Oregon Public Broadcasting

Oregon's housing market has suffered over the last couple of years, but the local commercial real estate market is enduring a similar fate.

Kristian Foden-Vencil took a look at the market for office buildings, industrial parks, shops and apartment complexes, and found that in some areas, owners have experienced the biggest drop in value since the Great Depression.

InFocus is an Oregon company that makes projectors -- the kind that an executive might use in a swanky business presentation.

A few years ago, the company was poised to market them as “the next big thing' in in-home entertainment.

It leased a big, four story office block in Wilsonville. But then says vice president, David Woolf, flat screen TVs came along and InFocus had to make deep cuts, and reduce its staff. 

David Woolf: "Every other fourth cube or every third cube was completely empty, and it felt like there were a lot of ghosts running around the place. So one of our top priorities became moving into a nice fast-paced exciting new building where we could all get together in a small environment."

Standing outside the company's new office near Tigard, Woolf says InFocus is still paying for a two year lease on its old building. But he says, the commercial real estate market is so soft, it was still cheaper to reduce costs at the old space and move into a smaller building.

David Woolf: "We're able to save a lot of money by shutting down the old building. saving on the security, the building maintenance, costs associated with greeting people, shipping and receiving and things like that. And also there are some great deals out there. In this case, two buildings is actually less expensive that one building if you can believe it."

Across town, Jeff Borlaug the president of the Commercial Association of Realtors, can certainly "believe it."

He says the market has been unravelling for the last couple of years.

Jeff Borlaug: "We have seen a decrease in values of almost 40 percent from this point in time back to 2007, which is probably the biggest reversal in value since the Great Depression, even eclipsing the trouble in the early 1990's."

Borlaug has seen a lot of changes in his career -- including the boom and bust of the Dot-com bubble and the similar fate of the housing bubble.

The question is: are things still getting worse -- or are they beginning to improve?

Jeff Borlaug: "Some are hopeful that 2010 will be the uptick and the upturn and we'll see improvement. I think the other folks would say they're a little bit fearful and the worst is yet to come. I think in our business you have to be an optimist to be successful. However, I'm a little of both. I'm hopeful that 2010 will be positive and yet I'm a little fearful that we haven't bottomed out and the worst is yet to come."

What he needs to turn him into a bull, he says, is a lowering of unemployment -- because office blocks and industrial parks would start filling up and newly hired staff would begin shopping again.

Commercial real estate is a lot like the housing market, where there are three main factors dictating price: location, location and location.

So are things the same across Oregon?

Mike Favret: "Well I think it's going to be a while longer, like three to five more years.

Mike Favret is a broker with Windermere in Eugene. He says commercial real estate prices there have dropped 20 to 25 percent there.

Mike Favret: "You know the banks don't want to lend and until they want to get active again in the market, it's going to be tough."

It's worse in Bend, according to Darren Powderly with Compass Commercial Real Estate Services. He says rental rates have dropped by about 40 percent and prices are down by as much as half. He thinks a return is years rather than months away. But he says, there is hope.

Darren Powderly: "You know the silver lining is the cost of doing business in Central Oregon has never been more attractive. There's plenty of employees to choose from. The cost of occupancy and office space is very low. The cost of housing is very low and we've seen an uptick in leads coming from the outside area just in the last two months, I've actually been contacted by a number of different companies."

For example, class A office space rents rents for an average of $17 per-square-foot-per-year in downtown Bend. In downtown Portland, that average is closer to $27.

But does the suffering commercial real estate market matter to anyone who doesn't own an office block or apartment complex?

Back at InFocus's new office, David Woolf says it does.

David Woolf: "The prices are so aggressive that I would encourage anybody to look at their lease and get out there and you might actually be able to save some money by moving into a new facility, even though you're locked into someplace else. And that's what happened with us."

There is one proviso: brokers will tell you  that as soon as employment begins to pick-up, deals are going to evaporate.