Urban Land Institute- June 2004
Cultured Pearl
By: BRAD BERTON
A mix of uses is energizing what is quickly becoming a magnetic social hub in Portland, Oregon.
When Matt Groening was naming The Simpsons characters after the northwest Portland streets he had walked during his formative years, the budding cartoonist could have had little inkling that the likes of Flanders and Lovejoy would soon become the setting for one of the nation’s more remarkable urban renewal stories. Nor did many others foresee such a swift and dramatic transformation of a downtown neighborhood long defined by aging industrial structures and an obsolete rail yard.
It was hardly a decade ago that art gallery owner Thomas Augustine even coined “the Pearl District” as the modern moniker identifying Portland’s increasingly popular residential, artistic, and leisure hub. Over that short period, as the new identity suggests, a growing roster of the area’s once-tired structural oyster shells has incubated an increasingly luxurious string of residential, commercial, and cultural pearls.
“I think within three to five years, a lot of people will look at what’s happening in the Pearl District as a perfectexample of enlightened urban redevelopment planning,” comments Craig Sweitzer, principal with the district’s Urban Works retail/specialty real estate brokerage.
Many of what are considered Portland’s most significant restaurants and nightclubs have moved into “the Pearl”as the area’s evening and weekend crowds have grown. But the prominent restaurateurs and other merchants are not just targeting a Pearl District resident population that has quickly swelled from nearly nothing to 3,500.“ The Pearl is pulling people from all over town and the suburbs,” notes Sweitzer.
Residential redevelopment of the old Hoyt Street Yards has combined with an improving mix of higher-quality uses in the adjacent warehouse district to energize what is now Portland’s most magnetic social hub. It also helps to have the heavily used new Portland Streetcar, a modern trolley that runs through the hub’s heart, as well as merchant marketing and a growing selection of cultural programs.
Even as the local economy has been in recession over the past few years, long time property owners and visionary real estate entrepreneurs have seen their fortunes flourish as robust demand for Pearl District digs has spawned residential rent and value appreciation. As has been the case in other revitalized central city districts in the West, such as Denver’s Lower Downtown (LoDo) and San Diego’s Gaslamp Quarter, the Pearl’s rapidly expanding population has quickly created a critical mass sustaining the area’s growing merchant roster.
The key is the people living in the 3,000 or so new units created in less than a decade through redevelopment programs in and around the Pearl, says Tiffany Sweitzer, president of the local Hoyt Street Properties group, which has been redeveloping the former rail yards on a block-by-block basis. “That gets the retailers’ attention,”she adds. “Our buyers are the Pearl’s most effective sellers.”
Hoyt Street Properties, founded in part by Pearl pioneer Homer Williams (stepfather of the Sweitzer siblings), is hardly halfway through the 2,500 residences planned for its 34 acres of former rail yards just west of the Union Station depot. Other Pearl sites, likewise, have seen redevelopment and reuse ventures, creating lofts in old warehouses, and condominiums and apartments, many also lofts, in numerous newly built structures.
But as Pearl property professionals and other stakeholders note, the district’s pioneering residents alone cannot account for the Pearl’s emergence as a multiblock center of Portland’s urban renaissance. Factors such as the Portland Streetcar, ongoing redevelopment in the wider River District, and coordinated merchant efforts to attract patrons have made the Pearl “cultured.” It is now the place to shop, wine and dine, carouse—and even learn.
“I think the merchants’ strong role in advocating the area indicates that people are buying into the Pearl vision,”says Tiffany Sweitzer. With the area’s growing popularity, businesses and property owners have taken a higher profile role in marketing and otherwise supporting the Pearl, she continues. To wit, the Pearl Street Business Association recently hired its first full-time administrator.
.
Leveraging the Pearl District’s popular monthly First Thursday arts celebrations, area businesses have managed to transform from being mostly service-based to becoming entertainment and boutique establishments, Craig Sweitzer observes. Hence, even amid the generally soft local business environment, retail rents in the Pearl have nearly doubled over the past five years from the low and midteens per square foot to the high $20s and even occasionally into the $30-plus range for smallish corner spots. “When I showed the Starbucks people a site I had in mind a couple of years back, they thought I was crazy,” he recalls. “But they took the risk, thinking it could become a good spot if the neighborhood kept improving, and now they’ve got two high-volume locations in the Pearl.”
Visitors are not quite sure what to make of the transforming neighborhood, says Chuck Barnes, an architectural consultant who lives on the Pearl’s periphery. “Some of them seem to think the Pearl is a theme park, with the popular restaurants and shops as the attractions,” he observes. Lest one think Portland residents unanimously view the Pearl’s emergence as positive, stakeholders acknowledge that any neighborhood witnessing such a transition faces considerable challenges. For instance, echoing the growth pains other revitalizing downtown districts across the country have experienced, the Pearl has found that many of the artists who flocked to the old warehouses have been priced out of the district.
Also, despite key improvements, traffic circulation patterns are not considered merchant friendly, and parking remains a challenge, especially on warmer weekends and during the First Thursday celebrations. Plus, not every redevelopment venture has been a success, leaving a noticeable number of underused locations on some of the Pearl’s quieter blocks. Meanwhile, the merchant roster is definitely a work in progress, say some observers.
Barnes, who has been in the area for about three years, laments that the Pearl’s retail base still reflects an emerging neighborhood that is far from mature. “There’s not a lot of breadth in the kind of retail we’re seeing here now. It will be interesting to see what it will be like in a decade or so when there aren’t so many lamp stores,” he says. Predictably, given the tough local and national economy, Pearl District merchant demand has not been quite as feverish lately as it was at the height of the cycle three years ago, Craig Sweitzer acknowledges. But he says he expects independent retailers to jump on opportunities as business starts to improve.
Considering the pace of retail deal making even amid the current environment, the Pearl may well see a considerable merchant makeover in less than ten years. Following the emergence of numerous art galleries in old industrial buildings, the Pearl’s burgeoning appeal has attracted an array of trendy new shops, coffee bars,restaurants, nightclubs, and even about 15 salons and spas, as well as an abundance of home furnishings outlets—not bad for an area most Portlanders largely ignored for decades.
Perhaps the greatest catalyst behind the Pearl’s transformation is the far-reaching 1997 redevelopment agreement between Hoyt Street Properties and the Portland Development Commission, which allowed the rail yard’s rebirth as a loft-heavy mixed-use district. The arrangement also entailed dismantling the old Lovejoy ramp approach to the Broadway Bridge, eliminating a substantial physical impediment to redevelopment of the Pearl’s northeastern quadrant.
The cleared rail yard constitutes an unusually large downtown development palette, stretching the Pearl’sboundaries farther northward. In the northwestern sector’s alphabetically sequenced east/west street scheme, the Hoyt Street Properties portfolio starts a couple of blocks north of Flanders, and development has steadily pushed through new four-lane artery Lovejoy and on toward Quimby. “It is certainly unusual to have so much land available for development within walking distance of a downtown core,” Tiffany Sweitzer points out. Indeed,the Pearl experience recalls redevelopment properties adjacent to the Union Station in a couple of other western U.S. downtowns that have come under unified control, observes Bill Sirois, transportation planning specialist with Carter & Burgess, an architectural/engineering firm based in Denver.
Some 50 cleared and cleaned former rail yard acres near Denver’s LoDo district have been redeveloped into a thriving high-density residential neighborhood and park now known as the Commons, Sirois continues. With the city’s Union Station set to become an even busier hub as proposed transit projects progress, estimates have the area housing 6,000 or more residents by early next decade. On the bustling southern fringe of downtown Seattle, a renovated Union Station anchors a commercial and retail district on former railroad property that has seen more than $250 million of redevelopment activity over barely five years.
Few districts anywhere are seeing as many cranes altering the skyline as can be seen today in Portland’s Pearl,where about a dozen mostly loft-type residential projects are now under construction. The rapid progress has led to a learning process for Hoyt Street Properties and other developers, as well as architects and contractors, as they have aimed to discover just what the emerging marketplace wants—and how to build it.
“We’ve essentially been paving new territory, determining how to sell a whole lifestyle,” Tiffany Sweitzer explains.The area’s edgy feel has not become a casualty because the bulk of the newly built residential development reflects the Pearl’s industrial roots.
“It’s fascinating to see the ‘loftrification’ process” in the Pearl District and other downtown neighborhoods, says Barnes. But the term “urban loft” arguably has lost at least some of its original meaning amid the multifamily developments the Pearl is seeing, the architect laments. “It used to mean open warehouse space; now it just means no walls—and granite countertops.”
While there is no guarantee that the area’s resilient residential activity will continue indefinitely, it is hard to deny that the Pearl District is now entrenched as a highly popular urban gathering place. As the Sweitzers and others emphasize, the Portland Streetcar has been something of a godsend for the area. Launched in summer 2001 with a boost from the Hoyt Street redevelopment agreement, the line runs through the heart of the Pearl, linking it to popular nearby shopping districts, the downtown core, and the regional light-rail system, known as MAX. According to city estimates, more than $1 billion in development has occurred within a two-block-deep area along the line.
Another key factor boosting the Pearl’s appeal is the simultaneous development of several significant mixed-use projects. Perhaps most noteworthy among these is Gerding/Edlen Development’s seven-acre redevelopment of the historic Blitz-Weinhard brewery. The ongoing Brewery Blocks project already includes Powell’s Books and a high-traffic Whole Foods Market, plus offices, restaurants, and other stores. In addition, a presold high-end condominium tower is being built as part of the Brewery Blocks redevelopment, as is Portland’s first market-raterental high-rise in nearly three decades.
Due in great part to the Brewery Blocks, the area recently attracted some high-profile Portland law firms,advertising agencies, and architects, not to mention property developers. Not only did Gerding/Edlen move its headquarters to the Brewery complex, principal Bob Gerding is relocating from the suburbs to a penthouse in theproject’s 11-story condominium tower. The 123-unit building, dubbed the Henry, sold out at an average of $334 per square foot seven months before completion.
As the Lovejoy corridor has come to anchor the Pearl’s northern small shop scene, the Brewery Blocks anchorsthe larger-format southern flank, Craig Sweitzer notes. Plus, the new REI recreation store appears primed to prompt a pedestrian push toward the Pearl’s western periphery.
Like most of Hoyt Street Properties’ developments, REI’s two-level, 40,000-square-foot facility is part of a mixed-use retail/residential project—in this case an 11-story tower known as the Edge, developed by Pearl stalwart Carroll Aspen LLC. REI closed its relatively suburban location at the Jantzen Beach shopping center earlier thisyear as it opened its Pearl location, which includes a two-story rock climbing pinnacle.
A few blocks to the north, a planned Safeway supermarket will push redevelopment farther into the Pearl’snorthwest quadrant, predicts Craig Sweitzer. The market is also bound to boost traffic at the new Lovejoy shops, as will the next planned public park on the Pearl’s northern flank, he adds.
About 350,000 shoppers are expected to visit the REI store annually, offering yet another attraction to bring shoppers to the district. Down the street is a 24-hour fitness facility in a converted industrial complex, where the old dock-high doors provide oversized open-air windows. A new gymnasium and pool are part of an expansion planned there.
The Pearl District has become a pedestrian-friendly quarter, offering varying fare for visitors and residents alike.Bicyclists pass patrons dining alfresco along Lovejoy and near the brewery—mostly young professionals and empty nesters, judging by their luxury vehicles. Dozens of children frolic in and around the water feature at thenew Jamison Square urban park in the heart of the area. Reflecting the area’s artistic heritage as well as its growing sophistication, the Pearl seems to have become the official home of the “gallery/wine bar.” One exampleis the year-old Yoshida’s, complete with art gallery, wine bar, bistro, and imported Shanghai furniture.
The Pearl District is also home to artistic institutions, including the Portland Institute of Contemporary Art, Art Institute of Portland, and Pacific Northwest College of Art. And the Portland Center Stage theater company is considering a move to the 1889-vintage former National Guard Armory building adjacent to the Henry. It also houses an array of nightclubs, including Paragon, Oba, and Fuel, all within a block, and Jimmy Mak’s, Portland’s most popular jazz club, is a couple of blocks to the east.
Pearl merchants now range from the uniquely exclusive to the merely mundane—from Urbane Zen, a store featuring its signature Bath Ballistics (scented bath oil balls), trendy pajamas, and spa wear, to restaurant chains like Baja Fresh, P.F. Chang’s, Subway, Quiznos, and the pair of Starbucks. Among the other new comers redefining the Pearl’s eclectic mix are:
• Vault, a martini and cocktail lounge with an 18-foot ice-glass bar
;• Adlicio Interiors, a custom-design furniture store with offerings that are handmade locally from sustainable hardwoods;
• La Zhu Pearl of the Orient, specializing in Asian antiques;
• Dress Code, a contemporary men’s shop that relocated from the downtown core; and
• Storables, a home accessories chain that opened a flagship-level store.
Soon to come are Adidas Originals and the high-end import chain Anthropologie.
The area’s crowded First Thursday celebrations reflect the district’s artistic flavor, as well as collaborative efforts to attract new patrons to the Pearl. Launched by Pearl galleries, the gatherings bring thousands of Oregonians and southwest Washingtonians to the district. As first Friday mornings approach, “the lucky people get to stay right here,” veteran Pearl real estate agent Debbie Thomas says of the district’s residents. Thanks in part to programs and events such as Friday Flicks and Friday Night Wine Dinners, Pearl patrons participate in all mannerof organized activities. Friday Night Flicks, held at the new tech-heavy Umpqua Bank, is organized by the nonprofit Zimmerman Community Center, which also organized the farmers market on the Pearl’s peripheral North Park Blocks. Zimmerman program director Gus Baum notes that more and more Pearlites are showing up for the screenings, which the center moves outdoors during summer months. Umpqua is also home to the Knit Happens workshops held by the Pearl’s Knit Knot Studio. As the latest Pearl Pulse neighborhood newsletter points out, sponsored classes in the district range from snow shoeing to yoga, back-country cooking to global positioning system navigation, and piano lessons to computer animation.
Urban renewal does not occur without challenges. And especially in a metropolitan area where an urban growth boundary limits suburban development, revitalization of close-in neighborhoods inherently leads to mention of the “G word”—gentrification. Indeed, most of those starving artists who had found affordable refuge in the early Pearl days have predictably opted to seek cheaper quarters. “It seems that happens everywhere: the artists are eventually forced out of all loft districts,” Barnes points out.
Tiffany Sweitzer acknowledges that market demand has prompted much of the Pearl District redevelopment work to focus on high-end, for-sale residential product. “What’s really best for the area is to see a real mix of product—affordable and market rate, rental and for sale.”
Given consistent escalation of the Pearl’s prices and rents, some observers, including certain city commissioners,even suggest that Portland’s redevelopment tax abatement program has proven so attractive in the Pearl that it is no longer necessary—or equitable. The ten-year abatement can knock $300 off the rent for apartments leasingfor $1,500 to $2,000, and it applies to buyers of for-sale product as well. The Brewery Blocks team even agreed to submit financial statements to finalize the abatement arrangement for the project’s market-rate apartmenttower—currently under construction—to demonstrate that equity investors are not seeing an internal rate of return above 10 percent.
But both Sweitzers stress that important Pearl District developments probably would not have made economic sense without the abatement prospects and, where applicable, historic renovation tax credits. “We’ve needed it to make some of them, like the Marshall-Wells Lofts, work,” Tiffany says. “But I do agree with people who think the program deserves some scrutiny. Is ten years too long? That’s worth looking at.”
The issue is bound to remain a topic of discussion as the economy recovers and the Pearl District continues toevolve—most likely with a new wave of office development and renovations, Craig Sweitzer says. He expects the Pearl to become more densely populated by the creative professions in particular, and perhaps by moretechnology tenants as well.
That, in turn, will tend to attract additional large and national retail players, he continues. But he says he would hate to see the big chains come to dominate the district. “It’s our boutiques that give the Pearl its charm; you can drive to a lifestyle center anywhere and shop at the national chains.”
Brad Berton is a Portland, Oregon–based freelance writer specializing in real estate and development.
