2018 Review: How was it for you?
2018 is in the history books and, if anything, we were surprised at how little changed from the previous year.
Unemployment was still at record low levels. Wages failed to increase significantly. Housing prices continued to skyrocket. And while some pundits were talking about the economy starting to slow down, economist John Mitchell assured us that the economy will continue to grow in 2019.
In the end, however, the economy isn't just a big picture issue. How it affects local businesses is where it becomes a real-world issue and not just an economist's forecast. To that end, we asked Portland-area business leaders how this past year was for them and what they were looking forward to in 2019.
George W. Hosfield
CFA, director and chief investment officer for Ferguson Wellman Capital Management
"Each year we present our capital market outlook in January. Reflecting our belief that this nine-year economic expansion and related bull market were not yet exhausted, the title of our 2018 Investment Outlook was 'It ain't over till it's over.' We've been right about the economy, but after 11 months in positive territory, equities slipped into negative territory the second week of December.
Unfortunately, it's possible to get the economy right and get the market wrong. At the end of the day, clients want you to get the market right.
At the beginning of 2018 the biggest risk to our thesis was the Fed raising interest rates too far, too fast. At times, anxiety related to potential Fed policy has rocked the market but given the fact that the quarter-point hike on December 19 was the fourth rate increase in 2018, we believe Fed Chair Powell has done an excellent job of 'normalizing' interest rates while keeping markets calm.
The title of our 2019 Investment Outlook is "The fasten seatbelt sign is on!" The flight metaphor reflects the fact that years of extremely accommodative Federal Reserve policy and a gradually improving economy provided calm skies for investors. With risks elevated and potential reward lessened, in recent months we have been modestly reducing risk in portfolios by paring back cyclical sectors, such as financials, technology and energy, and redeploying the capital in more defensive sectors, such as food and beverage and healthcare.
Whether referring to corporate earnings, U.S. economic growth or global GDP growth, the economic backdrop for 2019 could best be described as, 'Growing but slowing.' As the year progresses, through sector adjustments and asset allocation we shall continue to look for 'calmer air' for our client portfolios."
President, Oregon Manufacturing Extension Partnership
"Manufacturing accounts for nearly 30 percent of Oregon's state gross product, and 2018 marked another successful year for our industry and the Oregon Manufacturing Extension Partnership (OMEP). We grew our depth of companies served in Oregon by 24 percent.
Beyond attracting new clients in urban areas, a major driver of OMEP's success came from reaching rural parts of Oregon through our regional economic development partners and the state's network of small business development centers. In particular, we increased staff capacity in Southern Oregon by hiring a consultant in Roseburg, and made more connections in the northeastern part of the state. Our project list includes work in 30 of Oregon's 36 counties.
The small and midsize businesses we work with typically lack the capacity and resources to make significant business changes, but it's crucial to Oregon's economy that they stay healthy and thrive. There are more than 5,000 manufacturing companies in Oregon, and over 80 percent of them have 50 or fewer employees.
Workforce development is one of the biggest obstacles these companies face. To address this, OMEP's Smart Talent program helps businesses attract, engage and train new and existing workers. That includes reaching underserved populations. We're also encouraging youth to further their competency in STEM skills, and explore exciting careers in manufacturing that pay well. Smart Talent has helped businesses cut turnover by 24 to 55 percent, increased the hiring pool by 30 percent, created a more flexible workforce and simplified recruitment.
In 2019, we're invested in reaching more businesses in communities along the Oregon Coast that need our help. Sector wise, we plan to work with more food and beverage processors, a rapidly expanding industry in Oregon, while continuing to focus on our metal and wood products producers.
We're also focused on expanding work in top-line growth and advanced technologies among small and midsize businesses so they can leverage the same capabilities large companies are using to stay competitive in our increasingly global economy."
CEO at Oregon Food Bank
"In 2018 we've had two really big things happen year. The first is for the first time in decades the number of people experiencing hunger in Oregon is going down. We have rarely seen that curve in the right direction. It is still higher than the 2007 number. The second thing is that due to U.S. trade disputes there is a lot of surplus product in the agricultural system, and the government is buying one to two billion dollars' worth of U.S. agricultural products that will flow through the system. It's no longer as attractive to buy U.S. products, like pork, apples and milk.
It's more complicated than foreign countries hitting back at the U.S. and its tariffs.
There are U.S. farmers who have ended up with product that there's no longer a market for, and that product is flowing through the food banking system to our hungry neighbors.
The food is not subsidized and in supermarkets, it is flowing through the emergency food assistance program, to food banks, schools and other institutions.
The Oregon Food Bank central distribution goes out to 21 regional food banks throughout Oregon and south western Washington to 1,200 food pantries, soup kitchens and senior centers. That retail level is mostly volunteer run. Milk is one of the most requested items, by families. It doesn't come in because it so perishable but we are about to get 39 truckloads of fluid milk, and we need in 12 days to get it from central distribution to a food bank and into an empty tummy.
Milk lasts about 12 days in the system, whereas an apple at the right temperature and moisture they can last up to a year, but only weeks within the food bank system.
Right now, we also have a surplus of split peas and lentils. The pulses seem to be in overproduction. To me that's exciting because protein is often not in sufficient supply. Then we have to make sure people know how to prepare them.
The business model is counter cyclical. The food banking world relies on the community, more than 70 percent of revenue comes from individual donations.
They're particularly generous when the economy is bad because they know their neighbors are suffering. We have more resources. If the recession that is overdue happens, we hope the community still step up and help our hungry neighbors."
President and CEO, TMT Development
"The major highlight for TMT Development in 2018 was getting to watch the success of Park Avenue West, see it thriving and operating at full occupancy. It's wonderful to see both the residents and businesses settled into the space. We were thrilled to welcome two new retailers into the building this year with the opening of Pendleton and Tea Bar.
In terms of challenges, we continue to be faced with the realities of the ongoing homelessness crisis in Portland. We have also continued to struggle with navigating city government — including the bureau reorganizations, and the length of time it takes to get things done.
Looking forward into 2019, I would expect to see the market soften in the coming months, with climbing interest rates. We're facing a challenging climate for multifamily developments right now, so housing will be tight. We will likely see rates go up toward the end of 2019.
Thanks to the new Opportunity Zone legislation, we should see some new affordable housing projects kick off toward the end of 2019, which will be much needed after a period of slow growth in that particular sector."
President and CEO of Greater Portland Inc.
"Our organization had our best year on record, in the types of jobs and number of jobs we helped to bring in. In 2018, we helped recruit 10 companies, or 1,300 jobs, to the Portland metro area. In our economic impact modelling that's bringing in $74 million of income to the region, looking at number of jobs times payroll.
Two projects that stood out were Element Six Technologies (synthetic diamonds) in Gresham (60 jobs) and the Genentech expansion of 300 jobs.
Most of the work we do takes place on the front end before we even know who the company moving here is. We talk to site selectors and corporate decision makers, it takes one to one-and-a-half years to fill the pipeline.
In addition to our everyday work on recruitment, in 2018 we had our Tech Challenge, we had wonderful success in growing small businesses globally, and we worked on our diversity and leadership series.
We know there's still a need to does business retention-expansion and help exciting companies here grow and survive.
Pacific Foods was acquired by Campbell's, and we need to know where are their pain points. What do Pacific Foods need, workforce changes, do they need lean manufacturing? We have a deep and rich network of partners and investors. It's easy for us to connect businesses to people.
In 2019 we'll be working on an employment site toolkit, to help companies find land or buildings.
We just went to a presentation where Metro launched its economic value atlas, a GIS mapping tool with the Brookings Institution. It enables you to understand transportation, housing, and see where we should be making investments. We'll all be looking at the same set of data and can see how each market is performing. No other metros are doing it, we're on the leading edge.
On Feb. 27 we'll have our second annual Tech Challenge at Daimler, which is all about expanding smart cities with an equity focus."
Design Week Portland co-founder and vice president of creative at the digital agency Instrument
"Speaking from the standpoint of digital, there's a lot of work closing, and a competitive hiring landscape. The market is healthy, though everyone's been feeling the strain of rising costs and rate pressures over the past year.
The emerging tech sector is alive and well in Portland, with a lot of interesting designers and technologists working in mixed realities and future tech. I see a promising mix of expertise continuing to incubate here, from AR/VR prototyping products to projects pushing the boundaries of what's possible in these spaces."
President & Executive Director, VertueLab (formerly OregonBEST)
"During the first half of this year, we spent a significant amount of time planning and preparing for the launch of our new organization name and focus. During the second half, we have been implementing our new strategy, which includes continued support of the innovative women and men who are working to develop and bring to market new solutions that will reverse global warming, the cause of climate change.
As part of our new strategy, we've also been laying down the foundation to bring more capital to fund these innovators and their ventures at the earliest stages. The well-documented capital gap for entrepreneurs working on hard-to-commercialize, climate change-fighting technologies won't be solved by traditional capital tools. That's why we will be launching the fundraising effort for a new impact fund early in the new year — a fund that will support climate innovators in developing and validating their technologies to get them over the funding gap. Stay tuned."
Principal, Carleton Hart Architecture
"Carleton Hart Architecture had a strong 2018. Whether celebrating at the construction site or the ballot box, our affordable housing and community work saw many successes this year. From project kick-offs, to ground breakings, to support for housing initiatives, we saw our work directly impact the housing crisis.
The opening of PCRI's Beatrice Morrow Cannady Housing project on Martin Luther King, Jr. Boulevard. was especially gratifying, as it is redefining the role that housing can play in rebuilding a community and combating gentrification. We will continue to be involved in that effort in North and Northeast Portland with new projects coming on line in 2019 and 2020.
We look forward to building on this momentum in 2019. New voter-approved funding for affordable housing will keep us busy in that area, and new inroads into the commercial and private development markets will allow us to continue expanding our portfolio. While experiencing this growth, our greatest challenge has been finding new staff members to take on additional projects,, our firm is growing. We have been able to bring in new talent in the latter part of 2018 and will be adding to our staff in the new year.
2019 marks our firm's 25th anniversary. As we look to the future, we anticipate many more years of strengthening our relationships with clients and partners who share in our mission of inspiring community through design."
CEO of urban.systems
"2018 has been an interesting year. We're in the smart city business more generally.
Technology helps you reduce costs, and it now has a lot of people thinking how can they do the same with less money. For example, sensors in water pipes can save a lot of wasted water, detecting leaks early.
When there are plenty of resources, people say 'Let's pour more concrete and asphalt. But when you have a budget,' you ask how to make it go as far as possible.
Our interest is in the technology driving the data infrastructure. We don't want technology areas to silo: energy data separate from transportation data, etc. The electrification of transportation is one of the big opportunities. For the electrification component you want to be working with PGE, and have them put in the charging infrastructure.
I am optimistic going into 2019. I thought some of our elected officials have said some interesting things lately, for example Earl Blumenauer said the Dems are being serious about doing something with infrastructure, and that it's not likely to get past the senate in a couple of years but we can get ready for it. And we have a real opportunity in downtown Portland around the core, with OMSI, the Broadway Corridor, the stadium area and the Lloyd District. It's unusual to have that much of the core of any city being reconsidered. Portland is dealing with long-term plans, with the 2035 plan and a number of long-term goals, which require thinking differently about development. Reducing single occupant vehicles to less than 20 percent of overall trips — that means rethinking transportation itself.
Could we do a road usage charge without getting in the way of users? It does seem Lynn Peterson is optimistic, Metro can do what they need to do on multiple corridors to address the 20 percent target.
I think about package delivery. What if there were lockers at TriMet stops at the big park and rides? Have them delivered at night. That's their pathway to and from work, they could pick it up on the way home. Also, we don't really use the MAX in the evening. It would be nice to have some sort of freight use. TriMet has their own management, they might want a team with UPS or Amazon."
Principal, Scott Edwards Architecture
"Since we opened our doors 20 years ago, 2018 has been our strongest year as a firm. We have a business model based on diversity that aims to keep our work balanced: 33 percent public, 33 percent private, 33 percent non-profit. This year we found all of these sectors were quite robust, and work with our non-profit clients was particularly strong. This includes the Garlington Center Campus where we worked with Cascadia Behavioral Healthcare to create 52 affordable housing units and a 25,000 square-foot community wellness center on a 1.5-acre site in inner-Northeast Portland.
It feels like 2018 completed the rebound from the Great Recession. Every year at our holiday extravaganza, I do a piece about a staff member who has been with the firm for 10 years. When I looked to this year, I was surprised that we didn't have anybody who's 10-year anniversary landed in 2018. Then I remembered the recession and how different the landscape looked in 2008. It is a sobering and encouraging reminder of what is possible as I look to the next ten years.
Since the Great Recession, the quality of design work in our industry has improved dramatically. I see this as a reflection of optimism in our economy. Clients in Portland are investing in higher quality design. This has raised the bar across the board, increasing the caliber of architecture done by firms in our city.
The amount of opportunities brought to our firm this year has exceeded any previous year in terms of the types of work and size of projects. This has been both an opportunity and a challenge, and has forced us to be more strategic in how we evaluate and select which projects to tackle.
Some of the challenges were industry wide — finding new staff and the escalation of construction costs. The escalation is really affecting all sectors. In the firm's 20 years, I haven't seen a time when we've had escalation consistently like this. Projects are more expensive. That means our clients either have to find more money or adjust expectations. Managing client expectation is a big part of projects these days.
For 2019, we are looking forward to expanding our office. Growth over the past decade led to us opening a second office in 2016. We are now in the process of expanding our main office to bring everyone back under one roof and allow for growth.
We see another strong year for ourselves — and as an industry, I think that's also going to be the case. My expectations are that it won't be quite as robust as 2018. I think next year will start to catch up with us in terms of rising construction costs, effects of tariffs on building materials, and volatility in the economy both nationally and globally. My sense is that we will continue to see optimism in both the economy and construction, with a touch more caution mixed in."
CEO Business for a Better Portland
"Some of our significant accomplishments in 2018 have been educating and engaging our members, for example about the affordable housing bond that passed. We saw meaningful policy for the region and civic engagement for our members. It also helped us to surface a lot of new talent — people who were willing to take time out of work and study an issue.
We saw something similar when we held our transportation event at Urbanite. We had 135 to 150 people show up. It brought out these young business leaders who wanted to learn about transportation issues. As a next step we opened a member work group and 35 came. We worked on a sign-on letter about enhanced transportation corridors. In November we got involved in Central City in Motion, we wrote our testimony, they testified, it was a great example of how through civic engagement in policy younger leaders are stepping up.
In 2019 we will be ensuring Prosper Portland gets support for the work they do with smaller programs such as the Inclusive Business Resource Network for minority entrepreneurs.
Unlike a chamber of commerce we don't have a paid lobbyist. BBPDX relies upon young, smart people who are moving to Portland, and we're trying to take advantage of those youthful smarts.
In 2019 we'll be monitoring the oversight of the regional affordable housing bond and when the residential infill program is brought to council in May, we want our members educated before it gets there. I anticipate we would testify. And the Legislature will be in session and revenue reform will be an important part of the conversation."
Founder and owner, Joseph Hughes Construction
"In 2018, our volume dropped slightly compared to 2017. But while it wasn't as dynamic, it was still a solid year, margins were strong and there was no shortage of new opportunities.
We needed to grow our estimating and project management department but were struggling to find qualified people, consequently we had to pass up some projects that would have improved 2017. That impediment has been corrected.
Several projects were delayed waiting for permits to be issued. These will slide into 2019 and likely make 2019 a banner year.
Challenges we ran into this year included manpower — subcontractors not having enough people and not having enough time to bid jobs. Then we had wild price changes for building materials in 2018 with the tariffs and those types of things. Prices were so volatile we were joking that a sub wouldn't hold his price past the end of a phone call. We had steel subs who would hold their price for just seven days; lumber was the same story. Price stability for 30 days was a luxury.
I don't know what's going to happen with price fluctuations going into 2019. I expect continued upward movement with somewhat less volatility. Nationally and locally, things are going to stay strong, so demand will still be up for lumber and steel and other commodities. Labor costs will continue to rise at a rate exceeding the inflation level. Barring unpredictable events that we really have no control over — world politics and economies, disasters, wars, etc. — I expect 2019 to be an excellent year for the industry.
In this business one is always either too busy or not busy enough. We've always wished we could have stability, with no peaks or valleys. But that's just a fantasy. They say to be a general contractor, you must be an incurable optimist, and I am!
Close-in apartment development will be slower, but overall the construction industry will be busy. Portland still has record in-migration, and Portland real estate, painfully expensive as it is, continues the best bargain on the West Coast in a major city.
The talking heads on the news are all doom and gloom, which becomes self-fulfilling in terms of turning the economy sour. If people believe things are going to get bad, they pull back and make them bad.
I think there's some trepidation in the real estate and development marketplace. I think the biggest headwind currently is the false drama of the media, sensationalizing every minor change in interest rates and stock market prices, dire predictions to keep ratings up, making news out of nothing. Yes, the economy will change, it always does, but it will change a lot less if people don't buy into the drama. With record employment, strong growth, decent interest rates we're going to be fine for now."
Dr. Paul Spellman
KCRB, Professor of Molecular and Medical Genetics and Co-Director, CEDAR OHSU Knight Cancer Institute
"We moved into the Knight Cancer Research Building, my fourth building in seven and a half years. It's been great so far. We were really fortunate to have been involved in the design, to put things where want them.
There are 600 people in here so far, all of them working to fight cancer.
I'm on the fourth floor where there's a collaborative kitchen, and the amount of interaction has sky rocketed. I was on the sixth floor of the Robertson Life Sciences Building and no one ever came up who wasn't my neighbor. There's free coffee, and that's a strong driver.
Based on the amount of half gallons of half-and-half in the fridge I'd say we're getting through a lot of coffee. We also have monthly social hours and a weekly coffee hour. It helps make people comfortable talking to one another. That required activation energy before.
We're still settling in. It's not 100 percent perfect, but I'd say it's 97 percent perfect!
The Knight Cancer Institute's Cancer Early Detection Advanced Research Center, or CEDAR, is researching new methods to detect and eliminate lethal cancers early.
My lab is using substantial amounts of data to understand cancer biology and treatment. In 2019 we'll be focusing on the SMMART treatment program for advanced cancers.
We're excited to monitor patients with advanced cancers. Circulating tumor DNA is a sensitive predictor of whether or not tumors are responding to drugs.
We also have VisionMania, where we are evaluating 16 diff possible research programs, aiming to build enthusiasm around four of those areas. It's like March Madness, final four. Now we have the resources to make things happen and we're internally focused on this. It's a big push."
Marketing manager and CTO, Screaming Circuits
"2018 was a very good year for the company with records set in revenue and customers served. It was not, however, a year without challenges. Many electronics components became quite scarce due to growth in automotive electronics and the Internet of Things (IoT). That combined with the uncertainty brought in by tariffs made for some stressful times to go along with the good.
Electronics manufacturing is really joining other industries as a service that can be easily bought online. Last year proved that our hard work in that area is paying off. Screaming Circuits partners with Sunstone Circuits, out of Mulino, Oregon, to deliver the complete manufacturing product. Sunstone pioneered online selling of the bare circuit boards that we need for our assembly process. With their help, we're having a significant impact on the way electronics are manufactured in the USA.
Components supply problems hit the industry hard this past year. The IoT, which for years has largely been producing products for early adopters, is now producing viable consumer products and demand is skyrocketing. The same has happened in the automotive electronics industry. We had reports of car manufacturers going to suppliers of key components and buying up all of the stock. Most of the components with supply problems are tiny little parts that cost fractions of a penny each, but each board might have dozens or even hundreds of them. Many of these parts are expected to be difficult to procure for another year or so.
Components shortages will continue to be a problem. Tariffs may become a bigger factor. This year, they caused more uncertainty than trouble, but if a full-blown trade war ensues, the shortages could get much worse.
On the other side, technology continues to advance at an incredible rate. We've implemented software, process, and equipment improvements to address these advancements, as has our partner Sunstone Circuits. That means more prototypes for us to build, more research projects for us to help with, and more startups for us to serve. We're expecting a year of strong growth in 2019."
Compiled by Stephanie Basalyga and Joseph Gallivan.
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