Big Pink

U. S. Bancorp Tower - aka Big Pink

I get a newsletter from a realtor I know. We've bought and sold several houses in the 30-odd years we've lived here. He's not perfect, we didn't get as much money for one house as I thought we should, to the tune of a few thousand dollars. On the other hand, one house that I bought without him, I overpaid like a hundred grand. Well, in hindsight it seems that way. But that might just be my own internal criticism. I looked at the house and I could see there were some problems, but I thought they could be easily fixed. Conceptually they were, but it took a heck of a lot more work and money than I imagined. The upshot of all this is that having someone that you trust, tell you that you're looking at a fair price, that is invaluable.

Anyway, this newsletter pointed to this story from KATU:

Sale of Portland's iconic 'Big Pink' could spur city's recovery, economist says

PORTLAND, Ore. (KATU) — The advertised sale of Portland's largest office building has the Rose City back in the national news. However, an economist says the transaction could spark the city’s recovery.

The Unico/US Bancorp Tower building last sold for a little more than $370 million in 2015 and is expected to fetch a fraction of that if and when it sells. But, despite some people viewing the sale as proof of Portland’s fall, Mike Wilkerson said the possible sale marks a turning point.

“This will be individuals, institutional investors putting tens of millions of dollars into Portland [and] saying, ‘We believe in the future of the city, and we're willing to invest at this rate,' and from there, that's how the growth cycle starts. We've been stuck at the bottom because we needed this activity. This will be the beginning of the recovery,” Wilkerson, director of Economic Research at ECOnorthwest, said.

Wilkerson said the bad news is the possible impact the reduced market value of the property has on property tax collections for the city of Portland and Multnomah County.

A previous KATU investigation found many of Portland’s largest office buildings have lost hundreds of millions of dollars in combined market value, contributing to budget deficits in both local governments.

The advertised sale of Portland’s largest office building has the Rose City back in the national news. However – an economist says the transaction could spark the city’s recovery.

“The good news far outweighs any of that bad news damage because, effectively, what it's doing is saying, ‘Let's reset Portland as a place that is on a trajectory for upward investment,’” Wilkerson said.

The challenge for a buyer is what to do with the building after buying it. An advertisement for its sale indicated the building is 55% vacant; it has more vacant space than some entire office buildings downtown.

That vacancy level outpaces the vacancy rate of Class A properties in downtown Portland, roughly 35%, according to market research that real estate broker Colliers shared with KATU.

Wilkerson said even the possibility of selling the property, along with PacWest, which is also for sale, shows buyers and sellers starting to discuss what downtown properties are worth.

“Once you have two of the largest buildings transacting, the market now will have confidence that, OK, if it's selling at $100 a square foot or $70 a square foot or $50 a square foot, everyone in the rest of the market will say, ‘OK, now as a seller you're realistic in what that building is worth,’ versus holding out hope that it's worth closer to what you purchased it for five, 10 years ago,” Wilkerson said.

“What kind of impact do [sales like this] have on the economic recovery of a city,” KATU asked Wilkerson.

“Massive. What we need as a city is economic development or growth, and that starts with dollars coming into the region that don't exist here today,” Wilkerson said. “So, for us as a region, attracting that scale of capital flows all the way downstream into jobs, into income, into growth, and so these are some of the most crucial steps that we need to facilitate a recovery.”

Asked Google what it costs to build a skyscraper and this was the reply:

The cost to build a skyscraper can vary widely, but generally ranges from $300 to $600 per square foot in major urban areas.

If the price per square foot drops to $50 or $100, it might make it worthwhile to turn all this office space into living spaces, like apartments or condos. Talking to eldest son about this and he pointed out that just cutting up the floor with new partitions wouldn't cut it, you'd have to rework all the plumbing and all the wiring. Reworking the plumbing might be done more easily if you could raise the floor by one or two feet. That would depend on whether the ceilings are tall enough. And you might have to do something with the windows, like replace all of them. In any case, you would need some clever people to figure out the details and how to get it done without breaking the bank.

Thinking about all this, I am beginning to understand why what-look-like-perfectly-good buildings get knocked down to make room for a new ones.