COMMERCIAL REAL ESTATE SERVICES MARKET NEWS In This Issue Section 179 and Bonus Depreciation 1 Industrial Market 4th Quarter Overview 2 Retail Market 4th Quarter Overview 3 Broker Focus 4 Office Market 4th Quarter Overview 5 About Macadam Forbes 6 Section 179 and Bonus Depreciation New Savings for Purchases in 2013 To encourage businesses to invest in new equipment, Congress enacted Internal Revenue Code Section 179. Under Section 179, a business is allowed to deduct the cost of qualifying equipment at the time it is purchased and placed in service rather than taking a depreciation deduction over the life of the equipment. The Section 179 deduction limit is $500,000 in 2012 and 2013. The 179 limit is reduced dollar for dollar for qualifying purchases in excess of $2 million and the limit is reduced to $0 at $2.5 million of purchases. Examples of equipment qualifying for the Section 179 deductions are: Equipment (machines, etc.) purchased for business use Tangible Personal Property used in business Business Vehicles with a gross vehicle weight (GVW) in excess of 6,000 lbs. Computers Off the Shelf Computer Software Office Furniture Office Equipment Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment) Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be FOURTH QUARTER 2012 based on the percentage of time you use the equipment for business purposes). Not available for cars and light trucks under 6000 lbs. GVW. Contact your CPA for the rules relating to cars and light trucks. If the taxpayer purchases new equipment and does not elect to take advantage of Section 179, Bonus Depreciation is available. The Bonus Depreciation deduction is equal to 50% of the cost of the equipment. The deduction is taken in the year that the equipment is purchased and placed in service. Bonus Depreciation will not be available for equipment purchased after 2013. Cost in excess of the Bonus Depreciation is depreciated over the life of the asset. Bonus Depreciation is offered on top of the maximum allowable Section 179 limits and standard first-year depreciation. This allows larger businesses to write-off 50% of qualified assets using first year Bonus Depreciation. The most important difference is both new and used equipment both qualify for the Section 179 deduction, while Bonus Depreciation covers new equipment only. These limits are set to reduce and return to much lower amounts after 2013. So, you may wish to take advantage of Section 179 now before the enhanced tax deductions expire. Tax laws can be confusing and can change frequently, contact your CPA to learn more about these and other tax laws that can make a positive impact on your business. MACADAM FORBES MARKET SPOTLIGHT 9750-9790 SW Nimbus Avenue 10,611 SF - Mix of Open Plan & Offices Lessor: Shorenstein Realty Services L.P. Lessee: Passport Online,Inc. 13939 SW Tualatin Sherwood Road 50,981 SF Industrial Steel Structure Lessor: Blakeslee Properties, LLC Lessee: McKillican American Inc 1543 SW Alder Street 15,000 SF Showroom & Workspace Lessor: Midtown Plaza LLC Lessee: Uptown Auto Detail
PORTLAND INDUSTRIAL MARKET Fourth Quarter Industrial Vacancies for the overall Portland Industrial Market have been on a steady decline since 2010, closing out at 7.2% which is the lowest vacancy rate since 2008. The Flex Market has experienced the largest dip in vacancies closing out at 10.1% from 12.1% a year ago. The only construction project in the Flex Market was in the Westside Market Area and was delivered 100% pre-leased. 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Industrial Percentage (%) Featured Property For Sale or Prime 3.07 Acre Industrial Property $0.80 $0.60 $0.40 $0.20 $- Industrial Rental Rental s s (NNN(NNN) Monthly) 1740 NE Lombard Place, Portland, OR 97211 Sale Price: $2,085,000 : $10,520 per Month NNN 1,992 SF Office/Showroom 9,123 SF Pole Shed with Reinforced Concrete Poured Floors, 7,920 SF Pole Shed with Reinforced Concrete Poured Floors 11,280 SF Mix of Covered Shed and Enclosed Warehouse with 1,840 SF of Maintenance Shed 133,725.20 SF Lot (3.07 Acres) Property Amenities Fully fenced Two truck entrances, great for 53 trucks Great visibility on Lombard St. & Columbia Blvd. Contact Eleanor Aschoff or Mike Vandenburgh, SIOR for additional information. 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% 5.0% 3.0% $1.00 $0.80 $0.60 $0.40 $0.20 Flex Flex Percentage (%) s Flex Flex Rental Rental s s (NNN (NNN) Monthly)
PORTLAND RETAIL MARKET Featured Property For Sale Pearl District Net d Retail 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Percentages 2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q General Retail Mall Power Shopping 416 NW 10th Avenue, Portland, OR Sale Price: $1,800,000 Cap : 6.0% This 5,000 SF retail building in the heart of the Pearl District benefits from a tenant that has been successful at this location since 2003. Seller is currently negotiating a lease extension with rent increases through 2019. From this original location, tenant has expanded into Lake Oswego and John s Landing markets, for a total of three stores. For added financial security, there is a personal guarantee on the lease. Property is located across from the Gregory and one-half block from the Elizabeth condominium developments. There is a Portland Street Car station 20 feet away. The building has a beautiful saw-tooth roof with three north facing windows, letting in abundant natural light. Take advantage of this rare Pearl District retail opportunity. Contact Dann Wonser at Macadam Forbes for additional details. General Retail Historical Rental s Mall Power Shopping Total Retail Market 2006 $14.12 $20.42 $25.70 $17.37 $16.66 2007 $15.46 $24.12 $20.82 $19.27 $18.28 2008 $16.46 $21.87 $18.19 $19.61 $18.47 2009 $15.07 $19.18 $18.47 $18.38 $17.15 2010 $14.77 $21.05 $18.44 $18.36 $17.00 2011 $13.83 $25.49 $18.44 $17.24 $16.07 2012 $14.18 $26.45 $19.96 $16.28 $15.83 $30.00 $25.00 $20.00 $15.00 $10.00 Submarket Rental Rental s s 2006 2007 2008 2009 2010 2011 2012 General Retail Mall Power Shopping Total Retail Market General Retail Market Geographic Summary Overall Retail Power Shopping Mall Clark Co. 9.0% $16.22 5.5% $19.96 13.0% $16.28 1.4% $-.000 NE 6.0% $13.69 5.5% $18.44 12.9% $17.24 3.3% $21.00 SE 5.0% $14.49 2.2% $18.44 8.6% $18.36 5.3% $24.16 Lloyd Dist. 3.8% $16.63 N/A N/A 0.0% $-.000 2.4% $28.58 CBD 4.2% $20.74 N/A N/A 8.7% $18.30 21.8% $-.000 SW 4.9% $15.57 1.7% $20.72 7.4% $17.27 0.4% $-.00 0 NW 1.5% $16.75 N/A N/A 0.0% $20.00 N/A N/A Westside 4.9% $19.51 12.1% $27.80 5.1% $19.22 7.6% $33.58 I-5 Corridor 5.1% $17.99 4.5% $30.20 7.5% $18.78 4.2% $-.000 s rates for all retail categories except Shopping s are in the 4-5% range, with General Retail and Power s showing improvement over the past year. Shopping s continue to falter as they look for new strategies to attract customers and tenants. Rental rates declined for Shopping s, but increased in all other categories By area, the lowest vacancy rates are close-in. NW Portland has an exceptionally low 1.5% vacancy rate. The outer suburbs continue to show a slower recovery. Clark County still lags the rest of the market with 9.0% vacancy. There was positive net absorption of retail space in the Portland market in each of the last three years. New space continues to be developed at a pace that is one-fourth of the pre-recession rate. This should lead to further decrease in vacancy rates and strengthening of rents over the coming year.
PORTLAND OFFICE MARKET Fourth Quarter Office Office rental rates on all building classes combined have remained at a steady pace across all markets over the last year compared to previous years. With negligible change to the rental rates since the peak seen in 2008 ($20.15), 2012 closed out at a rate of $19.82. Most significant change in rates over last year was seen in the Class A Market closing at $24.44, the highest year-end closing rate since 2008. No significant changes to vacancy percentages in the overall Portland Market for the last twelve months, but a closer look at the Class B Market shows that despite the addition of 389,590 rentable building area added to the market over the last year, vacancy percentages fell from 11.8% at the close of 2011 to 10.4% at the close of 2012. This is the lowest vacancy percentage in the Class B Market since 2007. 10225 SW Park Way, Portland, OR Sale Price: $1,200,000 : $15.00/SF NNN 6,859 SF Building Featured Property For Sale or Cedar Hills Freestanding Office Building 40,946 SF Lot (.94 Acres) 6.5 Parking Spaces/1,000 SF Property Amenities Quality Office Space in the Heart of Cedar Hills Excellent Medical Location Near St. Vincent Hospital Easy Access to Highway 26 and 217 Excellent Signage Opportunity on Hwy 26 Great Highway 26 Visibility Percentage Percentage (%) Portland/Vancouver Portland/Vancouver by Building Class By - All Classes 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 20.0% 15.0% 10.0% 5.0% $25.00 $23.00 $21.00 $19.00 $17.00 $15.00 11.8% 10.3% 8.4% Class A Class B Class C Total : 24,168,474 37,526,032 22,661,561 Occupied Vacant Chart Key Office Percentage (%) - All Classes Portland/Vancouver Rental s (Full Service) Market - All Classes Core Area: Downtown, Close in NW, Close in NE, Close in SE and Close in SW. Eastside: Hollywood, Gateway, Airport, Milwaukie, Clackamas and Gresham. I-5 South: Tigard, Lake Oswego, Kruse Way, Tualatin, Wilsonville and Sherwood Vancouver: Vancouver, Hazel Dell, Salmon Creek, Five Corner, Mill Plain, Ellsworth and Camas Westside: Beaverton, Hillsboro, Aloha and Cornell Contact Colin Russell at Macadam Forbes for additional details.
Macadam Forbes, Inc. Commercial Real Estate Services FEATURED PROPERTIES: JOE KAPPLER ABOUT US Established in 1978, Macadam Forbes, Inc. is a significant force in Portland s commercial real estate history. Macadam Forbes sales and leasing team members average 20 years of experience in commercial real estate. Our agents thoroughly cover each sector of the market and achieve outstanding results by combining product knowledge and geographical specialization. Macadam Forbes, Inc. utilizes a network of business and real estate relationships that cover the Portland/Vancouver metropolitan areas and extends to markets across the country. BROKERAGE SERVICES Including: Landlord/Seller Representation Tenant/Buyer Representation Marketing Program & Brochure Development Build to Suits Consulting & Research Sale/backs Valuation Analysis Location Analysis Site Searches DEVELOPMENT & CONSTRUCTION SERVICES Including: Fee Development Project Management Build to Suit On-Demand Advisory If you would like a lease audit to measure against the market, a space needs analysis, are looking to move, buy or sell, please contact Macadam Forbes at 503.227.2500. Do you want to receive electronic issues of this newsletter? Send your email address and contact information to: marketing@macadamforbes.com. 1800 SW First Avenue, Suite 650 Portland, OR 97201 Main: 503.227.2500 www.macadamforbes.com COMMERCIAL REAL ESTATE SERVICES All of the information contained herein was obtained either from the owner or other parties we consider reliable. We have no reason to doubt its accuracy, however we do not guarantee it. The views expressed herein by the author do not necessarily represent the view of Macadam Forbes, Inc. or any of its affiliates.