2017: Good times, but...
2017 surprised many by not having pre-tremors of a recession. Instead the stock market boomed while wages barely rose. A president acting like a bull in a china shop stirred up fear and insecurity in many industries, and the promised on-shoring still remains to be seen.
In the Portland area, unemployment fell to record lows (under 4 percent in Washington County) and while jobs like bus driver and construction worker were a shoe-in for anyone with a pulse, locals had to compete with a stream of out of state millennials for the $80,000 to $120,000 jobs required to buy a home here.
Someone must be doing well because latte is now routinely $4 and chicken on a biscuit is $12.
Business Tribune reporters Joseph Gallivan and Emily Smoke as asked Portland area business leaders and thought leaders how 2017 went for them. Was it the year of disruption-as-a-good-thing? And what do they expect of 2018?
1. Tony Rodriguez, CTO, Digimarc
"With technology reshaping retail faster than ever, 2018 promises new opportunities for manufacturers, retailers and shoppers alike.
We're seeing Blockchain blow up. Best known as the basis for Bitcoin, blockchain's distributed ledger technology has potential for tracking products throughout the supply chain, tracing our food's origin and offering greater product transparency.
Biometrics is also going big. Apple's new Face ID marks the latest in an ongoing trend toward biometric-based security. For retailers, biometrics could mean faster checkout, more accurate shipping and better-fitting apparel.
Retailers have seen substantial consolidation in recent years. Albertsons acquired Safeway, Walmart purchased Jet and Amazon bought Whole Foods. Consolidation will continue with ethnic and specialty markets.
Machine learning just gets smarter. Walmart uses it to enhance the shopping experience in-store and online. Neural networks and other aspects of machine learning will be more prevalent, predicting what, when and where consumers will buy.
While self-checkout terminal orders increased by 155 percent in 2016, buzz continues for instant checkout like Sam's Club's Scan & Go or Amazon Go. Shoppers will soon scan and pay with an app, bypassing kiosks altogether."
2. Curtis Robinhold, Director of the Port of Portland
"2017 was spent assessing the challenges ahead for the Port of Portland. Our region is growing and changing, and we need to seize opportunities that come from that growth.
We're focused on building an airport for the next generation, and we've launched PDXNext. This is a series of construction projects that will make Portland International Airport better for travelers, airlines and employees. Passenger growth increased 28 percent since 2012, and we expect more record growth in 2018.
The largest of the projects is a $950 million expansion of the core of the airport. When complete, the improvements will help support passenger growth until 2045; enable better recovery after an earthquake; and allow us to adapt to rapid transformations in how people move through the airport. It's one of the largest construction projects in Oregon history, and the largest project that we've ever undertaken.
With help from an industry leader committee and a nationally recognized consultant team, we also took big steps in 2017 to revitalize our marine business and build a new future at Terminal 6. Swire Shipping will soon begin monthly container service – this is just a first step, but it's critical to demonstrate that T-6 is back in business as we work to attract additional carriers.
We must re-make our future by accepting that we're not likely to return to historic levels of container traffic, and instead offer regional shippers a variety of options and new approaches to serve our niche market.
As we address big challenges, fundamental values guide our efforts: We need to be equitable and inclusive in our work and reflective of the communities we serve. We're focused on the diversity of our workforce, as well as the selection of our contractors and the impact our programs have on historically disadvantaged communities. We also see an opportunity to continue to build environmental sustainability into our operations and take an even stronger leadership role on climate change
So how was our year? In 2017, we started the engine. Now we're revving up and hitting the road."
3. Cliff Allen, Dean and Vergil Miller Professor of The Business School at Portland State University.
"The Portland area economy has been strong this year. I can say that because typically when it is doing well, business school enrollment tends to sag. In good times people tend to get promoted without the extra degree (such as an MBA). When there's a talent shortage employers may take a risk on a less qualified person.
Ours has only flattened out, because there's been an influx of people to Portland. We now have 4,000 students in the business school. The new building is designed for a capacity of about 5,500.
Our graduates are going everywhere: into the athletic and outdoors space, but we're seeing them doing a bit of everything.
They're asking what is holding them back (at work) and keeping them from running a department or a division. Maybe it's financial acumen? This allows them to catapult to the next level, say from being a nurse to qualifying to run a large section of a hospital.
In the last year-and-a-half I have had more talent shortage discussions than in all the other years I've been here. A lot of companies think they're the only one in that scenario, but across the board, talent is on people's minds. It's because in the Great Recession a lot of companies took out their management training programs. They're reinstating them now, with tuition reimbursement programs and maybe higher-level internships and partnerships, and students who are paid to do projects. But they're slow to react. When you couple that with people retiring from the baby Boomer age group, it's making the situation worse than they thought. They don't have the bench strength.
Now they're talking about the new skills they need, like data science. Our graduate certificate in Business Analytics has more than doubled in enrollment, from 22 to 49.
A couple of signs I've noticed: the superhot real estate market has tapered a little bit, which I think is a healthy thing. And I think companies are still careful in hiring. It's not crazy, like when they were collecting talent just to have the people flowing through the system. The hangover from 2008 has not disappeared.
2018 is going to be another growth year for the economy. Business executives hear from their customers what they want, and they're reaching out to us. Our projection is the Business School is going to grow, making sure we meet the needs of the community."
4. Katie Poppe, Owner, Blue Star Donuts
In January, we opened our second Los Angeles location, in Manhattan Beach, and in November we opened our seventh Portland location at Progress Ridge in Beaverton. The suburbs are a new demographic for us, which is really exciting and nerve-wracking, and the early indicators look extremely favorable. We're also getting ready to debut our first-ever apparel line. 2018 has some very exciting projects coming online that I can't talk about quite yet.
At first, employee search was extremely challenging. It's a great economy, and anybody in the service industry can tell you horror stories of 50-75 percent no-show rates for scheduled interviews. It was crazy! We doubled down on investing in our company culture, benefits, and employee enrichment programs, and saw our turnover rates plummet. Voluntary turnover has been holding at about three percent for the past six months, and with almost 100 local employees that's a number we are very proud of.
We are the disrupters, so disruption is a good word to us. Making fresh, gourmet donuts on a scale such as ours has never really been done before. We're obsessed with making the best product possible and are just trying to keep up with demand.
Overall 2017 was a fantastic year for us, we're five years old now and ready to take Blue Star to the next level in 2018."
5. Brent Parry, President, Bremik Construction
"Overall, 2017 was a year that we doubled our revenue. Our growth was across the board for us as a company. Specifically, we have a large amount of work in the central business district, including the Pearl and Central Eastside and Slabtown, as opposed to say, the suburbs.
We are doing a considerable amount of affordable housing, and our federal government right now is potentially taking away some of the tax credits that feed a lot of those projects. Although Portland is in an affordable housing crisis and the Portland Housing Bureau and the City and all of the nonprofit affordable housing developers are trying very hard to deliver product, there's this looming event that could happen at the federal government level that could dramatically change their funding source.
This amount of construction, the popularity for job growth and national and international capital wanting to invest in Portland is new for us. Everybody's trying to figure out how to absorb and how to deal with this. It's causing overbuilding in some markets, so we will see some volatility there. For us, having a diverse portfolio of work in multiple market segments has allowed us to strategically double our volume by taking on more challenging and larger projects as opposed to just doubling the number of things we do. So, if last year we did a $10 million project, let's take that same team and do a $15 or $20 million project, for example.
We've been a very successful mid-size contractor in Portland and with the popularity of outside national money wanting to come to Portland that introduces a whole new group of owners. Understanding who is good, who wants to be in Portland, who is going to stay, and who's just coming in here to do a project and then move on to the next hot city is a new experience for us.
We certainly don't see any slow down through 2018. This may be difficult for some people to hear, but we expect and hope to see some slowing of the curve in 2019 in some of the market segments. Portland's construction industry is too busy, and this is not sustainable. Certainly, I want to see the curve continue to be on an upswing, but we need to flatten out the ramp right now.
By far, this is the most competitive environment we've ever experienced. I would say across all disciplines for skilled people, from carpenters and laborers, all the way through project managers, superintendents, accountants, we are in an incredibly competitive environment. I would say throughout our construction industry in the Portland area we probably have an unmet demand for about 25 percent of our labor and management professionals. Which will be part of what will cause our construction industry to slow down some because everybody is understaffed right now.
Costs are going up because of the reduction in productivity because of the lack of skilled people, and that is driving up costs faster than rents are going up. We are getting closer and closer to that point where projects become economically infeasible. So, Portland certainly should have the banner waving across the nation saying that we are open for business. Come to Portland, the economy's strong.
Generally speaking, people always fight change, and change is coming to Portland very fast. The sooner we accept it and not fight it but look at it and say how can we make it great change, then I think we'll be better off. That's my message to Portland. Change is coming. Be ready for it, embrace it, and be part of making it great rather than fighting it.
6. Vanessa Sturgeon, President, TMT Development
"2017 was the year that we got Park Avenue West fully leased up, so that's really where our focus was.
We're working on a project on Hawthorne that's 60 units and that is all that we really have in the pipeline at the moment because of inclusionary zoning. So, we don't anticipate doing more residential for the time being.
I expect the building boom to start to slow down a bit. I still expect it be solid in terms of what we've seen over the past two or three real estate cycles. Some of the projects in the pipeline for multi-family will get completed — not all of them. Then we'll see if the supply of housing continues to dwindle with new projects coming online because of inclusionary zoning. I think we can expect a lot less projects to be happening.
2017 is really the year that Portland focused on homeless and the housing crisis. It's the biggest challenge that we have. The business community is very open to continuing to help the government work out this issue. It's not only people that are homeless or precariously housed, it's also the garbage and biohazard that comes out of these unsafe encampments.
It is very difficult to find people because the employment market is so tight. I see it continuing to stay tight. We really are focusing on retention of our current staff. Rewarding excellent performance and making sure our culture stays intact as our economy continues to grow.
I think disruption was a bad word for us this year mostly because the homeless issue and the street level crimes have continued to be a negative disruption for us. There have been a lot of car break-ins. People are afraid to be downtown because of the aggressive panhandling and criminal behavior and the uptick in assaults and open drug use and drug dealing. It's been very difficult for us to explain to tenants that they should feel safe downtown because many people just don't.
I think in 2018 things will continue to move along at a fast clip. It'll be another fun year where the economy is very strong and people will continue to be focused on the environment of the central city and making it a safe and inviting place to be.
We just tend to work on projects that we really feel the city needs. That's really the only way to be successful in real estate development here. If you're not connected with the local community, it's going to be very difficult to be successful. It's a closely held value of people in Portland, and it's also a closely held value of any of the developers who are long-term holders in Portland."
7. Sarah Fritsch, VP of Product, Sales, Marketing and Brand at Schoolhouse Electric & Supply
"I would say our biggest area of growth in 2017 was employee engagement. It was our number one metric for success. It was already pretty high coming into the year, but this year we focused on rolling out compelling benefits and making sure that everybody was intrinsically connected to our strategic plan, our values, our mission, our goal. Just making sure that everybody felt like they were part of something bigger than themselves or their job. At Schoolhouse that's tricky. We have a mixed workforce of frontline factory workers and very highly-skilled designers working under one roof. We wanted everyone to be crystal clear on why we're all here. I have a belief that if you get that right you're going to get growth in all areas, and it's proven to be very true.
Our financial growth was impressive this year as well, but I connect that directly to the engaged employees. We're motivated to have good retention too. Two years ago, we were losing 56 percent of our staff, and now we're down to 25 percent.
We have huge plans for 2018. Currently we have two stores in Portland and New York City, and in 2018 we'll open the first store that we've opened in over 10 years. We're going to open in Pittsburgh. We're targeting late summer or early fall for that opening. We were hungry for brand expression of some sort, and it ended up coming out in the form of a new store.
Retail is really strong for us right now. It's different than what you're hearing. Everyone is saying retail is dead. For us, it's a critical part of our strategy. Web is huge for us, but Web's huge for everyone. I think what differentiates us is our stores are also performing really well. So much so that we're investing in another store next year, which is indicative of our belief in retail as part of this model. That said, we're thoughtful about if, when, and how we open retail stores. It's been 10 years since we've done it, so we have a relatively small footprint in retail.
The lighting industry is in full disruption mode right now. They're saying that LED is causing some of the fastest technology shifts in human history, so that obviously is transforming our industry right before our eyes. We're rising to the opportunity to define what this LED technology shift could mean for commercial spaces and also for homes. We want customers who value design and technology. That's really our sweet spot. We're never going to be on the leading edge of LED technology, but we certainly are thought leaders in how to make that technology look and feel well-designed and how to benefit homes and commercial spaces.
I think that we're poised to have a really good year. We're growing at a really fast rate, and 2018 doesn't look any different. Opening the new store will be major for us. We continue to invest in our employees. We're actively recruiting for some new positions. We have our launches mapped out. It'll be another year hopefully of good growth and good results."
8. Pam Treece, Executive Director, Westside Economic Alliance
"The Westside Economic Alliance had a good year. We set out on a strategy to highlight two areas of focus for our organization: transportation and housing.
One of the most significant issues of 2017 for WEA was the passage of the transportation bill, HB2017-10. Our organization worked hard, along with our members, to advocate for the bill. It not only gives us the opportunity to address congestion but also will provide opportunity for new jobs especially in the area of construction.
Following the passage of HB2017-10, WEA is now engaged in several leadership roles to determine the effective spending of the new transportation dollars. Frank Angelo, WEA board member and principal at Angelo Planning Group, sits on the advisory group that is working to address how the dollars from the new employee payroll tax for transit will be spent. I sit on the Portland Region Value Pricing Advisory Committee. Both of these groups have been commissioned by ODOT to ensure that the direction of the legislature is addressed.
At WEA, we spent a great deal of time and energy, along with our member partners, on housing issues. Primarily focusing on affordability of housing and housing stock availability. I believe that the County and the region are ready to address the issue head on. This is a problem that will only respond to a widespread collective effort. WEA has been a key player in convening the public, private and non-profit sectors from across the region to work collaboratively to address the issue.
The area unemployment rate is currently very low at 3.8 percent. This is a good indicator of a strong economy, but we need to remember that 11 percent of Washington County residents live at the poverty level identified by the federal government. According to the 2017 Report on Poverty by Community Action, "While Washington County's unemployment rate is among the lowest in the State, 47 percent of all jobs available in Washington County (128,629 jobs) are in occupations with an annual average median wage that is insufficient to afford housing at the current fair market rate".
WEA has been working with many groups including Work Systems Inc. and Portland Community College to encourage workforce development to meet the demands of the work place for trained workers. The Oregon Manufacturing and Innovation Center in Scappoose is a prime example of the positive direction toward enhanced workforce development. This effort will be key in lifting the under employed population of the region.
WEA endorsed both the PCC Forward bond renewal and the Hillsboro School district bond that passed this year. We are encouraged that the citizens are supporting education in Washington County and throughout the region."
9. Steve Moore, Executive Director, M.J. Murdock Charitable Trust
"In 2017, we were pleased to partner with over 300 organizations (66 in Oregon) through grants totaling more than $50 million in funding and training to hundreds of nonprofits in the education, arts and culture, health and human services, and scientific research sectors across the Pacific Northwest. This includes organizations like Virginia Garcia Memorial Health Center, the Hatfield Marine Science Center at Oregon State University, OHSU, the Oregon Justice Resource Center and Portland Playhouse.
In addition to our grant making, our organization spent much of the year preparing to move into the vibrant new waterfront space in downtown Vancouver, Washington. We are excited to see this new, part-urban, part-metro hub bring added capacity and energy into the Vancouver area.
I would say disruption is mostly good. We are so pleased to see how nonprofits and businesses are finding new ways to work together, to collaborate on significant problems and to find new ways of approaching existing challenges. The rapid growth of social media and digital conversations has made it even easier for us to communicate the message of our grantees with an audience that never stops growing. However, there is a dark side to disruption caused by the presence of cyber bullies and trolls with political agendas that is unhelpful to public discourse, challenging nonprofits and others to tell their story well.
The anticipated federal budget impacts could prevent added charitable giving to nonprofits. We expect that 2018 will be another exciting year of new projects and developments in the Pacific Northwest. We look forward to providing our support to a very diverse group of organizations who vary broadly throughout communities."
10. Kimberly Branam, Executive Director Prosper Portland
"2017 was a good year for our regional economy. We have record low levels of unemployment, significant job growth, in-migration continues to be strong. The economic indicators are good, there's nothing that gives me cause for concern in terms of the trajectory of our regional economic growth.
That said, who is seeing the gains of that growth continues to be a challenge. Poverty levels remain too high, and there are significant disparities between communities of color and white. There is less job growth in the middle income and middle skills opportunities.
This is not unique to Portland. Nevertheless, they are significant challenges to Portlanders.
We've seen challenges within manufacturing more than over last ten years. Some of these challenges are long-term. But income differentials and disparities are greater today than 20 years ago.
Our year at Prosper Portland can be broken into three themes.
One: We doubled down on our support for small and growing businesses. We launched a new, inclusive business resource network to support entrepreneurs of color and female entrepreneurs, and added a new, affordable tenanting program.
We initiated My People's Market for diverse entrepreneurs with Travel Oregon. The first event was November 9 and 1,200 people came and 87 entrepreneurs of color to the Redd, an Ecotrust building. We'll do it again in the summer of 2018. It's an in-person outgrowth of an online platform called the Mercatus, a website run by diverse entrepreneurs.
Two: We worked on neighborhood development and our longstanding priorities. In Lents, we broke ground and made headway on the Asian Health and Services Center and Woody Guthrie Place, as well as Oliver Station where the New Copper Penny was. We celebrated the groundbreaking for Convention Center Hotel, which is 30 years in the making. We released a Request for Qualifications for the Broadway Corridor and we collaborated with Portland State University on the expansion of new Business School. We put in $2 million into that, because we have an interest in PSU being a world class educational institution.
We also launched a new approach in Northeast Portland, through the North/Northeast Community Development Initiative Action Plan. It outlines how Prosper Portland will invest our remaining resources in ways that are supporting the African American community who have not benefited from the economic expansion.
Third: Communication and engagement. We undertook a process to really listen to public, and with our fantastic consultants we created a new brand, Prosper Portland. We have an enhanced commitment to transparency and a new web site.
We formed a new council on economic and racial equity to engage stakeholders, 20 people who meet quarterly and in subcommittees to advise on the implementation of our social equity policies.
We will be taking our 10-year financial sustainability plan to City Council, for us in the next 10 years to reposition the agency to have a more diverse and flexible toolkit and financial resources. We will put together a draft plan at our coming retreat at the White Stag building and it is coming to a city council work session in January.
2018 is going to rival 2017 in terms of activity. We will work on how do we deliver on our big, hairy, audacious goals, and make sure the investments we put forward have an equitable impact.
We're not yet seeing signs of significant economic slowdown, so we're moving forward on key projects. We'll expand our affordable commercial tenanting in Lents, North Portland and citywide, hoping to expand beyond the four pilot projects we have now. It's a question of resources.
We're working with Mayor Wheeler and our council of economic advisors to increase access to employment, looking at cluster strategies such as healthcare. We have new projects at Gateway and 106th Avenue and Halsey Street, in partnership with Human Solutions. We've put out an RFQ for the ODOT blocks in the central east side, and are looking to developing The Hill block, with Legacy Health and the Mayor's office, in the vacant parcel by Legacy Emanuel hospital.
We will be making progress in Old Town Chinatown looking for partner for Fourth and Burnside, formerly the Right 2 Dream Too site.
And we plan to have a partner to redevelop Centennial Mills — hope springs eternal! We have it out right now, we're looking for an offer, it's listed with a broker. I'm going to say in 2018 we will have a partner — that's my prediction — to move it forward."
11. Brian Adams, Associate Dean of Graduate Programs in the Pamplin School of Business at the University of Portland.
"The economy in Portland metro, Oregon and the Pacific Northwest, all three are looking good. They are well positioned to outperform national averages, and there's nothing to suggest that won't continue.
A lot of that is based on our industrial composition: we ae highly tied to high-end, high tech manufacturing. That will continue to help us grow, and for that we need a highly educated workforce. A lot of it is demographics and geography. We draw a lot from California.
Some people measure the economy by crane counts. For me it's coming into the North Portland campus and seeing all the building on the Mississippi neighborhood, and the appreciation of home values in North Portland and St. Johns. People who have lived there for years are now seeing an appreciation. The growth is not just in West Linn and Lake Oswego.
In the Business School, we are always looking at trends in economic and industrial practices. I'd say in 2017, it was mostly our Operations and Technology Management (OTM) who lead that, they do a good job of interacting with local business to meet their needs.
We're developing more of a focused curriculum for undergraduates. We're talking about real estate management, property management, construction deals, how to buy and hold real estate, because after manufacturing the real estate industry is one of the largest in the area. It's definitely better when property prices are going up!
But except for during the Great Recession, real estate tends to be recession proof, because you're not just buying it, there's renting and leasing too. Everyone needs a place to live.
Also, in the Marketing School, we're hiring a full-time position in Design Thinking and Design Management. It applies to many industries. For example, in healthcare, designing a system that
makes it easier for someone to connect with a healthcare professional on their issue – a nurse practitioner, a doctor, get a prescription filled…It's about a process to make it more efficient. It's asking how does information flow through a business?
Of the 100 applicants, very few have any kind of business background. Most are from engineering and design itself. That's a huge plus because they bring a different perspective, we're not all talking from the same biases. A lot of the applicants have been from Australia and China. Their work will start in the marketing department, then go to the school of nursing, engineering, who knows where?
Joseph Gallivan & Emily Smoke