Portland's skyline-defining office towers, it turns out, aren't created equal.
Downtown skyscrapers have always been the most expensive business real estate in the metro area. And a small subset of "trophy towers" has always received the biggest premium of all -- a gap that is widening.
A recent analysis by the brokerage Jones Lang LaSalle found that six towers in downtown Portland stand apart: Fox Tower; First & Main; Moda Tower; the US Bancorp Tower; and two buildings in the Pearl District's Brewery Blocks.
Those buildings get an average $36.25 a year per square foot, compared to $31.81 for non-trophy members of the skyline set. This might not sound like a lot at first blush, but the price difference is similar to that between renting an office downtown and in Milwaukie.
Despite higher prices, they have lower vacancy -- about 6.5 percent, compared to over 10 percent for non-trophy office towers.
The widening gap reflects the changing way businesses are approaching their real estate needs, said Jake Lancaster, a managing director with JLL in Portland. Companies are looking for unique space in amenity-rich offices and neighborhoods as a way to attract new talent, and some building owners are better positioned to make those investments.
It also shows the allure of the downtown office tower isn't all it used to be. Location and square footage remain important, but businesses are increasingly looking for unique workplaces that can promote a sense of culture within a company.
That's increasingly pushing office tenants toward smaller, often historic buildings that have been adapted for office use. There, tenants can have more control in space can seem more authentic.
"Whether in the trophy classification or in the adaptive reuse class ... the owners are doing a very good job of moving away from the commoditization of the real estate," Lancaster said.
Owners of some of the middling office towers are looking to find their way into the skyline set.
ScanlanKemperBard Cos. of Portland bought the office portion of the KOIN Center for $88 million in January (the top floors are residential condominiums) with plans to spend $4.3 million on upgrades to the lobby and other common areas. It will also refit vacant office suites for open floor plan offices popular with tech and creative sector companies.
And New York Life Insurance Co., which bought the 20-story One Main Place for $87 million in January, is planning a major renovation.
"There's new institutional ownership, and these new institutional owners are seeing what's happening with trophy rents and what the potential is for their buildings," said Patricia Raicht, a vice president for research at JLL. "They're investing in those buildings to put them in the competitive landscape of the trophy buildings."
-- Elliot Njus
enjus@oregonian.com
503-294-5034
@enjus