Lincoln High School Redevelopment - Portland State University

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Lincoln High School RedevelopmentThe current state of the development market suggests that PPS plan for a conservative,phased approach to developing the site, based on a long-term agenda.Before 2007, one might have envisioned an extremely dense development on theLincoln High School site, rich with condominiums and luxury apartments, inconjunction with hundreds of thousands of square feet of office space and retail.However, what the market will currently bear is drastically different.The market for new office and retail space has been decimated because of a significantrise in vacancy and unemployment. The condominium market is at astandstill with an estimated two to three and a half years’ worth of inventory yetto be absorbed. Several condominium projects have been converted to luxuryapartments to avoid going into receivership, which in turn increased the supplyof upper-end rental housing.The Lincoln site is an island separated from downtown by I-405, making an officebuilding much less marketable than a site on the east side of I-405. Thoughthe distance to downtown is relatively small, the absence of a surrounding officedistrict on this portion of the downtown periphery dictates substantially lowerasking rents than comparable downtown buildings. The proximity of the GooseHollow MAX stop increases the attractiveness of this site, but still requires a 5-10 minute ride to the core of downtown. The necessary reduction in asking rentswould handicap any financial model constructed to justify the development ofsubstantial amounts of office space.Likewise, substantial amounts of retail space will not thrive in an isolated site.There is no other major retail user nearby and retail vacancies are at an all-timehigh. Any retail uses would have to be supported by the site itself, which, giventhe intended mix, could include a small convenience store, franchise service restaurantlike a Subway, coffee shop and daycare, but no retail of larger size wouldbe anticipated for this site in the near future.Market 24Center for Real Estate • BOMA Development Workshop • Summer 2009
Lincoln High School RedevelopmentMarket The hotel market has also taken a hit, forcing some local hotels to close for twoto four weeks in order to cut costs. Hotel financing is unavailable, room rents arelow, RevPAR is at an all-time low and occupancy levels are marginal. The site isnot well connected to supporting uses such as a retail center or executive offices.Any hotel located in this area would not be financially viable in today’s marketnor the near future. A discount hotel on the eastern side of the site mighteventually work but this market is very weak and risky, and the use is not wellintegrated with a school.Aside from these currently perceived shortcomings, there are still some unmetmarket demands. First, while the market for upper-income residential units hasbeen saturated, demand for urban workforce or family housing remains. Second,a strong demand for student housing persists despite the economic downturn,positioning this publicly owned site to capitalize on and supply needed studenthousing. Financing is available under the HUD 221(d)(4) and (3) programs forunits that are affordable for up to 80% of area median income.According to the Housing Authority of Portland, the 2009 area median incomefor Portland is $49,000 for a 1-person household, up to $70,000 for a family offour. At 80% of median income, the feasible rent for workforce housing unitscould range from $1,089 to $1,555 per month. Considering the proximity toPSU there is potential to quickly absorb up to 1,000 primarily student housingunits serving upperclassmen and graduate students. Unfortunately the financingoptions though HUD are unavailable for student housing specifically. However,college students meeting the income requirements are eligible for tenurein workforce housing and would likely be attracted to the intended unit mix ofworkforce housing. The current demand for student housing is approximately600 beds per year according to PSU facilities personnel, with workforce housingabsorbing another 300 units per year, projecting a combined absorption of up to900-1,000 units in the initial phase of intended development.The overall vacancy in rental housing in Southwest Portland has remained thelowest in Portland at 4.28% according to the Norris Beggs & Simpson MultifamilyReport 1st Quarter of 2009. Vacancies for new units are over 80 basispoints lower for the same area at 3.47%, according to same NB&S report.Center for Real Estate • BOMA Development Workshop • Summer 200925
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Lincoln High School Redevelopment - Portland State University

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