Economic Opportunities Analysis

TASK 4 — ALTERNATIVE CHOICES

Economic Opportunities Analysis

PORTLAND PLAN BACKGROUND REPORT FALL 2009

Acknowledgments

Bureau of Planning and Sustainability (BPS)Mayor Sam Adams, Commissioner-in-charge

Susan Anderson, Director

Joe Zehnder, Chief Planner

Steve Dotterrer, Principal Planner

Eric Engstrom, Principal Planner

Gil Kelley, Former Director, Bureau of Planning

CoordinatorsSteve Kountz, Senior Economic Planner, BPS

Alma Flores, Economic Planner, BPS

Prepared by E.D. Hovee and Company, LLC

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Table of Contents

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Note: This EOA analysis and report has been funded through a grant from the State of Oregon Department of Land Conservation and Development.

E.D. Hovee & Company, LLC for City of Portland: Economic Opportunities Analysis – Task 4 Alternative Choices

II.. IINNTTRROODDUUCCTTIIOONN TTOO EEOOAA AALLTTEERRNNAATTIIVVEE CCHHOOIICCEESS The City of Portland is conducting an Economic Opportunities Analysis (EOA) to comply with Oregon Statewide Planning Goal 9. Because of its location as the largest city in the Portland metro area, revisions to the City’s Comprehensive Plan (both the Portland Plan and Central City Plan) involve coordination with Metro population and employment allocations throughout the region. Portland has the opportunity to shape its plan in a way that fits not only state and regional goals but also locally determined priorities and choices.

Previous reports prepared for this EOA have addressed historic trends, future forecast of employment and industrial/commercial land needs, and available supply of potential building and land inventory to accommodate future demand. The intent of this Task 4 report is to address public policy choices arising from the forecast alternatives and supply constraints now identified – both over the next five years and over a longer term time horizon to 2035.

WORK APPROACH

1. Trends, Opportunities & Market Factors• Recent Trends • Sector Specializations

• Submarket Analysis • Focus Groups

BOP Review• Trend Refinement

• Forecast Implications

4. Alternative Choices• Growth Target Choices • Land Capacity Choices

• Public Investments & Incentives • Report (Draft & Final)

2. Forecast Demand• Job/Development Density• Redevelopment Demand• Disaggregated Forecast

• Short-term Needs

3. Available Supply• Vacant Land & Brownfields• Redevelopment Capacity

• Supply Definitions• Short-term Supply

Economic Opportunities AnalysisProject Approach

BOP Review• Demand/Supply Refinement

• Policy Implications

BOP Review• Summary Materials

• PowerPoint

The overall approach to this EOA is illustrated by the chart (to the right). Analysis prepared to date covers:

• Task 1 – review of trends, opportunities and market factors.

• Task 2 – forecast of employment and associated employment land demand to 2035.

• Task 3 – comparison of forecast demand with available supply.

This Task 4 report is focused on identification of alternative choices related to growth targets, land/development capacity and public investments/incentives. This discussion of alternative choices is informed by the results of the preceding Task 1-3 analyses and by discussion with a Technical Advisory Committee convened for this EOA.

E.D. Hovee & Company, LLC for City of Portland: Economic Opportunities Analysis – Task 4 Alternative Choices Page 1

ORGANIZATION OF TASK 4 ALTERNATIVE CHOICES DISCUSSION The remainder of this Task 4 report is organized to cover the following topics:

Alternative Choice Matrix Evaluation City-Wide Choices

Central City & Regional Center Office Close-In Incubator

Manufacturing & Distribution Neighborhood & Town Center Commercial

Commercial Corridor / TOD Campus Institutional

This is a review draft report, subject to revisions based on comments received from the Bureau of Planning and Sustainability (BPS) and the Technical Advisory Committee (TAC).


IIII.. AALLTTEERRNNAATTIIVVEE CCHHOOIICCEE MMAATTRRIIXX EEVVAALLUUAATTIIOONN This discussion begins by outlining a framework for identification and evaluation of alternative choices posed with this Portland Economic Opportunities Analysis (EOA).

Demand Analysis Topics. As occurred with the Task 1 analysis of trends (particularly focus group input), this policy discussion is organized around six demand analysis topics identified as being of particular interest to the City of Portland in its current Comprehensive Plan update:

• Central City & Regional Center Office • Close-In Incubator • Manufacturing & Distribution • Neighborhood & Town Center Commercial • Commercial Corridor / Mixed Use / Transit Oriented Development (TOD) • Campus Institutional

Also covered is the identification of choices that might be considered on a city-wide basis. While there is some inevitable overlap as between the incubator/manufacturing-distribution and neighborhood commercial/TOD categories, useful distinctions emerge that warrant continuation of these distinct categories through this policy framework analysis.

Range of Choice Options. The matrix chart on the next three pages depicts four sets of broad choices for consideration:

• Growth Targets – based on evaluation of alternative shares of regional employment growth within Metro forecast ranges to support economic competitiveness, equitability and sustainability.

• Development Capacity – with consideration of added vacant and low value improved land plus other capacity potentially available to meet demand by use type.

• Market Options – encompassing changing real estate options that will be delivered by the private sector but the pace and direction of which may be affected by public policy.

• Public Investment / Incentives – focused on effective alternatives to meet anticipated market demand and Portland growth targets.

Employment Growth. Of the four choice types, growth targets appear to offer the greatest opportunity for setting quantifiable targets. Recommended is a mid-range employment scenario of an added 150,000+ in-city jobs between 2010-2035, but with consideration of planning to also address Portland’s capacity to accommodate a high growth scenario of 200,000 net new jobs.

Timing & Geographic Considerations. In addition to these four broad choice factors, the matrix evaluation also serves to distinguish between short- and long-term opportunities, and geographic trade-offs within the City of Portland. Following presentation of this summary matrix, the remainder of this alternative choices report offers a more detailed discussion for each of the choice sets considered.


EOA Alternative Choices by Demand Topic Grouping

Demand Group

City Growth Target

Development Capacity

Market Options

Public Investment & Incentives

Timing & Geography

CITY-WIDE (394,000 jobs as of 2006)

• Target Portland capture of at least 27% of forecast PMSA mid-range job growth

• Minimum 150,000 net added jobs (mid growth scenario)

• Consider planning to assess high growth capacity for 200,000 net added jobs by 2035

• City-wide target 3,220 acres of land need, 75% met by vacant & low value but improved land sites

• Will need aggressive program to increase vacant developable supply plus some redevelopment of higher value sites

• Build & sustain competitiveness by targeting business clusters of emerging opportunity

• Extend beyond “picking winners” to culture of sustainability (yielding economic benefit across all business sectors)

• Business district operating fund match (including district-level technical assistance extending beyond URAs)

Short-Term: Update Comprehensive Plan with Goal 9 economic development objectives Long-Term: Achieve recognition as a sustainable global pathway city Trade-Offs: Traded sector focus for sustained prosperity

Central City & Regional Center Office (116,500 jobs Central City + 7,400 Gateway)

• Minimum Central City target of an added 50,000+ jobs by 2035

• Target 5,000+ added jobs for Portland’s Gateway Regional Center area

• Central City need more than amply met by available FAR headroom capacity

• Gateway needs added land and/or increased density (as zoned) to achieve jobs target

• Eastside office corridor (e. g. Gateway, PDX airport) for diversity

• Central City large site expansion (next Pearl, SoWa) for diversity

• Significant jobs capacity anticipated through redevelopment

• Consideration of increased FAR @ select sites with demonstrated demand

• Better district-wide live-work integration with workforce residential

• Right-sizing of office development to demand – including mid-rise structures & public-private demand aggregation function

• Renewed public-private marketing of Central City & Regional Center as the preferred business & worker choice

• Continued investment in the Central City as the PMSA’s vital core

• TIF, transit & public parking incentives for high wage employment and/or affordable residential

• Investment in a second Portland office node outside the Central City

• Regulatory streamlining with FAR & development oriented permitting options.

Short-Term: Regulatory streamlining, downtown marketing, office demand aggregation function & adaptive reuse for workforce housing Long-Term: New construction with office/ residential mixed use in downtown core & jump-start for new non-Central City office node Trade-Offs: Location/ timing of new Central City node & question of airport vs. Gateway as initial non-Central City priority


Demand Group

City Growth Target


Market Options


Timing & Geography

Close-In Incubator (18,500 jobs as of 2006)

• Make Portland the first home metro area business start-up activity (initially targeted to information & design firms)

• Target 7,000+ added Central Eastside & Lower Albina jobs (up by nearly 40% over current conditions)

• 75% of space need met by vacant & low value improved sites

• Expand range of permitted information & design services for diverse creative plus business service firms

• Expand zones with EOS-like overlays thru more of Central Eastside, Lower Albina and/or Gateway)

• Assure close-by, affordable residential

• Encourage low cost building rehab & new affordable Class B/C creative space design & construction options

• Facilitate green branding of the Portland incubator initiative – with sustainability built into building design, operations & green business practices

• SDC/permitting plus TIF/related incentives for low cost rehab & rapid occupancy change

• Financial incentives for housing investment in-district as allowed & adjoining residential neighborhoods

Short-Term: Planning, SDC & regulatory streamlining for more robust creative services Long-Term: Design & technical assistance with nearby residential incentives & incubator space marketing Trade-Offs: Pearl & Central Eastside focus near-term with questions of critical mass for Lower Albina, Gateway & town centers

Manufacturing & Distribution (80,700 jobs)

• Minimum 25,000+ added Willamette-Columbia corridor jobs (mid growth scenario)

• Add non-employment related industrial demand for transportation & logistics facilities of regional significance.

• Consider more detailed analysis of other potential economic drivers demonstrated to serve as valid predictors of industrial land needs

• Vacant inventory in balance with job-related demand (but not for 640 acres of regional transport sites)

• Maintain industrial sanctuary

• Provide for land extensive transport logistic & distribution functions of regional significance

• Encourage full site utilization & on-going reinvestment

• Consider options for an enhanced airport city concept around PDX

• Investigate options for Portland manufacturing vitality post-economic recovery

• Support opportunities for sustainable design/ business practices & increased FAR / site utilization

• Prioritize to high wage, traded sector offering a sustainability edge

• Public gap funding to resolve brownfield issues in tandem with private investment (comparable to greenfield site options)

• Continue SIP & other economic development investment funding

• Make transportation & utility improvements for site development with commitment of private investment & jobs

Short-Term: Industrial sanctuary & reserve capacity, post-recovery industrial strategy, economic toolkit & brownfield gap funding Long-Term: Land & infrastructure for transport functions of regional significance, industrial transport investment program & airport city concept adoption Trade-Offs: Primary tradeoffs between city & suburban metro counties or other locations in U.S. & globally


Demand Group

City Growth Target


Market Options


Timing & Geography

Neighborhood & Town Center Commercial (79,500 jobs as of 2006 + 5,100 jobs in 3 Town Centers)

• Encourage full city-wide 20-minute coverage with critical urban retail services

• 29,000+ added neighborhood commercial jobs by 2035 (a mid growth forecast target also including TOD/corridor areas)

• Added 4,000+ jobs in Hillsdale, Hollywood & St. Johns Town Centers

• Neighborhood commercial land capacity adequate to overall need while town centers have 60% unmet need unless FARs increase 3-fold

• Fill in 20-minute neighborhood gaps

• Increase neighborhood commercial FAR – for retail + complementary service commercial & mixed use

• Mixed use w/ residential & low-impact service industrial supportive of street retail

• Build neighborhood commercial & mixed use development expertise (with small business emphasis)

• Expand retail from 100% corners/nodes to diversify business mix

• Multi-year Main Street approach to coordinated business district revitalization

• On-going city-wide commercial revitalization program

• Incentives tool-kit for business improvement, development & cooperative marketing

Short-Term: Framework for 20-minute neighborhoods & incentives tool-kit Long-Term: Greater development intensity with mix of retail/non-retail commercial, expand out from 100% nodes Trade-Offs: Local versus destination customers (or layering); business & community vs. public sector led approach

TOD / Mixed Use Corridors (51,000 jobs as subset of Neighborhood Commercial)

• Plan for capture of at least 2/3 of neighborhood commercial growth – or 19,000+ added corridor jobs

• Target added demand to transit corridors (including an expanded city-wide streetcar system)

• Reach job targets via more FAR & higher value site development

• Prioritize streetcar expansion to market ready corridors w/ FAR headroom (both jobs + residential)

• Transition to form based zoning for more mixed use

• Create TOD building prototypes increasing the ratio of employment to residential space

• Tailor the mixed use formula to neighborhood market demographics & affordability

• Fund city-wide phased streetcar system extension

• Incent mixed use/TOD projects with a significant job component (retail & other)

• Incent placemaking features & amenities for pedestrian appeal

Short-Term: Fund 1st phase streetcar system; set Comp Plan & prototype TODs Long-Term: Achieve transit build-out; build TOD expertise Trade-Offs: Select corridors for existing density or to leverage new development?

Campus Institutional (37,000 jobs +5,800 w/PSU)

• Accommodate 100% of desired in-city campus institutional expansion & reconfiguration

• Minimum 29,000+ added in-city jobs by 2035 (mid growth scenario)

• Nearly 80% of need not met w/ current vacant & low value sites only

• Master plan density & on-site expansion + TOD satellite use

• Provide institutional zoning with rapid response capability

• Encourage traded sector specialization as part of institutional planning

• Broaden full-service capacities with mixed use development

• Transit service customized to institutional needs & ridership opportunities w/ reduced auto footprint

• Utility planning with updated master plans

Short-Term: Set institutional mechanism for partnership roles & auto trip reduction Long-Term: Facilitate traded sector & mixed use capacity Trade-Offs: Risks to core service mission


IIIIII.. CCIITTYY--WWIIDDEE CCHHOOIICCEESS With over 394,000 jobs as of 2006, Portland accounts for 40% of the 1.015 million jobs in the 7-county metro area (PMSA). Due to Portland’s historic and continuing role as a regional job center, the city’s 40% share of the region’s employment base is much higher than its 26% share of the region’s 2.1+ million residents. Services account for just over one-fifth (21%) of the City’s employment base – followed by health and social services, arts/accommodations/food services, education, retail, and manufacturing.

From 2000-2006, in-city job growth occurred at a rate averaging just 0.2% per year. This compares with non-farm employment growth averaging 0.7% annually for the 7-county PMSA.

Since 2000, net in-city job growth has also been focused on service (and management) jobs, followed by health and social services, education and arts/accommodations/food services. Available State of Oregon Employment Security Department (ESD) data indicates that all other sectors (including retail and manufacturing) experienced net in-city employment loss.

Future employment, industrial/commercial needs and resulting city-wide choices can be set within this broad context of existing conditions and recent trends. Key policy choices reviewed with this EOA relate to city-wide growth targets, land capacity, market options, public investment and incentives, and timing and geographic considerations. Each of these choice options is considered, in turn.

CITY-WIDE GROWTH TARGETS City-wide growth targets can be differentiated between those that drive employment growth and supplemental factors critical for the translation of job growth to building space and land demand.

Employment Growth. Two primary variables influencing anticipated employment growth for the Portland metro area are considered with this EOA analysis:

1. Metro’s overall employment forecast. Consistent with Metro’s recently released employment Urban Growth Report, a range of forecast alternatives is provided. The average annual job growth rate from 2010-2035 ranges from 1.5% per year (with the low scenario) to 1.9% with the high scenario. Specifically noted is that the rate of growth projected with all three regional forecast scenarios is above the 0.7% regional job growth rate actually experienced from 2000-06. As a result of TAC input and to narrow the overall forecast range, Metro’s mid-range projection of 1.7% annual job growth is given primary emphasis with this EOA analysis.

2. Portland’s anticipated share of regional employment growth. As with the regional job forecast, the potential for up to three alternative scenarios have been evaluated in terms of Portland’s anticipated capture of future job growth. While Portland currently has an approximate 40% share of the region’s employment, its capture rate has declined over time with higher rates of population and employment growth experienced elsewhere in the PMSA.


From 2000-06, the City captured only 11% of net added jobs throughout the region. Portland’s anticipated capture of future job growth to 2035 ranges from about 18% of net new jobs with a low scenario to 36% with high growth. Note: for consistency of comparison, these capture rates are calculated against the Metro mid-range scenario.

The resulting forecast range of added in-city jobs anticipated over the 2010-2035 period is summarized as follows:

• Low Scenario (+100,000 jobs) • Mid Scenario (+150,000 jobs) • High Scenario (+200,000 jobs)

These job growth scenarios reflect a range that has been narrowed from what was previously considered with the initial draft of a Task 2/3 analysis based on input from the City of Portland and EOA Technical Advisory Committee (TAC). The following chart depicts the results of these first two forecast allocation steps – together with the next four steps that follow.

Portland Demand Scenario Forecast Steps Summarized Forecast Variable Low Scenario Mid Scenario High Scenario Employment Growth: 1. Metro PMSA Job

Forecast (2010-2035) ---1.7% AAGR (mid-range Metro forecast across all scenarios) ---

2. Portland Capture of PMSA Job Growth (calculated on PMSA mid scenario)

18% Capture (0.9% AAGR)



1+2 Resulting Job Forecast + 100,000 + 150,000 + 200,000 Building/Land Need: 3. Job Allocation

to Building Types ---------------------- Constant across all scenarios ----------------------

4. Typical Building Square Feet per Job

---------------------- Constant across all scenarios ----------------------

5. Floor Area Ratios (FARs)

Central City increases by 16%, other non-industrial by 10%, industrial constant



6. Special Land Needs ---- Determined separately for airport, rail and marine terminals ---- Note: AAGR denotes annual average % growth rate through the forecast period. Source: Metro, City of Portland and E.D. Hovee & Company, LLC.

The Metro regional employment urban growth report (UGR) recently released does not include job forecasts specific to individual jurisdiction boundaries but is organized by market subarea. However, the forecast range noted above for Portland corresponds well with Metroscope forecast outputs – indicating a range of from about 113,000 added jobs for Portland geographies (low scenario) to 149,000 (mid scenario) to 202,000 (high scenario).


Also noted is that the Portland-specific scenarios (ranging from 100,000-200,000) all are above the City’s recently released economic development strategy – indicating a growth target of 10,000 added in-city jobs over the next five years. To achieve the low forecast figure of 100,000 in 25 years, an average of 20,000 net new jobs would need to be created in each 5-year period. However, given the effects of the economic downturn, the pace of new job development short-term may well below the long-term need, especially in the early stages of economic recovery.

Building/Land Need. Four additional variables are identified as next steps to translate Portland employment growth into building (square footage) and associated land (acreage) needs:

3. Job allocation to building types. Six building types are identified – retail, office, institutional, flex/business park, general industrial, and warehouse. This step aggregates 18 job classifications into a more manageable set of six overall types, and groups jobs according to typical space needs (such as square feet per employee). The allocation of jobs to building types is informed both by regional Metro data and the City of Portland’s 2006 sectoral shares across geographic subareas.

4. Typical building square feet per job. Information has been applied based on building type information prepared by Metro with modifications for industrial building types based on the City prepared Industrial Atlas data.

5. Floor area ratios (FARs). Ratios used primarily reflect observed FARs by geography as reported by BPS development capacity dataset. FARs are defined as building floor area divided by site (or land) area.

6. Special land needs. Consistent with DLCD Goal 9 methodology, most industrial/ commercial land need is determined based on anticipated job growth. However, some land needs do not have a direct relationship to job growth as little building area is typically required. This is notably the case for transportation related terminals important to serve the entire region – for air, rail and marine service. Information for these potential needs has been identified with input from the City of Portland BPS and Port of Portland.

Of the four building/land need measures, only one of these measures (FARs) are varied between the low, mid and high range scenarios. Increasing FARs with higher growth scenarios has the effect of somewhat dampening resulting land demand, below what would otherwise occur.

Forecast Scenario Results. The range of city-wide job growth anticipated with these three forecast scenarios is indicated at:

• Low Demand (+ 100,000 net new jobs from 2010-35 – for 1,340 acre gross land need) • Mid Demand (+ 150,000 net new jobs – with 2,580 acre resulting land need) • High Demand (+ 200,000 net new jobs – for up to a 3,470 acre land need)

Resulting net added industrial and commercial building space demand ranges from 48-97 million square feet (depending on the growth scenario). Non-industrial use accounts for the majority of the potential building space demand – across all three demand scenarios.

As noted, employment driven land needs range from less than 1,350 to nearly 3,500 acres of gross land area. To this can be added up to approximately 640 acres of industrial land need not


directly linked to employment growth – for regional transportation / logistics marine, rail and airport related functions of significance to Portland and the metro region.

These gross acreage needs may be met through some combination of development on currently vacant land and redevelopment. As part of the Task 3 land capacity analysis, the ‘default’ mix of greenfield capacity is determined first, with the remaining land need estimated as a residual to be accommodated through redevelopment to the extent feasible. Where redevelopment proves to be not possible – whether for reasons related to market, cost or policy considerations – that demand opportunity could be lost to Portland and (in some cases) to the metro region.

Recommended Growth Targets. City of Portland capture of regional job growth over the 2010-35 time period ranges from 18% (with the low growth scenario) to 27% (mid growth) to 36% (high growth). As of 2006, Portland had an estimated 40% share of all employment in the 7-county Portland metro area; however, the city captured only 11% of net new jobs in the Portland metro area over the 2000-06 time period.

Recommended with this EOA is a mid-range employment scenario of a minimum of 150,000+ added in-city jobs between 2010-2035. Also recommended is consideration of planning to address Portland’s capacity to accommodate a high growth scenario of 200,000 net new jobs.

DEVELOPMENT CAPACITY Capacity options are directed to yield maximum opportunity for the full range of added jobs together with industrial and commercial development land needs for any of the Metro regional and City share scenarios envisioned through 2035. Primary variables affecting land capacity are:

• Vacant and shovel ready industrial lands • Constrained sites • Redevelopment of previously developed properties – including vacated brownfield sites

and existing developed properties with relatively low ratios of improvements to land value (especially non-industrial parcels with improvements valued at less than 50% of land value)

For this analysis, gross acreage land demand is compared with the vacant plus low value improved land supply. Anticipated development capacity is set to levels of development intensity (or FAR) consistent with market trends. With redevelopment of low value lands of less than 50% improvements to land value, development capacity is adjusted down for the existing square footage of existing building use – thereby indicating the net added development potential.

Industrial & Commercial Development Capacity. Preliminary Task 3 employment capacity analysis indicates that:

• With a low growth scenario, Portland appears to have an adequate inventory of vacant and low value improved land to accommodate employment-driven industrial and commercial demand in total. However, key demand/supply mismatches by specific demand group category are noted. When special transportation/logistic needs are added for airport runway, marine terminal facilities and rail year capacity within the 25-year


forecast period, Willamette-Columbia corridor (the likely recipient of these uses) reports a roughly 100 acre shortfall. Supply also falls short of demand in some but not all the commercial areas. Institutional uses are projected to experience the largest supply shortage (though this could be addressed in part with higher FAR of future development).

• With a mid growth scenario, the total vacant and low value land shortfall is estimated at just over 825 acres (with the shortfall potentially reduced to less than 200 acres if transportation and logistics needs are not met over the planning horizon). Excluding transport/logistic needs, vacant lands within the Willamette-Columbia Corridor (harbor and east) industrial districts appear to be approximately in balance, though a shortfall is noted for Central City industrial (including design and information services). The Central City appears to have adequate overall capacity assuming that a substantial share of new development continues to occur on lesser improved, previously developed parcels. Adequate development capacity is also indicated for neighborhood commercial. Supply limitations appear to be most pronounced for institutional uses (short by 365 acres) and for regional and town center areas. These shortfalls can be at least partially resolved if it is assumed that supportive market and policy factors are in place to facilitate redevelopment with increased FAR density as job growth demand occurs.

• With a high growth scenario, the potential vacant and low value land supply shortfall city-wide increases to nearly 1,400 acres (including regional transport/logistics needs). Industrial districts would be short by more than 300 acres, increasing to close to a nearly 1,000 acre deficiency when regional transport/logistics needs are included. Except for the Central City, commercial districts would fall further behind, with redevelopment rather than vacant land inventory needed to accommodate approximately 20% of net added building space needs city-wide (and more than 90% for institutional uses).

Recommended Capacity Approach. Metro’s Employment Urban Growth Report (May 2009) applies a range of redevelopment (or refill) rates for industrial and commercial uses across nine distinct subareas of the tri-county UGB region. Employment growth and building space demand that can be accommodated by refill is then deducted from the calculation of remaining acreage need for the UGB.

This EOA covers the same factors but suggests reversing the sequence of the Metro methodology as more applicable to Portland’s situation. Recognizing that a more limited supply of greenfield sites will require added redevelopment than is true for much of the rest of the region, this capacity approach involves:

• First, allocating projected employment and building space (as well as special regional transportation land) demands to:

The existing unconstrained vacant inventory. A portion of the constrained vacant (including brownfields) inventory. Low value already developed commercial sites (with improvements value of

less than 50% of land value) based on demonstrated capacity for commercial area and mixed use redevelopment in recent years


• Second, allocating any remaining unmet demand to redevelopment and intensified use of

existing industrial and higher value commercial sites – typically at higher FARs than exist with the site as currently developed.

To the extent that shortfalls in development capacity are experienced, the City of Portland would need either to increase land availability (as with annexation and/or UGB expansion) or would lose some portion of competitive share to other parts of the metro area (or to other areas outside the region). As the City is relatively constrained by other existing jurisdictions in most directions, options for annexation and UGB expansion are extremely limited.

An option for consideration beyond the direct scope of this EOA is with West Hayden Island, which is now included within the Portland UGB but has not been annexed. West Hayden Island is designated as Marine Industrial Land on the Metro 2040 Concept Map and as a Regionally Significant Industrial Area with the Title 4 map of the Urban Growth Functional Plan.

MARKET OPTIONS Market options represent discretionary choices primarily to private employers and development firms as means to accommodate demand for industrial or commercial development.

Private Sector Role. Implementation of public policy objectives that might result from this EOA depends on corresponding private initiative and investment. Key private sector choices available include:

• Whether or not to locate a business and/or construct a building facility in Portland, elsewhere in the metro area, or outside the metro area.

• How much to invest, when and where. • The form of building development or occupancy (covering such factors as building

height, design features, accommodation of parking, loading and storage needs).

The City, metro region and state of Oregon have taken a more active role in land use planning and growth management than many other places nationally or globally. Private businesses can respond to in a way that facilitates, impedes or helps to refine public policy objectives. In some cases as with Central City and transit-oriented development, private sector developers often have taken the initiative, as with projects involving increased densities of development.

In other cases, private sector concerns with business cost structure and logistics may lead to decisions that suggest disinvestment or relocation. This is particularly the case for industrial firms that compete globally and for whom maintaining a competitive cost structure relative to other facilities internationally is critical to business sustainability.

Public Sector Role. Because the private rather than the public sector is responsible for most development investment (except for public facility structures), the public sector typically can only indirectly influence the development decision rather than actually cause new investment to occur. Key means of influencing private decisions include approaches to assuring land/development capacity and associated regulatory approach together with public investment and incentives (discussed below).


Supportive public policy and technical assistance also can play a pivotal role in helping to shape what is perceived as a positive business climate. This may be of greater importance in the short-term due to the need to stimulate recovery from rates of unemployment that currently are among the nation’s highest.

Barriers to City-Wide Employment & Economic Sustainability. Despite Portland’s historic and continued role as a job center serving the entire region, the experience of the last several decades (and especially since 2000) indicates that this continued role is by no means assured. Business owners and industrial/commercial real estate investors make decisions about where and how to invest based on evaluation of the alternatives available.

For many though not all commercial businesses, those comparisons are between Portland and other communities of the metro area. For industrial and other traded sector businesses that compete globally, comparisons are often with locations well beyond the Portland metro area.

This EOA analysis has identified barriers to future city-wide employment and economic sustainability that include:

• An increasingly limited supply of shovel, ready unconstrained vacant land suitable for immediate development.

• Need to address supply constraints including brownfields issues for industrial sites – if Portland is to remain competitive regionally and globally for traded sector investment.

• Growing dependence of commercial and institutional development on redevelopment of low valued land (with lesser improvements value), coupled with need for increasing FARs and business profitability to support higher rental rates and property costs.

• Business concern expressed through focus groups conducted with this EOA that economic development go beyond favoring some business activities to encompass clear support for nurturing the broader spectrum of diverse business activities city-wide.

These barriers may prove more challenging to address during a period of economic slowdown and recovery with more limited private and public sector resources available than was the case previously. At the same time, the economic slowdown may stimulate opportunities to consider plan and policy changes that serve to facilitate a more robust recovery as the fundamentals of market demand strengthen both regionally and globally. How this repositioning in the short term (over then next five years) occurs may well affect realistic prospects for how effectively job growth targets are realized over the longer term (of the next 25 years).

Recommended Market Approach. Recommended is a strategic approach aimed to encourage continued private sector initiative to achieve City and regional economic development objectives while also providing the early warning capacity to address private concerns that could lead to unnecessary disinvestment or business relocation away from Portland.

The City, region and state have identified business clusters representing targets of opportunity for sustainable economic growth. Increasingly, this region is finding that it has a brand identity if not competitive advantage for firms oriented to sustainable development and business practices. Created are opportunities to further expand this region’s competitive niche for green business


development whether or not the business is part of an identified business cluster. As is noted by the recently released Economic Development Strategy: A Five-Year Plan for Promoting Job Creation and Economic Growth, “Portland’s economic future lies in its greatest strength, the sustainable way of life that has been meticulously cultivated over the last 40 years.”

The economic development strategy recommends that Portland focus its resources on building and sustaining competitiveness in four industry cluster concentrations – Clean Tech and Sustainable Industries, Activewear, Software and Advanced Manufacturing. These clusters span across conventional NAICS based industry classifications. They are all aimed at enhancing Portland’s competitive position and brand “as a leader in sustainability will translate into growth in revenues and profits” for the city’s existing business base as well as targeted business sectors.

Other key aspects of this strategic approach to economic development are objectives for an international strategy of encouraging exports and attracting foreign investment, excellence in higher education, workforce development, sustainable building, vibrant Central City, selling the Portland brand, and neighborhood business vitality.

Recommended are two primary market options for consideration with this EOA:

• Building and sustaining competitiveness for Portland by promoting business clusters of emerging opportunity. This approach is reflected by the economic development strategy recently completed by the Portland Development Commission.

• Extending beyond “picking winners” to a broader culture of sustainability. In effect, this culture of business and ecosystem sustainability can extend across the full range of commercial and industrial business activities – while carving a distinct competitive edge for businesses serving customers both locally and internationally. In this context sustainability is meant to encompass not just green design and business practices but the broader “triple bottom line” of economic, social and environmental benefit.

PUBLIC INVESTMENT & INCENTIVES A clear objective of this EOA is to identify and evaluate opportunities and limitations of public investments, development incentives, and other public interventions to meet added market demand both short- and long-term.

Public Sector Resources. Types of resources available directly or indirectly to the City of Portland to affect positive economic development outcomes include:

• Infrastructure investment – as with street and transit infrastructure, utilities, and brownfield remediation assistance.

• Ongoing City services – as for police, fire, parks/recreation, and development services essential for quality of working environment and timely response to business issues.

• Regulatory environment – reflected through the City’s Comprehensive Plan, zoning and building development procedures.

• Direct business services – as generally provided through the Portland Development Commission (PDC) including location and site selection, financial incentives and


services, retention/expansion/recruitment services, development assistance, regional partnerships, workforce connections and promoting business cluster concentrations.

• Technical assistance – provided both directly to individual businesses (as with the PDC-sponsored development opportunity strategy (DOS) program) or to neighborhood business districts (as with Business Improvement Districts or the City’s Main Street initiative).

• Direct financial incentives – including resources available in designated portions of the City (primarily via PDC) as with urban renewal districts and associated tax increment funding, enterprise and e-commerce zones.

Recommended Public Investment/Incentives Approach. With this EOA and updated Comprehensive Plan (Portland/Central City Plan) process, there is renewed opportunity to formulate and adopt a city-wide economic development strategy that could be viewed as a primary tool for:

• Implementation of the updated Comprehensive Plan • As a Council-adopted means of providing inter-bureau coordination of resources for

short-term economic recovery and long-term on-going economic development.

There have been times when the City has had an adopted, unified approach to economic development, as with the Comprehensive Development Strategy (CEDS) that has been used as a basis for coordination of federal and local economic development resources. A similar but updated approach as with the just released Economic Development Strategy could prove critical – especially over the immediate future as Portland confront substantial employment needs associated with the current economic recession.

While much of the public sector role has focused on one-time capital investments and incentives, on-going business district operating matching fund support is recommended for consideration. This would be similar to PDC’s Development Opportunity Services (DOS) program currently available on a business-specific basis.

The difference is that the current DOS program is building or business-owner specific, a program that should be continued. Also recommended is a similar “grass-roots” approach that could be generalized and extended to meet the needs of multi-block business districts.

TIMING & TRADE-OFF CONSIDERATIONS With city-wide as well as demand-specific initiatives, additional consideration is given to distinguishing between short- and long-term opportunities, and to geographic or other trade offs that may be important to address with plan implementation.

Short-Term Opportunities. As has become increasingly evident due to the severity of the economic recession, the short-term outlook (extending through much of the 2010-15 period) can be expected to be primarily about economic recovery. The duration and breadth of the recovery experienced will prove instrumental in setting the stage for a longer term path of more sustainable growth and development both regionally and for the City of Portland.


This near-term focus also offers previously unforeseen opportunity to address critical issues that will be important to the City’s subsequent competitive position post-recovery. Examples of key opportunities to address short-term include:

• Adopting updated Portland and Central City Plans with explicit Goal 9 economic development objectives, implementation tools and resources.

• Substantive steps to resolve brownfield liabilities so that development can proceed with greater certainty and financial feasibility. Note: while the City can influence this issue, cooperative actions of state and federal agencies are also required.

• Setting the stage for the next wave of infrastructure investments important for economic competitiveness (e.g. Columbia River Crossing, city-wide streetcar system plan).

• Creating a green business agenda that extends across the entire spectrum of Portland’s industrial and commercial business sectors.

Long-Term Opportunities. Beyond 2015, the City’s longer term opportunities hinge on the extent to which Portland can achieve greater prominence as a competitive global pathway city, with greater diversity of businesses more resilient in the face of future economic downturns and focused on high wage jobs for Portland residents. “Global pathway” markets have been defined by the national Urban Land Institute as generally comprised of “favored 24-hour coastal cities” which can be expected to prosper in the evolving global marketplace, maintain values better and bouncing back more quickly from economic downturns. Demand sector specific opportunities are addressed with the demand group discussions that follow this city-wide overview.

Trade-Offs. Perhaps the most important geographic tradeoff for consideration with this EOA may lie in the priority given to varied industrial and commercial (including mixed use) development opportunities. Traditionally, industrial development has provided higher wage jobs than commercial activity. However, a more varied pattern of wage levels is now found both within both industrial and commercial sectors.

Higher wage jobs continue to be associated with firms that have a traded sector focus, exporting a substantial portion of their goods and/or services outside the Portland metro area. This traded sector function traditionally has applied primarily to manufacturers; it also increasingly applies to a number of business, financial and creative service firms (including information and design services) who sell their goods or services throughout the U.S. or globally.

In addition to geographic tradeoff, other tradeoff potentials are noted as between:

• Extent of development versus redevelopment. • FAR of development – especially for non-industrial uses.

Recommended for consideration with this EOA is more focus on higher wage employment (including jobs offering career advancement) with traded sector firms together with forging innovative approaches to recycling underutilized (including brownfield) sites – all as part of a coordinated city-wide economic development strategy implemented with this Comprehensive Plan update.


IIVV.. CCEENNTTRRAALL CCIITTYY && RREEGGIIOONNAALL CCEENNTTEERR OOFFFFIICCEE Central City and regional center office is the first of six demand groupings considered in detail with this EOA policy discussion. The City of Portland’s mid-high rise office development is focused on multi-level structures of approximately 4+ stories, generally supported by some component of on-site structured parking.

Mid-high rise office product is predominantly concentrated in the Central City (especially the Downtown/CBD and Lloyd District). Densities step down in the River District, North Macadam/John’s Landing (which still relies upon surface parking), and the Central Eastside (where recent multi-story development has been fueled by warehouse renovations).

As of 2006, Central City commercial districts accounted for close to 116,500 jobs (or nearly 30% of the nearly 395,000 jobs in the City of Portland). When the Central City Plan industrial incubator districts of Central Eastside and Lower Albina are included, the job total increases to just under 135,000, or 34% of total citywide jobs.

Services represent the most common job type accounting for over half of total Central City employment. Other supporting and complementary Central City employment activity is represented by retail/arts/accommodations and public sector employment. Overall, Central City jobs increased at a rate of 1.6% annually between 2000 and 2006, with higher rates of growth in the University, River District, Lloyd District (and Central Eastside) portions of the Central City.

Mid-high rise office development is most often seen in the Central City but has also occurred at some (generally more isolated) locations outside the Central City. The Gateway Regional Center has an existing employment base estimated at 7,400 jobs as of 2006, with health services dominating office-related use. Other more dispersed areas of the region also include lesser concentrations of office space including town centers and emerging areas as in the immediate vicinity of Portland International Airport.

Major medical and educational institutional uses have been a significant driver of mid-high rise buildings outside of the core area. These more institutionally oriented users are considered a separate demand type by this EOA policy discussion.

Mid-high rise office product is typically differentiated between:

• Class A – the primary though not exclusive focus for most Central City new construction. • Class B – representing older buildings generally constructed prior to the 1960s, often

offering rehab or upgrading potential. May include newer low-mid rise structures with a lower level of interior finishes than Class A space.

• Class C – including both historic Central City properties and, in some cases, more recent construction of lesser cost low rise office product generally at the edge of or outside the Central City.


As with the city-wide discussion, key policy choices reviewed for Central City office relate to growth targets, land capacity, market options, public investment and incentives, and timing and geographic considerations. Each of these choice options is considered, in turn.

CENTRAL CITY & REGIONAL CENTER GROWTH TARGETS Portland’s share of PMSA employment has been declining in recent years. The low growth scenario reflects low regional job growth and a continuation of recent loss of office market share; Portland’s market capture could decline to 75-80% of its current shares of regional office employment in key professional, finance and administrative functions by 2035.

However, even in a low growth scenario, the Central City is expected increase its total job base. With mid or high demand scenarios, the rate of loss of market share is reduced, to about 90-95% of current shares with a high demand scenario.

Forecast Scenario Results. The range of Central City job growth anticipated with these three EOA forecast scenarios is indicated at:

• Low Demand (+34,220 Central City jobs, +3,860 for Gateway Regional Center) • Mid Demand (+50,120 Central City jobs, +5,040 for Gateway Regional Center) • High Demand (+65,010 Central City jobs, +6,120 for Gateway Regional Center)

Approximately one-half of Central City net job growth would be associated with increases in private sector office-related employment. Other key sources of projected Central City job growth are retail, institutional and flex space building space demand.

As indicated, the Gateway Regional Center (possibly together with Town Centers as well as some other areas as in immediate proximity to the Portland airport) also can be expected to experience substantially increasing office-related job growth potential, especially with a high demand scenario.

Recommended Growth Target. Recommended is a minimum net job growth target in the range of the mid-demand scenario of approximately 50,000 Central City and 5,000 added Regional Center jobs. As noted, Central City job growth will be about half related to added private sector related office space employment. In the Gateway Regional Center, office employment demand most likely would represent a smaller 20-25% share of anticipated district job growth (with a possibly larger share of growth in a high demand scenario).

As has occurred with the City of Portland’s 1995 adoption of the Central City Transportation Management Plan (CCTMP), planning for a more expansive high growth scenario also is recommended. This approach is useful to better assure that transportation and other infrastructure capacity is in place to accommodate and encourage added Central employment demand. This strategic choice could also prove pivotal to maintaining a continued strong competitive position for Portland’s Central City as the dominant office center for the Portland region rather than encouraging undue decentralization of office employment as has occurred in many other metro regions of the U.S.


DEVELOPMENT CAPACITY Need for added Central City and related office site needs can be obtained by comparing forecast demand with the inventory of vacant and low value sites. If vacant and low value land acreage proved inadequate to accommodate forecast growth, the remaining net demand might need to be accommodated either by redevelopment of some portion of the existing higher value inventory or transfer of unmet demand to other areas of Portland or the metro region.

However, this does not appear to be a significant issue due to the amounts of FAR headroom available to the Central City – with headroom defined as the difference between either zoned or market-supported development intensity minus square footage on the ground today

Added need for building space associated with new employment is projected at 19 million square feet over 25 years with the mid-range targeted scenario (or a range of low to high demand of between 13-25 million square feet). All of these figures are well within the 53-68 million square feet of market-supportable development capacity associated with vacant and low value improved sites alone.

When all Central City properties are considered (including properties with higher ratios of improvements to land value), the long-term added zoned FAR headroom for the Central City is estimated at 220 million square feet. Headroom capacity based on a Central City wide current market-support average 5:1 FAR is estimated at 135 million square feet.

Central City Implications. Under virtually any forecast scenario of Central City office growth, the following observations are noted:

• When considered on its own, there is more than adequate capacity to accommodate a wide range of employment scenarios assuming development of existing vacant plus lesser improved low valued sites.

• Historical data currently available indicates that upwards of 65% of new Central City buildings have located on redeveloped (rather than vacant) sites. Unless large acreages of vacant or prime redevelopment tracts are made available, it is a reasonable expectation that this pattern should continue into the future.

• The extra capacity calculated narrows when effects of residential use of Central City property also considered. While not an explicit part of this EOA, a 2005 analysis conducted for the Westside (with streetcar-related development) indicated that approximately 2/3 of newly constructed space since 1997 was for residential building area and only 1/3 was for commercial employment-related development.

• However, even if residential were to account for 2/3 of overall Central space demand over a longer period, the vacant plus low valued inventory appears to be adequate with either low-mid growth scenarios.

• With high growth, there would be substantially more competition for remaining lesser improved properties, meaning that more development would need to shift to redevelopment of already improved higher value sites (which would likely occur primarily during periods of very strong overall regional economic growth). While there remains ample zoned FAR headroom downtown for decades to come, site choices that


prove to be feasible from the perspectives of market and financial feasibility could begin to become more constrained, especially toward the latter part of the 2035 forecast period.

• The net result with either mid-high growth generally should be expected to be an increase in average building height and FAR. However, lack of large corporate office tenants in Portland coupled with current and perhaps continuing tightened pre-lease and financing requirements could lead to some downsizing of future office projects driven by anchor uses that commit to lease in advance of a decision to construct.

• There is more than enough FAR headroom potential in the Central City so that added office space need not occur as high rise office towers only. No Central City geographies have been identified in which existing FARs uniformly approach allowable FARs. In effect, some portion of development also could continue to be accommodated in mid-rise and mixed office/residential structures.

Implications for Regional Centers & Other Office Nodes. While this capacity analysis indicates more than adequate Central City office capacity through the forecast period, there are two primary reasons identified with this EOA to consider encouragement of creating new office nodes in Portland, particularly toward the mid to latter portion of the 25-year EOA forecast period:

• First and perhaps most importantly, creation of added office nodes provides greater opportunity for the City of Portland to offer an office product more directly competitive with lower rise (4-8 story) and larger footprint (including campus oriented) office parks and individual developments currently focused in the suburban market around Portland. Greater diversity of office product would better enable in-City locations to recapture competitive share of the office space market that has been lost over the last 1-2 decades.

• Second, the ability to locate office space closer to where employees live offers the opportunity to better serve parts of the City that have relatively few jobs compared to population and achieve commute trip reduction. This is a particular opportunity represented by development of a second office node on the east side of Portland, as potentially represented by the Gateway Regional Center or Portland airport area.

Capacity Approach. The following specific recommendations are offered as strategic approaches to better assure adequate capacity for Central City and Regional Center office development product over a 25-year forecast period to 2035:

• Encourage creation of a new eastside Class A (or possibly mid-rise Class B) office center or corridor in Portland to supplement the Central City role, better leverage eastside workforce opportunities, and maintain Portland’s share of regional office employment. To some degree, this objective could be met by development throughout any of the City’s regional and town center areas. However, creating a critical mass likely will require focused attention on a single center (such as Gateway or the Portland airport area). As noted, a new office node is most viable with a commitment to mid-high in-city job growth, as a means to remain competitive with other suburban locations in the metro area and to better serve east Portland workforce needs.


• Within the Central City, consider steps to identify at least one area potentially suitable for

large footprint office use. This could be a distinct office niche as identified by focus group participants that would better enable the Central City to maintain a high share of regional office development. A large footprint district that could play the role of the next Pearl or South Waterfront, but would be predicated on greater emphasis for employment rather than residential as the driving development impetus. Potential candidates might include the Conway property and/or high priority/gateway locations within the Central Eastside. Also important is the determination of an appropriate time frame for phase-in of development to avoid unnecessary dilution of initiatives with existing Central City districts.

MARKET OPTIONS As noted, market options represent discretionary choices primarily to private employers and development firms as means to accommodate demand for office-related development. With the exception of buildings for governmental functions, the delivery of new or renovated office space in Portland is accomplished by private real estate development firms, who generally build for multiple tenants in any single office structure.

Barriers to Central City & Regional Center Office Development. After a period of rapid Central City office development in 1970s and 1980s (stimulated by Transit Mall investment), Downtown in the 1990s went for the better part of the decade without a single new Class A multi-tenant office structure – despite rapid employment growth occurring regionally.

Lack of downtown office development during this period can be attributed to a variety of factors including creation of new suburban Class A office alternatives (such as Kruse Way in Lake Oswego), migration of office demand to non-Class A space (notably business parks and former retail space), and relative absence of major corporate tenants able to commit to enough space to justify the large amounts of building square footage associated with new high-rise construction.

During this time period, Central City focus also shifted from office to residential and mixed use as new drivers of core area development. In recent years, this has had the previously unanticipated effect of generating new office demand closer to residential, notably in the Pearl/River district. The increased role that a mixed residential-commercial neighborhood can play for the downtown core area received particular attention and recommended priority from developers participating with the Central City office focus group.

For the Gateway Regional Center, substantial new office development has not yet occurred despite direct proximity to east-west and north-south freeway (I-84 / I-205) and light rail transit (MAX) service coupled with availability of tax increment funding through urban renewal designation. Barriers to successful mid-high rise office development have included lack of an existing critical mass of professional and financial sector office activity, lower market rents inadequate to support mid-high rise construction costs, and relative fragmentation of many of the vacant and/or lesser valued property holdings.

Market Response. Market-based options of particular importance for this EOA include consideration of:


• Encouragement of live-work integration for downtown core area office product. In this

context, the term “live-work” is applied as a general concept to encompass side-by-side or area-wide opportunities for better integrating home and employment as well as single building-specific applications. Focus groups indicate that housing and retail developed in close proximity to each other is becoming the number one indicator for a desirable office location in Portland (given that the Central City cannot, for the most part, accommodate campus style development). This could involve options ranging from redevelopment of some older office space for residential or mixed use to construction of new projects with a mix of residential and office space (as market conditions warrant).

• Right-sizing of office development to market demand both in Central City and other Portland locations – involving options ranging from mid- rather than exclusively high-rise office development and possibly a form of public-private demand aggregation to better achieve the pre-lease requirements essential to obtain financing for construction of high-rise office towers. While high-rise issues are primarily addressed to Class A office space, obtaining greater interest in new and lower cost construction of mid rise (4-8 story) Class B buildings appears less proven in the Portland metro area. Encouraging this product type will likely require architectural/engineering firms to explore new development prototypes coupled with demonstration of significant cost advantages that can better meet required tenant price points outside the downtown and Pearl district office market.

• Renewed public-private marketing emphasis on Portland’s Central City (and possibly the eastside) as preferred business locations and as desired choices for office workforce.

PUBLIC INVESTMENT & INCENTIVES The City of Portland has a long history of public investment both in the Central City and its regional and town centers.

Sources of Public Investment. Urban renewal with use of tax increment financing has served as a key source of public investment. Planned expiration of existing URAs together with increased utilization of urban renewal outside the downtown has called the continued applicability of these resources for Central City use into question. Tax increment also generally has not been used as a means to incent office-related development since the City’s first URA in the South Auditorium district (dating to the late 1950s).

Investment in street, transit and public parking infrastructure together with the City’s roles as utility and provider of on-going services ranging from public safety to parks are instrumental to the ongoing vitality of Portland’s most urban places. In these varied capacities, City investment and services have often been reinforced by corresponding commitments from public agencies including Metro/MERC, TriMet, Multnomah County, the state of Oregon and federal government.

Public Investment & Incentive Recommendations. For Portland to maintain its dominant presence as the region’s #1 employment center, renewed consideration of public investment and incentives for Central City office investment is warranted. This is especially the


case with an economic downturn that has revealed structural weaknesses in City and statewide competitiveness for an employment base that is more sustainable through changing economic cycles nationally and globally.

Specifically recommended is consideration of:

• Continued investment in the Central City as the PMSA’s vital employment core (via retail, transportation improvements and housing integration).

• Renewed and highly targeted application of tax increment financing (TIF) as available through urban renewal designations together with transit and public parking investment to incent high wage Central employment (including support for accompanying work force-related residential use).

• Application of similar resources to further market interest in a second office node outside the Central City (most likely Gateway or the Portland airport). A second node would provide an alternative for firms not prepared to pay a premium for a Central City address and would also be well located to draw from east Portland workforce with multi-modal transportation accessibility.

• Regulatory streamlining with FAR & development oriented permitting options. Of special interest to the development community is opportunity for a menu driven process allowing for either: a) a rapid-fire permit option with clear standards and minimal review process; or b) a more discretionary process to address more innovative proposals in a setting that also offers more opportunity for public review and input.

TIMING & TRADE-OFF CONSIDERATIONS Given the rapidity of the economic downturn and need to focus available public resources, not all of the growth, land capacity, market and public options can be expected to come into play at the same time. Some Central City office-relate opportunities are more market-ready than others; tradeoffs also can be expected.

Short-Term Opportunities. Over the short term period of the next five years (2010-2015), much of the action regionally and for Central City office will be about job recovery and re-fill of vacant building space. Key opportunities can be expected to focus on:

• Regulatory streamlining so that Central City office is construction-ready once market demand is adequate to support construction of new or substantially renovated office space.

• Marketing of Central City office space options as a preferred choice for business location and workforce attraction.

• Public-private initiative to create a demand aggregation and credit enhancement capability to better incent high-rise, high-wage downtown office development. Demand aggregation would be a mechanism making it more readily possible to meet (or guarantee) pre-lease requirements for project financing in today’s more constrained development finance market which are especially difficult to achieve in Portland due to relative absence of major corporate tenants.


• Consideration of workforce and affordable rental housing conversion of Class B/C office

space that appears to have less long-term viability for sustained office use.

Long-Term Opportunities. Looking beyond 2015, opportunities can shift toward:

• New construction as well as adaptive re-use to encourage more workforce housing in and near the downtown office core.

• Planning and initial project catalyst jump start for at least one new Central City and one new non-Central City office node (especially if mid-high growth conditions of aggressive Portland market capture can be demonstrated).

Trade-Offs. Potentially the most significant tradeoff relates to the question of encouraging one or more Central City and non-Central City office nodes:

• A new Pearl or South Waterfront (SoWa) in proximity to the Central City needs to be timed so that the next new district does not unnecessarily undercut an existing office center but offers the potential for office product and job capture that otherwise would not likely be attainable for Portland’s Central City. Absent an as yet-unforeseen catalyst project opportunity, active development and marketing of a new or expanded Central City node would not be expected until the mid-latter part of this EOA 25-year forecast period. The case for considering an expanded Central City option will be stronger if Portland moves toward more of a mid-high growth job scenario.

• Recognizing the substantial impetus required to seed a new non-Central City office node or encourage an emerging node, a pivotal question is where to prioritize required supportive public investment. On the eastside, the airport area currently appears to be more market ready for office development in conjunction with an airport city development concept – seeded by the new Port office building and federal agency plans. Gateway and town center locations may be better poised for smaller scale Class B/flexible office space – tailored more to an incubator strategy (further detailed with the incubator discussion). Other smaller concentrations of mid-high rise space can be expected around more institutional uses and with some more limited opportunity for mid-rise construction in the City’s town centers (e.g. Hollywood and possibly Hillsdale or St. Johns).


VV.. CCLLOOSSEE--IINN IINNCCUUBBAATTOORR Incubator districts can be defined as relatively lower cost areas of the city that accommodate a diversity of employment activities – ranging from manufacturing and distribution to some office uses with particular focus on information and design services together with supporting retail. This activity is housed in a range of building types including older 2+ level industrial structures and Class C office space.

Central Eastside and Lower Albina represent prototypes of incubator activity, especially Central Eastside with its Employment Opportunity Subarea (EOS) zoning area extending from west of MLK/Grand to the Willamette River. As of 2006, these two districts are home to not quite 18,500 jobs (or 5% of city-wide employment) – smallest of the six demand groupings considered. However, job growth appears to have been relatively rapid in recent years.

It is noted that the River District is also experiencing growth with information and design service firms. Gateway has also been identified as a potentially emerging incubator district, due to a legacy of lower cost industrial-service space and flexible Central Employment (EX) type zoning.

In effect, incubator space and incubator districts represent an increasingly important hybrid or cross over product positioned between traditional office and industrial-service segments of employment building space spectrum. Incubator space is intended to:

• Offer greater flexibility to the user – including pure office, exclusive industrial-distribution, and also mixed office-industrial functions.

• Be oriented to information and design applications – for which Portland is becoming better known both on the west coast and nationally.

• Offer employment and functional business space at a cost below that of prime office – but with better finishes and in a more urbanized setting than would be possible in an exclusively industrial sanctuary setting.

CLOSE-IN INCUBATOR GROWTH TARGETS Central Eastside and Lower Albina are the primary focus of this incubator discussion, but with future potential for similar emerging incubator potential as in the Gateway regional center.

Forecast Scenario Results. The range of Central Eastside and Lower Albina job growth anticipated with the three alternative forecast scenarios considered to date is indicated at:

• Low Demand (+4,480 jobs) • Mid Demand (+6,950 jobs) • High Demand (+9,280 jobs)

Significant shares of this demand is likely to be met by office (including flex) space, together with active demand anticipated possible for institutional use and remaining net job growth dispersed across building types including retail, warehouse/distribution, and (with high growth) general industrial.


Recommended Growth Target. Recommended is minimum growth target consistent with a mid-demand forecast of at least 7,000 net new Central Eastside and Lower Albina jobs. This target is predicated on making Portland the first home for metro area business start-up activity – with special focus on information and design firms.

DEVELOPMENT CAPACITY Land inventory data indicates that the supply of vacant property is more limited for the close-in incubator districts of Central Eastside and Lower Albina than for any of the other five strategic demand types considered. Even in the low growth scenario, the majority of net added development capacity would need to be provided through redevelopment at higher employment intensity than with current development patterns.

Already improved but relatively low value lots (at less than 50% improvements to land value) can be expected to provide the bulk of the 50-100 gross acres of land area estimated as needed for development with the low, mid and high range job forecasts. Due to a small geographic land base, the required redevelopment rate is relatively high at 9-20% of the existing developed site area.

Redevelopment Opportunity. Substantial redevelopment (including adaptive reuse) at increased FARs and employment densities will be required to accommodate forecast employment growth and associated building space demand – with low, mid or high range demand scenarios. The alternative would be to forego this opportunity for in-city incubator areas, with potential demand transferred more to other areas of the region or outside the metro area.

There is very little vacant land within the incubator districts – only 23 acres, seven acres of which have some amount of environmental overlay that will constrain development. Including low value already improved land parcels, the total supply of most likely development sites is estimated at perhaps 75-85 acres, inadequate to fully meet mid-range need of 80 acres or high growth potential for up to 100 acres with net added building space (including offsets for existing space removed with site redevelopment).

A portion of job growth within this districts has been fueled by the renovation of multi-story buildings into uses that support higher (largely service sector) job densities while offering competitive rents. It could be that the capacity of these districts will effectively be reached when the supply of buildings to renovate is fully developed, unless new construction can be priced at levels well below costs of providing new Class A office space.

Initial estimates are that 2.8-3.2 million square feet of net added space could be provided with the vacant and low value land supply. Except for the low demand scenario, this still runs short of the building space required, meaning a need for further redevelopment of what are likely to be higher valued (as well as already improved) redevelopment sites.

Capacity Approach. Resulting recommendations related to incubator land and development capacity are to:


• Consider expanding the range of information and design service uses (or the range of

non-industrial uses) allowed outright in Employment Opportunity Subarea (EOS) zones to encompass a more diverse range of professional, technical and business service activity.

• Expand EOS-type overlay zoning to other areas of Central Eastside and Lower Albina; also review zoning provisions to assure similar use flexibility for Gateway or other districts with emerging incubator interests.

• Assure opportunity for close-by, affordable residential. Offering diverse workforce housing options both on major commercial/mixed use corridors (already zoned for residential use) and in adjoining neighborhoods (just beyond these incubator districts) would better provide for the supportive housing that has fueled business and job growth in other commercial districts both in the Central City and City-wide.

MARKET OPTIONS Incubator space represents a relatively new building space concept for business use both nationally and in the Portland metro area.

Portland Metro & City Application. In this region, construction of new flex space (as a high end version of a business park building product) was the first response to this opportunity. This has been expressed primarily in suburban context and for high tech users – as in Washington County’s Sunset Corridor.

More recently, Portland’s Central City has seen the emergence of this concept, primarily with adaptive reuse of existing older multi-level industrial and Class B/C office space. Part of the desire expressed through focus group interviews is for a grittier (or less formal) work environment offering not only low cost space for business startups but a sense of shared community, supportive business services and resulting business-to-business networking opportunities.

Not yet determined is whether and how this adaptive reuse model can be applied to also leverage new construction, once the stock of the most prime existing multi-story older industrial spaces has been renovated. The primary challenge for creating new incubator space is to deliver a product that meets current business needs at rental rates low enough to be competitive for start-up and emerging creative firms.

Barriers to Development. Based on the quantitative analysis and the focus group interview results from this EOA, potential barriers to further incubator-related development would appear to include the potential mismatch between desired tenant rental rates and cost of development (especially for new construction), together with challenges of applying code provisions to adaptive reuse of older multi-story warehouses for contemporary information and design services activity.

An added issue relates to the question of allowed office uses consistent with the Central Eastside Employment Opportunity Subarea (EOA). While this allows a greater range of office related use than previously, the partial coverage could be viewed as a limiting factor, especially when


existing tenant spaces turn over, with the space re-marketed (or sub-leased) to tenants that may not be fully aware of use restrictions.

Market Response. The primary market-oriented recommendations are to:

• Continue to encourage low cost building rehabilitation, increasingly supplemented by construction of new multi-level Class B/C creative space with design and construction costs tailored to assure continued market appeal and affordability.

• Facilitate green branding of the Portland incubator initiative – with sustainability built into building design and operations together with green business tenant practices.

PUBLIC INVESTMENT & INCENTIVES The business incubator concept is still somewhat embryonic both locally and nationally. Many of the early facilities developed represented a form of public-private partnership. Often, economic development or other public-private organizations took a lead role in constructing and operating an incubator facility – often including shared tenant spaces and services (as with conference areas, common reception, and business support services).

In recent years, the urban incubator concept has become increasingly privatized and has proven most cost effective for rehabilitation and adaptive reuse of existing structures. Reuse of existing buildings and re-positioning of existing industrial districts creates the need and opportunity for a substantial public sector role – both in the form of overall district planning and building specific reuse applications.

Public Investment & Incentive Recommendations. Options important to facilitate continued incubator business and building space development include:

• Reductions in SDC cost and permitting flexibility within already developed areas plus application of tax increment and related incentives to better assure feasibility of low cost rehabilitation and capacity for rapid occupancy change.

• Financial incentives for workforce housing investment in-district as allowed and in adjoining residential neighborhoods.

Central Eastside has an in-place URA as does the potentially emerging incubator district of Gateway. For incubator activity to play a more prominent role in Lower Albina, future URA designation should be considered, especially as may become possible with planned expiration or re-configuration of other Portland URA districts.

TIMING & TRADE-OFF CONSIDERATIONS The breathing room created by the current recession offers opportunity for the comprehensive planning and the regulatory environment to catch up with the market, setting the stage for more robust activity not just close-in but at other incubator nodes throughout Portland longer term.


Short-Term Opportunities. Over the 2010-15 time period, incubator opportunities could be focused on streamlining the regulatory framework in conjunction with approval of the Portland Plan and updated Central City Plan, including:

• Determination of districts appropriate for expansion of EOS-like overlays (beyond the portion of the Central Eastside from MLK/Grand to the Willamette River).

• Expanding the range of permitted EOS to encompass for a broader and more robust list of creative and business service-related uses.

• Adoption of SDC and permitting incentives for rehab and rapid occupancy approvals with adaptive reuse of facilities for incubator use.

Long-Term Opportunities. Beyond 2015, potentials for substantially ramped up incubator activity can be affected by:

• Design and technical assistance to demonstrate feasibility of new construction for multi-level incubator facilities – including sustainable design and building operations.

• Financial incentives for housing investment to create stronger work-live connection – both for close-in eastside neighborhoods and for the outer eastside (as in Gateway).

• Active public-private marketing of Portland as the first home for regional business start-up and entrepreneurial innovation.

Trade-Offs. Building critical mass for incubator districts one-at-a-time may present a trade off choice with the longer term objective of spreading the entrepreneurial buzz to multiple districts across the City:

• An early challenge (through the economic downturn) is to maintain momentum and avoid poaching of existing activity – as between the Pearl District and Central Eastside.

• A second question is when and how to encourage more incubator activity in Lower Albina – without compromising Central Eastside potential or creating conflicts with industrial sanctuary activity in Lower Albina.

• A third question relates to the market opportunity and timing for extension of incubator opportunity to Gateway and possibly other town center areas in Portland. Gateway activity is already starting to occur and serves a market more clearly separated from the close-in eastside, so may represent less of a tradeoff concern.

These trade-offs are less problematic with a high or mid-growth scenario than with low growth. A more focused approach on districts with existing activity is most appropriate near term or until Portland’s economic recovery is well underway.


VVII.. MMAANNUUFFAACCTTUURRIINNGG && DDIISSTTRRIIBBUUTTIIOONN While once located across as many as 16 identified industrial districts in Portland, the city’s manufacturing, transportation/logistics and distribution activity has become increasingly focused on the Willamette-Columbia corridor. For purposes of this EOA, this is defined to include the combination of the Columbia Harbor and Columbia East subareas. Commercial real estate conventions for the types of building space occupied include general industrial or manufacturing, warehouse/distribution and flex-business park space.

As of 2006, this arc-shaped industrial manufacturing corridor accounts for over 80,000 jobs (or more than 20% of all employment in the City of Portland). Perhaps more strategically, this area provides a remaining vacant land base estimated at more than 2,275 acres. This is more than three-quarters (77%) of the City’s vacant industrial and commercial land inventory.

The majority of jobs in the Columbia Harbor/Corridor area (63%) represent transportation/ distribution and manufacturing activity. These 50,500 industrially-focused jobs across this arc now account for 65% of all transportation/distribution and manufacturing jobs city-wide.

From 2000-2006, total employment declined slightly within the Columbia Harbor but increased for the Corridor area east of 82nd Avenue. While still industrially focused, job growth since 2000 appears to have occurred primarily with service sector firms.

MANUFACTURING & DISTRIBUTION GROWTH TARGETS As is true of other sectors, Portland’s share of the region’s industrial jobs has been on the decline for a number of years. If Portland’s share of industrial jobs continues to decline at historic rates, the city’s share of the region’s manufacturing and transportation jobs could drop to less than 80% of current shares and wholesale trade to about 60%. This trend toward a declining share of in-City industrial employment is moderated with a low growth scenario and moves closer to stabilization with a high growth scenario.

Forecast Scenario Results. The range of Columbia-Willamette (Harbor plus Columbia East) job growth anticipated with the three employment-driven forecast scenarios outlined with the Task 2 demand forecast over the 2010-35 period is indicated at:

• Low Demand (+14,700 jobs, with no need for added industrial/commercial acreage beyond existing vacant and low value sites unless regional transportation/logistics needs are also to be accommodated over the forecast period)

• Mid Demand (+24,680 jobs, with employment-driven demand and supply roughly in balance but with additional industrial/commercial land area potentially needed to accommodate up to 640 acres for regional transportation/ logistics needs)

• High Demand (+34,070 jobs, approaching 300 acres of unmet need for employment driven land demand, or a cumulative figure in the range of 900-950 acres with regional transport/logistics needs included)


As noted, in addition to demand directly attributable to employment growth, added land needs can be anticipated for distribution/transportation logistics activity that is not necessarily associated with added employment. This is to accommodate potential land needs associated with marine terminal, regional rail, and airport expansion – adding to a cumulative land need preliminarily estimated at up to an added 640 acres.

With the mid-demand scenario, the Willamette-Columbia area would account for about 16% of city-wide job growth and 44% of city-wide land acreage needs. With regional transportation and logistics needs included, this area would account for the majority (55%) of gross added land acreage requirements city-wide.

More so than with the other employment sectors and areas of the City, manufacturing and distribution is subject to greater variation in land needs than commercial including institutional activity. In part, this is due to the as yet uncertain need and long-term timing for regional transportation and logistics needs. Of similar or greater significance is the effect that a low regional employment forecast could have for regional and in-city industrial land needs.

The low PMSA employment forecast scenario assumes the potential for very low regional industrial employment growth, effectively extrapolating a pattern consistent with national trends. If this outcome is experienced, the implications could range from minimal to negative in-City industrial job growth, depending on whether the City also continued to experience a declining share of the remaining regional industrial employment activity.

Recommended Growth Target. Recommended is an employment growth target at least equivalent to that of the mid-forecast scenario, equating to an estimated 25,000+ added Columbia Harbor and Columbia East jobs over the 2010-2035 year time period. Achieving this target will require some combination of more rapid regional growth and slowed erosion of the city’s industrial base.

In addition, it is recommended that provision be made to accommodate long-term expansion needs for Portland marine terminals, rail yard and airport runway expansion that may occur largely independent of industrial employment activity, but which are significant to the economic vitality of the entire Portland metro area.

Also recommended is that more detailed analysis be conducted of the relationship of demand drivers other than employment as a means to better understand and predict industrial land demand. This additional analysis would occur subsequent to completion of this EOA but prior to adoption of a new Comprehensive Plan for Portland.

DEVELOPMENT CAPACITY For industrial/manufacturing use and much of related Columbia-Willamette uses, the predominant portion of new development is anticipated to occur via use of currently fully or partially vacant industrial lands and not through redevelopment. Through most if not all of the 2035 forecast period, the intensity of industrial development (or FAR) is anticipated to remain comparable to current conditions.


Manufacturing & Distribution Implications. The needs for added manufacturing and distribution land depend widely on the growth scenario that occurs and the extent to which vacant land can be made truly shovel ready.

• With a low growth scenario, the existing vacant land inventory appears to be more than adequate to accommodate anticipated employment-driven demand but would not also be able to accommodate all of the regional transport terminal needs if they were to materialize over the 25-year forecast period.

• With moderate growth, forecast demand is roughly in balance with the supply of potentially available vacant, albeit leaving virtually no margin for unanticipated conditions or accommodating major regional transport terminals. If regional transport needs were to be met, the Willamette-Columbia area would be short by about 645 acres.

• With high growth, the Willamette-Columbia region would be 225 acres short of accommodating employment-driven demand – increasing to an 875 acre deficit with regionally significant transport/logistics functions included in demand calculations.

Capacity Approach. As indicated with the discussion of alternative forecasts, land demand and supply are roughly in balance with low growth whereas the unmet need for added land ranges up to 900-950 acres with a high growth scenario. Given the wide variation in land needs that is possible (depending on the employment and non-employment growth projections indicated), a more flexible approach to assuring adequate capacity is recommended for consideration. On a preliminary basis, key elements of this adaptive strategy could be to:

• Assure land capacity for regionally significant transportation and logistical functions in addition to employment-driven needs to support metro area full service vitality.

• Ability to prioritize getting brownfields back in as a viable component of shovel-ready supply, especially in a mid-high growth scenario, especially toward the mid-latter part of the 25 year EOA forecast horizon. As sites with some level of contamination that may impact development feasibility/cost, brownfields account for over 900 acres of vacant land within the Columbia industrial districts, or 40% of the vacant land inventory. The single greatest need to render these sites developable is a conclusion on Superfund liability and cost assignment, which is outside of the City’s direct control. After this determination is received, some need for clean up funds will undoubtedly remain, if sites are to be made competitive with the cost of alternative greenfield development elsewhere in the Portland metro area.

• Bring new land available for industrial use in the City of Portland through UGB expansion and annexation. The best available option identified to date is West Hayden Island, which is within Portland’s UGB and identified for marine industrial use but not yet annexed.

• Maintain industrial sanctuary designations and industrial reserves for unanticipated growth. Consider provisions to strengthen the industrial sanctuary designation for the Willamette-Columbia corridor to more actively discourage incompatible use. Limit any review of the industrial sanctuary policy through the 25 year forecast period to Central City (including incubator) and dispersed industrial areas based on pre-determined benchmarks for suggested refinements at five-ten year intervals.


• Provide for land extensive transportation, logistic and distribution functions of regional

significance and prioritize a Portland presence for those functions for which there are no clearly viable regional alternatives.

• Encourage full-site utilization of existing industrial properties and on-going reinvestment to minimize the need for new greenfield sites.

• Consider options for an enhanced airport city/aerotropolis function centered with greater intensity of required transport logistic, hospitality, regional office, and destination retail functions in the area extending east from the PDX international airport to the I-205 interchange. This offers the greatest opportunity for added employment capacity near term as it may be the most market ready given investments already being made.

Review of vacant constrained and redevelopment land supply is particularly important within Portland’s industrial districts, where substantial increases in development density are not as likely and site redevelopment is often less financially feasible. In the event that regional transport needs are to be fully accommodated within the forecast period and in the absence of added land supply (as with West Hayden Island annexation), required redevelopment corridor-wide could range to as much as 20% of all existing property with a high growth scenario. If this level of redevelopment proves not to be feasible, the growth demand would likely shift elsewhere in or possibly outside the Portland metro area.

MARKET OPTIONS Through the last economic cycle (extending into this past year of 2008), the market for development of industrial space has been extraordinarily robust in Portland as well as elsewhere across the U.S. This has been changed by the severity of the recent economic downturn which has dramatically affected manufacturing and trade activity both domestically and internationally.

Barriers to Development. Even with economic recovery, there is considerable national and global uncertainty as to the short- and long-term outlook for U.S. industrial activity. However, maintaining the private sector driven end-user and multi-tenant real estate development capacity to reposition for global competitiveness is of substantial importance to this region’s continued prospects for economic prosperity and high wage jobs.

Beyond this global concern, other regional and local barriers to manufacturing-distribution development have been identified through this EOA process, including:

• Need for infrastructure reinvestment at locations with transportation or utility infrastructure to serve current business and industry needs.

• Regional transportation congestion affecting freight delivery and cost. • Prolonged uncertainty over Superfund and related environmental remediation costs and

responsibilities for underutilized and vacated industrial sites. • Factors ranging from obsolete older facilities to environmental land set-asides that limit

efficiency of site utilization.


• Rapidity and complexity of anticipated changes to address sustainability concerns

affecting all aspects of industrial use – from green design and development to ongoing facility operations and related business practices.

Market Response. Recommended with this EOA are initiatives to address these barriers through a combined approach of market and public investment/incentive options. Market response opportunities are to:

• Conduct more detailed investigation of options for metro and in-city manufacturing vitality post-economic recovery. Greater focus on realistic industrial prospects and needs may be important to better ascertain prior to adoption of the Portland Plan.

• Support long-term opportunities for sustainable design and business practices including demonstration of market based options for increased site FAR utilization. A move to green business practices offers a competitive edge for Portland’s industrial as well as service business base.

PUBLIC INVESTMENT & INCENTIVES The City of Portland has an extensive though more episodic history with regard to active encouragement of industrial development.

Public Investment Role. In the late 1970s, the City attracted considerable federal investment to provide infrastructure for the Swan Island, Northwest and Rivergate industrial areas – all part of the Columbia Harbor area. In the 1980s, this initiative was extended to the Columbia South Shore, with urban renewal designation and subsequent construction of Airport Way opening the area from PDX east to a continuing wave of industrial and business park investment.

The City has created an Enterprise Zone, with tax incentives available to businesses for qualified investments in an area covering much the North Portland portion of the Columbia-Willamette harbor area. The Willamette Industrial Urban Renewal Area was also established in recent years. Results with this more recent URA have been mixed to date, in large part due to the presence of substantial brownfield sites limiting reinvestment on the lower Willamette River.

Public Investment & Incentive Recommendations. Four recommendations are recommended for consideration:

• Prioritize public investment and incentives to high wage, traded sector in-city industrial uses with demonstrated opportunity for a sustained competitive edge.

• As a continuation of the multi-agency brownfields (or STAMP) process, adopt and implement a public gap strategy to resolve brownfield liability issues in tandem with committed private investment. This initiative should be focused on assuring competitiveness of brownfield properties with comparable greenfield site options both in Portland and regionally.

• Continue and, where justified by need, expand the strategic investment program (SIP), enterprise zone and other economic development funding as incentive options available to encourage major capital intensive and high wage investment.


• Make transportation and utility improvements to sites accompanied by commitments for

private investment and net new jobs (or maintenance of existing employment).

TIMING & TRADE-OFF CONSIDERATIONS While the economic recession has eased the pressure on industrial land supply, it has also focused renewed attention to the short- and long-term competitiveness of the Portland metro area and entire state for sustainable employment more resilient in the face of future economic downturns. A major part of the answer lies in decisions regarding the region’s commitment to industrial infrastructure that will prove to be competitive not just domestically but globally.

Short-Term Opportunities. From among the menu of development capacity, market, public investment and incentive options, the following are recommended as priority actions over the 2010-2015 time period:

• Industrial sanctuary maintenance, with adequate designation of reserve capacity as part of the Portland Plan.

• More detailed collaborative public-private sector evaluation of options for Portland industrial vitality post-recovery.

• Creating a more clearly defined economic toolkit that can be targeted and made readily available to high wage, traded sector industries.

• Adoption and initial implementation of a public gap funding strategy to address brownfield issues on a basis making private investment feasible.

Successful implementation of these short-term items is critical to set the stage for subsequent realization of longer term manufacturing and distribution options for Portland.

Long-Term Opportunities. Beyond 2015, longer-term recommended priorities include:

• Providing land and infrastructure for transport logistic and distribution functions of regional significance that can only be met in the Columbia-Willamette Harbor area.

• Allocating funding for local and regional transportation improvements aimed at enhanced competitiveness for Columbia-Willamette industries.

• Approving and starting implementation of an aerotropolis/airport city concept for PDX.

Trade-Offs. Unlike the other demand topics considered, there are few geographic trade-offs available for manufacturing and distribution businesses in Portland. Increasingly, the Willamette-Columbia corridor has become the focus of most large scale industrial investment:

• Manufacturing and distribution business tradeoffs within the region are between this in-city district and other portions of the region including Clark and Clackamas Counties together with other nearby alternatives just outside the Portland metro area.

• For marine, air terminal and (possibly) rail, there are virtually no viable alternatives elsewhere in the Portland metro area. If it can not happen in Portland’s Willamette-Columbia corridor, the resulting economic opportunity will be lost to this metro region.


VVIIII.. NNEEIIGGHHBBOORRHHOOOODD && TTOOWWNN CCEENNTTEERR CCOOMMMMEERRCCIIAALL With the Task 1 Trends, Opportunities & Market Factors analysis, neighborhood and town center subareas are defined as incorporating all employment geographies outside of the Central City and Regional Centers, institutional and industrial areas. As of 2006, Portland neighborhood commercial areas accounted for close to 79,500 jobs, or 20% of city-wide employment.

Neighborhood Commercial. As defined, neighborhood commercial therefore encompasses commercial corridors including areas with significant transit oriented development (TOD) potential. Consequently, for purposes of this policy review, the focus of this Neighborhood Commercial review is on those 20-minute neighborhoods without strong transit-oriented corridor potential.

Taken together, the commercial nodes and dispersed commercial areas that are the focus of this policy discussion account for about 28,500 jobs (or 36%) of the neighborhood commercial total – with commercial corridors accounting for the remaining 64%. Across all neighborhood commercial areas, retail and services account for about two-thirds (66%) of the employment total.

The number of jobs associated with neighborhood commercial has remained essentially flat at the 79,500 level since 2000. However, within this overall neighborhood commercial category, there has been a rather sizable shift of jobs away from dispersed commercial toward commercial corridors.

Town Center Commercial. Three town centers are defined with this EOA consistent with the Metro 2040 Growth Concept – Hillsdale, Hollywood and St. Johns. Taken together, these three town centers account for just over 8,300 jobs as of 2006, or 2% of all employment in Portland. Between 2000 and 2006, Hollywood experienced net job growth while St. Johns and Hillsdale are indicated as experiencing job losses.

Residential Employment. State of Oregon Employment Department (OED) data indicate that there is a substantial base of about 30,000 jobs in residentially zoned areas of the City of Portland as of 2006. This accounts for nearly 8% of all employment city-wide.

Located outside of industrial and commercially zoned areas, this job based is dominated by employment in education and health care (accounting for 46% of the job total), followed by services, construction contractors, retail and accommodations. Some (undetermined) portion of this figure includes home-based occupations.

NEIGHBORHOOD & TOWN CENTER COMMERCIAL GROWTH TARGETS Forecast analysis has been prepared for neighborhood commercial areas in their entirety – with no detailed distinction between commercial corridors, nodes and dispersed commercial. It is noted that, if recent trends continue, dispersed commercial would account for a decreasing share of future job growth, with commercial corridors taking more of the city-wide total of neighborhood commercial activity.


Forecast Scenario Results. The range of neighborhood commercial job growth anticipated with the three EOA employment-driven forecast scenarios is indicated at:

• Low Demand (+18,300 neighborhood commercial jobs, +2,720 jobs for 3 town centers) • Mid Demand (+28,800 neighborhood commercial jobs, +3,900 jobs for 3 town centers) • High Demand (+38,750 neighborhood commercial jobs, +5,000 jobs for 3 town centers)

With all three scenarios, neighborhood commercial would account for just under one-fifth (19%) of forecast city-wide job growth. Taken together with the City’s three identified town centers of Hillsdale, Hollywood and St. Johns, these commercial areas would account for 22% of City-wide job growth.

Forecasts have also been made for changes of employment in residentially zoned areas. This is not a major focus of this EOA as such uses do not make use of commercial or industrially zoned property.

Relatively modest employment changes are forecast for employment in residential areas pursuant to all three forecast scenarios – ranging from a loss of 3,340 jobs (low growth) to loss of 730 jobs (mid demand) to possible gain of 1,740 jobs (high scenario). In all three scenarios, it is anticipated that institutional uses will remain relatively unchanged in residential zones and that non-institutional growth of covered employment is not actively encouraged by City policy.

Recommended Growth Target. An overarching objective is to encourage full city-wide 20-minute neighborhood coverage with critical urban retail services. These are the services that people use nearly every day – including transit, shopping, quality food, schools, parks and social activities – all situated in close proximity to housing. Recommended 100% coverage means providing neighborhood commercial zoning as needed to meet commercial market potential within a 20-minute walking/bicycling distance of residential neighborhoods throughout the city.

In numerical terms, recommended is a growth target for commercial nodes and dispersed commercial areas at least equivalent to the mid-range growth scenario of an added 29,000+ jobs between 2010-2035. If realized, this target would represent a substantial reversal of trends experienced in recent years – a period since 2000 during which virtually no net overall neighborhood commercial job growth was experienced.

DEVELOPMENT CAPACITY Analysis conducted with this EOA indicates there should be adequate vacant plus low value redevelopment neighborhood commercial land capacity for Portland neighborhood business areas to accommodate forecast demand with the low or mid or demand scenarios. With high growth, there is a possible minor shortfall (of about 10 acres).

With town centers, the situation is reversed with substantial development capacity limitations. The capacity shortfall ranges from about 20-25 acres with low demand to 60+ acres with mid-growth to 80 acres with high growth demand. Required redevelopment correspondingly ranges from about 11% to 23% of total existing land area. This conclusion is not surprising as the city’s three town centers have only about 15% the land area of all neighborhood commercial city-wide.


Neighborhood Commercial Implications. The neighborhood commercial geography is associated with the second highest acreage demand after manufacturing-distribution, estimated at 390-780 acres city-wide. As noted, vacant and low value (improved) parcels are sufficient to meet this demand in all but the high scenario (with a relatively minor shortage of 10 acres).

The majority of the easy to develop land supply lies with lesser value but already improved rather than vacant sites. Consequently, some level of redevelopment can be expected, at rates ranging from 6% of the non vacant supply with low growth to 16% with high growth.

Demand and resulting development activity is not likely to be experienced uniformly across all of the city’s neighborhood commercial areas. Opportunities can be expected to be greatest in or near neighborhoods experiencing growth in numbers of households and/or disposable incomes and in areas that also have generated some broader regional destination appeal.

Town Center Implications. Achieving any suitable level of growth will be dependent on a combination of infilling remaining undeveloped properties together with redevelopment at higher densities (FARs), often in combination with mixed use development. Current estimated market supported FARs are relatively low for the City’s town centers, averaging 0.5 (consistent with a significant existing amount of surface parking lot area).

Achieving higher FARs for Hillsdale, Hollywood and/or St. Johns will depend on opportunities to reduce the proportion of land in surface parking including reduced parking standards, access to on-street parking and initial application of structured parking options as with major development projects.

Residential Implications. While no explicit supply analysis has been conducted for employment uses in residential neighborhoods, the general conclusion of this EOA is that covered employment in residential neighborhoods will represent a declining share of City-wide employment. Employment in residential areas is forecast to decline in the low and mid-growth scenarios, but with a possible 6% covered employment gain over 25 years with the high scenario.

This would not preclude other opportunities for more at-home employment ranging from sole proprietors (not covered by unemployment insurance) to telecommuters (typically reported out of other work locations). Also noted is that capacity needs will be different for institutional uses (such as schools or medical clinics) where expansion demand occurs versus private individuals and firms (where non-conforming uses might be reduced over time).

Capacity Approach. Recommendations resulting from this analysis are essentially two-fold:

• Encourage the infill of remaining 20-minute neighborhood gaps. This might be facilitated by providing added commercial zoning at targeted locations and/or a market responsive neighborhood commercial rezone process.

• Where feasible, increase the realized FAR of neighborhood commercial, by incenting not only retail but also complementary service-commercial uses and mixed use development (for both employment and residential uses). With town centers, increasing FAR utilization of a relatively small inventory of existing sites will prove especially critical to


achieving even low-range projections, including reduction in land area devoted to surface lot parking.

MARKET OPTIONS Neighborhood commercial districts such as NW 23rd, Hawthorne, Sellwood, and more recently Alberta and Mississippi have been rediscovered as gathering places that serve not only local resident needs but become regionally known as destinations for specialized retail and entertainment. Unlike the Central City and regional/town centers, these neighborhood centers often have not been the focus of major public policy intervention but rather have come into their own via what has often been locally driven, organic growth.

Town centers have experienced a more mixed pattern of business and development activity. Hillsdale initially developed with auto-oriented commercial, but market demand has fostered some multi-level (including office) development as well as specialty plus neighborhood oriented retail. Hollywood is probably the most readily recognizable town center with an extremely compact form of development for a non-central city location, and with job growth occurring in the first half of this decade. St. Johns has experienced business district revitalization dating to the 1970s, followed by a period of waning activity and now renewed interest from both public and private sectors.

Barriers to Development. Revitalization challenges begin with the observation that reported job change in recent years has been flat to negative for neighborhood commercial, except for corridors. As has occurred in parts of the Central City, housing investment predominated in recent years.

For town centers, a similar mixed experienced is noted – with Hollywood gaining jobs while Hillsdale and St. Johns experienced net job loss. Compared to neighborhood commercial, these are extremely compact areas with much lower availability of vacant land for development.

When new trendy businesses come into a neighborhood commercial or town center district, they often replace an existing business. The resulting retail or service business concept is often more fresh and relevant to current market demand, but the results have not always been demonstrated in net job growth.

A second dilemma noted is the risk that successful districts tend to start by doing a good job of attracting neighborhood residents and serving local needs, but then transition over time to also capture outside customers as the district becomes better known – especially if for a specialty market niche as for restaurants, art galleries, home furnishings and antiques. Non-local customers create added business vitality and street activity but also add traffic that may undermine the values and livability of the host neighborhood.

A final barrier to development in the years ahead relates to the relative lack of vacant land. Throughout neighborhood commercial and town center areas, most development will occur on sites that have been previously developed and have existing uses. Achieving net job gains requires redeveloping at higher overall FARs than previously experienced, often with more mixed use including some residential component. Market feasibility of redevelopment will be


dependent on some combination of achieving higher rents or sales values than previously together with selective application of public investment and incentives. The required rent premium threshold will generally be greater for town centers than neighborhood commercial areas, as town center redevelopment often will required reuse of higher value sites.

Recommended Market Response. In response to these challenges and opportunities anticipated both short- and long-term, market options suggested with this EOA are to:

• Encourage a broad range of mixed use with residential and low-impact service-industrial activity that is supportive of street retail. This is particularly important as demand for retail uses should not be expected as the sole or even necessarily the dominant occupant of neighborhood commercial space at all locations.

• Build neighborhood commercial and mixed used development expertise. Encourage district-specific adaptation from the experience and lessons learned with successful districts to date. Maintain a small business emphasis.

• Expand retail with complementary non-retail commercial uses from existing 100% corners and nodes to better diversify business mix and avoid market oversaturation.

PUBLIC INVESTMENT & INCENTIVES As noted, much of the revitalization action with neighborhood districts has occurred with community and private sector initiative, often with investors and developers outside the limelight of the Central City.

Public Role in Neighborhood & Town Center Revitalization. Another pivotal difference is that when interest is expressed in stronger public sector support for neighborhood commercial, it comes less in the form of capital investment funding and more in the form of day-to-day technical, marketing and related business assistance.

This is clearly demonstrated in the neighborhood commercial focus group discussion. At the top of the priority list were requests for improved access to resources for small business and planning for change but with less emphasis on mandates.

Public Investment & Incentive Recommendations. Key suggestions fall into the realm of on-going business district support with emphasis on:

• Making the nationally proven Main Street approach to coordinated business district revitalization available to pilot districts in Portland. Main Street emphasizes a 4-point approach of organization, design, promotion, and economic restructuring.

• Implementation of a broader, city-wide commercial revitalization project – as an ongoing community economic development function. This would encompass elements of the Main Street 4-point approach, but would more directly prioritize the public responsibility for infrastructure, planning and business assistance.

• Creating an incentives toolkit for business improvement, development and cooperative marketing. The resource listing could represent a series of menu choices available city-wide, with the opportunity for each district to select those resources most applicable to


local business and community interest. This could be similar to the incentives toolkit for mixed use previously prepared by the City Bureau of Planning and Sustainability.

• A related option is to provide marketing tools for business districts similar to Neighborhood Profiles for the city’s residential neighborhoods.

TIMING & TRADE-OFF CONSIDERATIONS Despite a record of comparatively poor job performance in recent years, neighborhood commercial representatives are extremely bullish about future prospects. In a more frugal time, there is good reason as customers increasingly want to shop local, especially when consumers can also be assured of quality service and reasonable pricing.

Short-Term Opportunities. For the immediate future, there is considerable opportunity for the City to become more fully engaged with neighborhood districts in the role of enabling rather than directing business district activity:

• Providing the land use and zoning framework allowing for infill of remaining 20-minute neighborhood gaps.

• Making a Main Street program available to pilot districts and creating the framework for city-wide commercial revitalization together with a starter incentives toolkit.

Long-Term Opportunities. Beyond five years, neighborhood business leadership shifts more decisively from the public sector back again to private-sector initiative and with more opportunities for public-private partnership by:

• Inviting increased intensity of commercial and mixed use development through strategic zoning strategies that support a hierarchy of commercial uses both on the main street corridor and adjoining side streets. .

• Encouraging a broader range of office-retail, service industrial-retail and commercial-residential mixed use applications – both with new construction and adaptive reuse.

• Incrementally expanding the footprint of neighborhood commercial out from the existing 100% corners and nodes.

Trade-Offs. Two questions are highlighted. Each is appropriately answered first by those who live and work in each neighborhood district:

• Tradeoff of local neighborhood and destination businesses. Bringing these two seemingly disparate customer segments together offers optimum opportunity for business sustainability. An example would be a café/bistro that caters to locals at breakfast, area workers at lunch, and non-local residents at dinner.

• Potential trade-off of community and local business initiative vs. a more public sector led approach (as often occurs with URAs). This conflict is perhaps best addressed by encouraging self-help programs as with Main Street and creation of a resource list or toolkit that can be customized by district.


VVIIIIII.. CCOOMMMMEERRCCIIAALL CCOORRRRIIDDOORR // TTOODD Commercial corridor demand includes opportunities that can be met in mixed use settings as with transit oriented development (on major transit corridors), and on major auto thoroughfares. As of 2006, Portland’s commercial corridors represent a 51,000+ job base (or about 13% of all employment in the City). As noted in the earlier section, these commercial corridors account for close to two thirds (64%) of all employment within the city’s neighborhood commercial neighborhoods.

The job base of Portland’s commercial corridors is relatively diverse, led by retail (including dining, arts and accommodations) at more than 40% of the job total. Overall commercial corridor employment has been on the increase in recent years – at rates above the city-wide average.

COMMERCIAL CORRIDOR/TOD GROWTH TARGETS As noted, forecast analysis has been conducted for neighborhood commercial areas in their entirety – with no detailed distinction between commercial corridors, nodes and dispersed commercial.

Forecast Scenario Results. As of 2006, commercial corridors accounted for almost two thirds of all neighborhood commercial employment. Assuming that commercial corridors and related TOD oriented development continue to capture at least this share of all neighborhood commercial demand, the range of commercial corridor growth anticipated with the three employment-driven forecast scenarios is indicated at:


If recent trends continue, corridors might well be expected to account for an event greater share of city-wide total neighborhood commercial activity in the future, as employment shifts away from dispersed neighborhood commercial and more toward corridors. This is particularly the case with potential implementation of a Portland Streetcar System Plan aimed to catalyze added employment and mixed use development along high priority commercial corridors.

Recommended Growth Target. Recommended as a minimum expectation is a mid-demand scenario with commercial corridors capturing at least two-thirds of neighborhood commercial – for about 19,000+ added jobs city-wide through the forecast period.

Most of this added demand would be targeted to transit corridors rather than to auto-oriented commercial corridors. TOD capture could increase further to the extent that these corridors also draw a range of retail and other service sector employment away from other commercial areas of the city.


DEVELOPMENT CAPACITY As noted with the more encompassing neighborhood commercial discussion, accommodating anticipated demand depends on increasing development intensity or FAR along existing high priority transit corridors. This is the case because most new development is expected to occur not within the relatively limited supply of fully vacant land, but through redevelopment of sites with existing uses (focused at least initially on properties with a low level of improvements to land valuation).

To the extent that corridors with high capacity transit (light rail or streetcar) prove successful at further shifting demand, the impetus for redevelopment could become particularly pronounced for the corridor portion of neighborhood commercial demand. Also noted is that demand should not be expected to be experienced uniformly along an entire corridor but may be strongest at key intersections or nodes (including transit stops).

Commercial Corridor / TOD Implications. Opportunities for added employment are expected to be greater for designated corridors and transit oriented development than for other dispersed neighborhood commercial and nodes – especially if corridor designation can be accompanied by policy actions to assure adequate FAR headroom capacity.

Capacity Approach. Based on this overall understanding, capacity actions of greatest importance are to:

• Prioritize light rail and Portland Streetcar system expansion to corridors offering FAR headroom (for jobs + residents) including demonstration of market readiness for development prior to streetcar funding commitment.

• Transition from use-based to form-based zoning to encourage more and increasingly creative forms of corridor mixed use – including work above shop opportunities not as readily feasible in a more expensive Central City setting.

MARKET OPTIONS In the Central City, Portland Streetcar successfully served to re-orient where development occurred and the pace of development. Properties situated within one block of the streetcar alignment experienced a rate of building inventory growth averaging 5.8% per year versus a 1.0% building stock rate of increase for properties at 3+ blocks from the alignment.

From 1997-2004, about two-thirds (66%) of development was for residential with the remainder for employment-related uses. Office development was slower to materialize but has increasingly oriented to streetcar as in the Pearl District brewery blocks, west end of downtown, Portland State University, and with OHSU development in SoWa.

The Commercial Corridor / TOD Market. The combination of the economic downturn and lower FARs that can realistically be accommodated outside the Central City mean that a higher proportion of building space (ground floor or more) can be expected to consist of employment versus residential uses outside the Central City – at least near term.


Ground floor retail use can be expected to be focused at major intersections or similar nodes. In-between, expect a broader range of other ground and some upper level commercial and related use – including professional businesses, service uses such as day care and possibly even artisan activities ranging from studio space to quasi service-industrial uses as diverse as carpenter’s or bike repair shops and more flexible live-work building space.

Barriers to Development. Anticipated barriers are similar to those of other neighborhood commercial areas. However, due to the greater density of development that can be anticipated, the importance of addressing potential barriers becomes even more critical with TOD and mixed use development (including streetcar and high capacity transit) corridors.

While zoned FARs do not appear to be of significance generally for neighborhood commercial, this could be an issue to monitor more closely for TOD development, especially at sites where there may be market opportunity for mid-rise development. A related constraining factor along a number of potential streetcar corridors is limited depth of sites, especially in areas where commercial zoning is limited to a depth of one-half block from the major arterial.

More whole block assemblages can be expected at high demand TOD/mixed use locations. This might include possible need for FAR or building height step downs from the main commercial street to the adjoining street face and at the next parallel street. Where structured parking is required, market feasibility is also improved for one-half block or better sites due to greater efficiency of the parking floor plate.

Recommended Market Response. Two options distinctive to transit oriented development (as compared with other neighborhood commercial districts) are suggested with this EOA:

• Engage the design and development community in shaping TOD building prototypes along street corridors that increase the ratio of employment to residential square footage – including concepts for addressing fire/life/safety and ADA provisions with fully flexible and integrated work-live building space.

• Cultivate owners and developers prepared to tailor the mixed use formula to individualized neighborhood market demographics and affordability price points.

PUBLIC INVESTMENT & INCENTIVES Unlike many other neighborhood business districts, transit corridors have received substantial attention – especially for initiatives to stimulate transit oriented development (TOD).

Public TOD Role. With MAX light rail, TriMet has been a leader with joint development in proximity to station areas. More recently with Portland Streetcar, the Central City experience has been one of relatively continuous active ground level development along the entire streetcar corridor. This has been attributed to more closely spaced stops and the more integrated nature of streetcar with the street and pedestrian environment.

Public Investment & Incentive Recommendations. For corridor and TOD commercial use, three primary recommendations are noted:


• Fund and construct a phased city-wide streetcar system with added high capacity transit

corridors. • Use the TOD approach to incent mixed use projects with a significant job component –

both retail and other (including higher wage) long-term job opportunities. • Incent the construction of placemaking features and amenities at transit stops and along

corridors for a more pleasant street environment that encourages both pedestrian and commercial activity.

TIMING & TRADE-OFF CONSIDERATIONS With no other demand topic does the shift to a development oriented transit system show so clearly as with mixed use corridors. Building a transit system that is keyed to leverage development marks perhaps the single greatest change in the economic development paradigm for Portland in the years ahead – extending well beyond recent experience that to date has been largely focused on the Central City.

Short-Term Opportunities. The primary objective recommended for 2010-15 is to complete and adopt a city-wide streetcar system plan together with identification of build-out for high capacity bus and MAX corridors. Specific opportunities are to:

• Commit to first phase plan for city-wide streetcar system plus added MAX corridors and proceed with project funding and preliminary design.

• Amend Comprehensive Plan and zoning to encourage higher densities and mixed use with a strong employment component along selected transit corridors.

• Complete prototype development projects to demonstrate the competitiveness and affordability of streetcar corridor mixed employment-residential in a post-recession economic environment.

Long-Term Opportunities. Over the 2015-35 time horizon, the objective is to fund and build-out a transit system consistent with city-wide goals of energy and carbon footprint savings – and to achieve corresponding transit oriented development (TOD):

• Complete first phase streetcar and added MAX corridors and proceed toward system build-out by 2035.

• Work with development interests to build the expertise and capacity specific to the unique market and aspirational characteristics of each TOD corridor.

Trade-Offs. The most apparent TOD-related tradeoff is whether to prioritize streetcar and high capacity transit corridors that already have high density of development versus corridors where transit can effectively leverage significant added development.

This EOA analysis recognizes the importance of both opportunities but suggests placing greater priority on corridors that can serve to leverage increased density of development. This approach also will serve to maximize net added job potential together with savings for city-wide energy use and carbon footprint of both operational and embodied energy.


IIXX.. CCAAMMPPUUSS IINNSSTTIITTUUTTIIOONNAALL Throughout this EOA, institutions have been defined as representing major medical and higher education uses located within defined campus settings. Many of these institutions are located in or near residential areas of the City.

As of 2006, the 29 major institutions in Portland (excluding Portland State University - PSU) accounted for nearly 37,000 jobs. When the Central City PSU University District is included, the combined job count goes to nearly 42,800 (or 11% of the city-wide total job base).

As might be expected, education and health care make up 96% of the jobs within these defined campus districts. Since 2000, employment has been increasing more rapidly for these 29 institutional campuses (plus PSU) than for any other employment use in Portland.

CAMPUS-INSTITUTIONAL GROWTH TARGETS An aspirational objective would be to accommodate 100% of desired in-city campus institutional needs for expansion and reconfiguration.

Forecast Scenario Results. The range of non-Central City campus-institutional growth anticipated with three city-wide forecast scenarios is indicated at:


From 2000-2006, institutions accounted for more than the total net job growth occurring in the City of Portland – more than offsetting job losses experienced in other sectors. While other employment uses are forecast to again take positive shares of regional job growth, institutional use is still projected to account for about 23% of city-wide job needs to 2035 with low growth. With high growth, institutions would drop to a forecast 18% of total city-wide job gains – assuming that other sectors of the City’s economy pick up shares of employment activity more comparable to long-term historical experience.

Note: These figures exclude added institutional employment growth associated with Portland State University. PSU-related demand is included separately with Central City employment growth projections.

Recommended Growth Target. A minimum mid demand scenario planning target suggested for the 25 year horizon of this EOA is 29,000+ campus institutional jobs (outside Portland’s Central City). In conjunction with master planning processes of individual institutions, more aggressive growth targets (in line with a high demand scenario) will be important if the City is to aim for retention of 100% of existing campus institutional activity to remain in Portland.


DEVELOPMENT CAPACITY Of all the six priority demand topics considered, Central City and institutional uses represent the type of development that perhaps offers the most certain employment growth potential for Portland in the years ahead. Anticipated demand ranges from 370 to 550 acres, versus an effective supply of vacant and low value improved land estimated at between 100-125 acres.

In effect, institutional use is the most undersupplied with vacant and low value land inventory relative to forecast growth potential. Most of the easy to develop land is low value rather than vacant, meaning that redevelopment (with higher FARs) or land acquisition could be required to account for as much as 60-90%+ of job growth needs across all three forecast scenarios.

More so than for the other uses described with this EOA alternative choices analysis, zoning capacity estimates for institutional should be considered as preliminary and subject to further refinement through the City of Portland Bureau of Planning and Sustainability (BPS). This refinement will involve more detailed review of the conditional use master plans for each institution which is beyond the direct scope of this EOA.

A wide range of zoning is noted that further complicates this evaluation process. Zoning designations include:

• Central Commercial (CX) at Portland State University (within the Central City) • Central Employment (EX), a recent change at Oregon Health and Science University

(OHSU) outside the Central City • Institutional Residential (IR) at some education and health care campuses outside the

Central City. • Multi-Family Residential (MFR) at other non-Central City sites, especially within or next

to neighborhoods.

Institutional Implications. Realistic options for resolving the gap between demand and supply is extremely challenging not only because of the size of the gap but also the physical setting of many institutions – often bounded by residential neighborhoods. On paper, options could include:

• Increasing the campus footprint (with land acquisition), often requiring re-zoning and conditional use plan (CUP) approval processes.

• Creating satellite campuses taking advantage of opportunities for transit oriented development (TOD).

• Increased density of development within the existing footprint. • Relocation of some portion of campus institutional activity elsewhere in or outside the

Portland metro area.

Each of these options carries some downside risk. Yet resolution is increasingly vital as institutions currently represent the most secure form of job growth and also can be instrumental


to placing Portland on the map as a global pathway city encompassing world class education and health care.

Capacity Approach. Recommendations for consideration are two-fold:

• Offer master planning that encourages satellite institution facilities along transit corridors or building up within the existing footprint as a priority over campus footprint expansion. This often will mean more creative transportation and parking strategies – including increased and more customized transit support to existing locations not as readily served by transit at present.

• Provide institutional zoning offering a flexible partnership role with rapid response capability to changing institutional needs as they occur.

While it is premature with this EOA to recommend a single approach that will work equally well across all major health care and educational institutions, there appears to be great interest and support for considering some type of overall institutional zone designation that might be accompanied by a more rapid-paced master plan amendment process. The master plan process should include designation of each institution’s sphere of influence extending beyond its immediate campus boundary. As a separate but related mater, more clear outright use designations might be made for smaller satellite institutional uses in other commercial zones as around transit stations.

MARKET OPTIONS Delivery of educational and medical services is often not thought of as a market activity due to the active role of public agency and non-profit service providers.

Market Relevance for Portland. The imperatives of fundraising and attracting customers (students or patients) place the city’s institutions in an increasingly competitive market environment – for talent, capital and recognition. This marketized role affects not only the institution but the broader community.

A widely cited economic development constraint for Portland is its presence as the largest metro area in the U.S. without a nationally recognized research university. Regions ranging from Boston to the Bay area have found that well-recognized research universities become traded sector catalysts for leveraging entrepreneurial talent and capital.

While less common, medical institutions can play a similar traded sector role – attracting medical research funds and patients willing to pay for specialties not readily duplicated elsewhere. Examples of communities that have benefited from this traded sector function are as diverse as Baltimore (Johns Hopkins), Houston (Anderson Clinic), Cleveland (Cleveland Clinic) and Rochester, Minnesota (Mayo Clinic).

Barriers to Development. Major issues affecting continued development of Portland institutional activities can be summarized to include historic development at what often proved to be unusual locations not consistent with typical commercial siting criteria, with resulting poor transit or arterial street access, a presence within or near neighborhoods that constrains campus


expansion, and zoning/regulatory mechanisms that appear to increasingly impede effective on-site planning including capacity for response to rapidly changing educational and health care needs.

With a few noted exceptions, there is also a general orientation by Portland institutions to serve primarily local and regional rather than national or global customer markets. This lack of a traded sector focus may unnecessarily limit opportunities to leverage more specialized niches of excellence for Portland institutions that could further increase economic multipliers for added spin-off income in-city and regionally.

Recommended Market Response. Portland institutions are well regarded for serving needs of Portland metro and Oregon clientele. What this EOA suggests is that the economic multipliers related to institutional activity could be substantially enhanced by greater traded sector focus. Specific recommendations are two-fold:

• Encourage consideration of traded sector specialization opportunities as part of future master planning by each major Portland institution.

• Broaden the full-service appeal of Portland institutions by offering flexibility for complementary on-site or nearby service functions – ranging from more residential (as for students and employees) to commercial mixed use (including more vibrant retail and personal services).

PUBLIC INVESTMENT & INCENTIVES Because Portland’s major medical and educational institutions have often been in place for many years, their needs for continued public investment and service reconfiguration can be easily overlooked. However, rapid growth in facility requirements gives rise to growing institutional frustration with what may be increasingly inadequate public infrastructure support.

Institutional Infrastructure Needs. Consistent with focus group discussion, the single greatest public infrastructure need identified by medical and educational institutions is for improved transit service – often to what have been considered out-of-the-way or difficult to serve locations. Not as frequently mentioned but a likely consideration will be needs for utility upgrading to the extent that institutions build new or expand facilities at existing campus sites.

Public Investment & Incentives Recommendations. Suggested is renewed consideration for:

• Transit service customized to institutional needs and ridership opportunities coupled with reductions in the campus auto and parking footprint.

• Long-term utility planning as required to better support updated campus master plans.

TIMING & TRADE-OFF CONSIDERATIONS For Portland’s medical and educational institutions, the time frame for action is less relaxed and the tradeoffs more challenging due to the pace of growth already occurring and expected for the foreseeable future.


Short-Term Opportunities. Unlike private portions of the region’s economy, Portland’s medical and educational institutions can be expected to experience continued growth pressures even during this period of economic downturn and ensuing recovery. Critical to facilitating this economic development opportunity will be steps to:

• Set the institutional mechanisms in place for a more demand-responsive partnership role as part of the Portland Plan and Central City Plan update.

• Work institution-by-institution to create customized transit and auto trip-reduction programs.

Long-Term Opportunities. Return to a stronger growth economy and resulting workforce training needs coupled with aging of the baby boomer population can be expected to further intensify growth pressures for many of Portland’s institutions. Rather than expand in a largely uncoordinated fashion, the 2015-2035 period may be a time to:

• More actively encourage wealth creating, traded sector niche functions as an integral component of coordinated institutional master planning.

• Aggressively move to better integrate Portland institutions into their neighborhood communities with locally-inspired mixed use.

Trade-Offs. As indicated by the above discussion, pertinent trade-offs are of two types:

• Mission focus on serving Portland and Oregon based clientele versus selective traded sector specialization for added regional recognition and economic impact.

• Capacity for institutions to also serve as community gathering places without unduly compromising their distinctive core service missions.


Economic Opportunities Analysis

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