The developers behind a planned Pearl District office tower are moving fast.
The nine-story Pearl West building, announced in January, is set to break ground next week after flying through the city's design review and permitting process.
Why the rush? The team behind the project, led by developer Walter Bowen's BPM Real Estate, wants to take advantage of one of the hottest markets for office space in the country at a time when there's little competition in the offing.
"They were pretty clear to us when we were being considered for the project that we need to be very aggressive getting the project through quickly," said Phil Beyl of GBD Architects Inc., which collaborated with THA Architecture Inc. on the project.
Work is expected to begin July 17 on Pearl West, which would make it the first new-construction, central-city office building since the recession to break ground - and without an anchor tenant in place.
The 230,000 square foot building - to be built on a half block at Northwest 14th and Irving on what's now a parking lot - fronts Irving Street along a block reserved for pedestrian traffic only.
The ground floor will include 10,000 square feet of retail space, sitting above three levels of underground parking.
Without a clear picture of what the building's tenants might be, architects designed the eight levels of office space with flexibility in mind. Tenants like law firms may prefer a finished look, while creative firms might want exposed concrete floors and bare ceilings that show off the building's structural elements.
"The Pearl District has kind of evolved to accommodate both ends of that aesthetic, and everything in between," Beyl said.
The project may be a post-recession first, but it could have competition soon.
The fundamentals of the office market in Portland look good. The metro as a whole has one of the lowest office vacancy rates in the country at 8.7 percent, according to the commercial real estate data firm CoStar.
In the central city - which includes downtown, Old Town and the Pearl District, as well as the Lloyd District - office vacancy fell from 10 percent to 9.5 percent in the year's second quarter. Businesses looking for big spaces report few options in the city's core.
And the Pearl District is even hotter. The vacancy rate for the limited office space that's been built there is 5.7 percent. Brokerage Jones Lang LaSalle reported last year that Northwest Couch Street is one of the nation's most expensive streets for office space.
"Several fast-growing Pearl District based companies have been forced to either split operations into multiple properties or leave the district," said Kevin Joshi, a senior vice president with brokerage Kidder Mathews, which is marketing Pearl West. "Based on current activity, we would not be surprised to have the building fully leased by substantial completion in the first quarter of 2016."
The $55.3 million project has a $41.74 million construction loan from led by Washington Capital with participation from ULLICO, a life insurance company for labor unions.
The flow of capital isn't really putting much of a limit on office development in Portland, said John Petersen, president of Melvin Mark Capital Group.
"Banks tend to get pretty nervous during a recession - like the one we just had - then they get pretty optimistic in the recovery," Petersen said. "They're willing to do as much as they've mostly ever wanted to do."
Instead, it's developers who are unwilling to take on the risk of new construction. Compared to Seattle and San Francisco, developers in Portland are "more careful," Petersen said.
And even as the economy has improved, the office market has seen some uncertainty that gives developers reason to be nervous.
The federal government helped keep Portland vacancy artificially low by remodeling its Edith Green-Wendell Wyatt building during the depths of the recession, shifting its workers into other downtown office buildings. Now those workers are moving back into the federal building, leaving vacancies behind in their wake.
Large users of downtown office space -- like legal and financial services firms -- are retrenching, signing leases for smaller, more efficient spaces. Meanwhile, developers are retrofitting older buildings to suit modern tenants, absorbing some of the demand that would have gone to new construction.
And construction of the Park Avenue West Tower, which sits between Park Avenue and SW 9th downtown, will add nearly 200,000 square feet of office space to the market, setting off another round of musical chairs for central-city office workers.