of
Capstone Partners, testament
to institutional investors’ new
regard for the region.
And yet, industry veterans
who’ve lived through the
collapse of other bullish
cycles, can’t help but be wary.
“Everyone agrees the party
has been going on a long
time,” said Jim Link, general
manager and executive vice
president of Skanska USA
Building in Portland.
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