Investors often wonder how the commercial real estate market in Oregon is different than others. In this episode, René Nelson outlines the similarities, differences, and current opportunities.
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Today we’re with René Nelson, CCIM, a well known multi-family expert and commercial real estate broker. We’re talking about commercial real estate in Oregon.
René, how does commercial real estate in Oregon compare to other markets across the U.S.?
René Nelson: Well, you know, Patrick, right now we’re seeing a shortage of inventory for commercial real estate in Oregon and prices are still pushing up. We’re really in a seller’s market, where buyers are paying inflated prices, similar to the pre-recession from 2005 and 2006. Prices for commercial real estate nationally increased 5% compared to 2015, 2016. In Oregon, our average transaction amount right now is around 1.4 million in sales price.
I watch an interesting statistic where they track jobs versus market rent. I watch that on a national level, as well as in Oregon. Portland just ranked third nationally for the strongest job growth and the greatest rent growth. The Portland market actually edged out major cities like Phoenix, Las Vegas, Orlando, and Nashville.
With investors looking to buy here then, how does that impact sales prices for commercial real estate in Oregon versus nationally?
René Nelson: You know, nationally, most investors use a cap rate to decide if they’re going to jump into a market and buy. Nationally, the cap rate for multi-family was round 6.5%. But in Oregon, for the newer projects, it was around 6%, where even the older projects built in the sixties and the seventies, that cap rate was 5.79%. The reason that cap rate was lower because there was so much competition, it drove up prices.
Let me give you an example. A Class A property, where it’s brand new, high rise, typically lots of glass, and all the young millenniums want to live there, on a national level, those are selling for about $87,000 a unit. Where in Oregon, we had 21 of those sales last year and they sold for $236,000 a unit. That number clearly demonstrates that investors are just clamoring to buy in Oregon because of the opportunities for employment and increased rents.
René, I know that the listeners want me to ask you this: So can you still get a good buy in Oregon?
René Nelson: You know, you absolutely can. The old days of where buyers thought, “Well, I’m going to come in and offer below list price,” that’s not going to work in this market. Unfortunately, we’re in a hot market and the buyers are going to have to be realistic but there are opportunities in this market right now and it’s a great time to buy. There are investors that are looking, so they are going to have competition, but there is definitely opportunity right now for buyers.
Thank you, René. That was a great explanation. To our listeners, if you need more information, go to Eugene-Commercial.com or call René at 541-912-6583.
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