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Survey reveals industry firm’s optimism, challenges

Daily Journal of Commerce

October 22, 2019

Overview

A large-scale survey of Pacific Northwest real estate and construction professionals found widespread concern with environmental and housing regulation, and health care costs.

The top concern of 776 professionals surveyed was environmental regulation, with 60 percent naming it a major issue; it was followed closely by affordable housing and rent control at 57 percent. Following those concerns were taxation, at 41 percent, and health care reform, with 31 percent.

“Living and working in this market, one of the things people really value is the quality of life and the lifestyle and the natural environment,” said Stephanie Holmberg, leader of the real estate and construction industry group at Schwabe, Williamson and Wyatt, which commissioned the survey.

“From a business perspective, increased environmental regulation can be at odds with that.” The results are part of an “age-old tension” in the state, Holmberg said. Oregon lawmakers this past summer passed a law forcing contractors to use newer diesel engines on jobsites to reduce emissions.

Respondents to Schwabe, Williamson and Wyatt’s State of Commercial Real Estate and Construction in the Pacific Northwest survey were broadly confident in their companies, industries and regional economies. Nearly 75 percent indicated they were confident about the state of business. Construction industry leaders were somewhat more optimistic than their counterparts in commercial real estate.

“From my perspective, there’s plenty of work out there right now,” said Erik Timmons, president and CEO of Yorke & Curtis Inc., a construction firm based in Beaverton. “Things haven’t slowed as far as calls for new projects. The only market that’s slowed as far as Yorke & Curtis has seen is multifamily.”

However, contractors’ business may be a lagging indicator – for them a slowdown is apparent only when it hits the ground.

“We’re busy for now, but our pipeline, looking at it, is kind of thin,” said Tom DiChiara, principal at Cairn Pacific, a mixed-use developer that has three major projects under construction in the Slabtown area of Northwest Portland.

“I definitely am expecting a slowdown over the next two, three, four years,” DiChiara said. “Supply has caught up to demand. I expect there to be a flattening; it’s not going to fall off a cliff.”

Cairn Pacific may entitle one more parcel in Slabtown, but not build on it immediately, DiChiara said.

“We’ve been struggling with really low yields and really high costs on projects,” he said. “It’s tough to make new projects pencil.”

Timmons acknowledged contractors see the economic cycle from a different perspective.

“There has to be a leveling, but at the same time there’s this confidence in the market,” he said. “We know that something’s going to happen – but we don’t see it happening.”

Timmons said some projects are delayed by rising costs, and brought to a halt when new estimates come in.

“You’re just constantly getting stuck in not getting projects started even though they’re on the books,” he said.

In the Schwabe survey, Hillsboro and Bellevue, Washington, were most often cited as bright spots for future growth in commercial real estate and construction.

“We know that our region is strong at the moment in terms of the economy, and a growing market and population, and we’ve seen a lot of outside money coming into both Seattle and Portland,” Holmberg said.

Employee retention was another key takeaway for businesses. Ninety percent of survey respondents said they have an “employee-friendly culture,” while 84 percent said they offer “good workplace conditions, perks and amenities.”

Yet more than half of respondents indicated their biggest challenge is finding qualified employees, and 58 percent said they will increase their full-time workforce in the coming year.

The survey was conducted by the American Business Journals June 4 to July 9. Respondents were invited to the online survey by Schwabe, the Daily Journal of Commerce, the Puget Sound and Portland business journals and the Association of General Contractors of Washington.

The full study is available at www.schwabe.com/state-of-real-estate-construction.

Column first appeared in the Oregon Daily Journal of Commerce on October 22, 2019.

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