Despite pandemic, Lake Oswego developers remain optimistic
Despite the current climate in today's society — social unrest, the recent wildfire devastation, the COVID-19 pandemic and its effects on health as well as local businesses — developers of new projects in Lake Oswego remain optimistic about present and future retail and restaurant tenants.
Major developments including Mercantile Village, Mary's Woods and The Beacon have not had much trouble securing tenants and remain positive throughout the economic downturn.
Even key figures in the North Anchor project, a future development that includes multifamily housing, retail, restaurant and boutique hotel components, say they are optimistic about the future of retail and restaurant establishments down the road.
Diane Hood, president and CEO of Mary's Woods, said they've been fortunate because most of the new tenants opened their doors before COVID-19 hit locally.
Since businesses were allowed to reopen again under Phase 1 of the state's reopening plan, Hood said operations have been going well.
PDX Fitness is the newest business that most likely will open in mid-October. Hood said since the personal training boot camp-style establishment is bringing in trainers with existing clientele, it shouldn't be too tough to get going.
Hood said they were able to offer rent concessions and extend the rent-free period for new tenants.
"Our goal has always been we want people to be there for the long haul and be part of our community," Hood said. "(We) didn't want people forced out due to COVID."
Hood said there is one space left for rent on the lower floor of the second most northern building. She said there's no pressure to fill the space right now, though they have had inquiries.
"Certainly in some odd ways, the timing has worked out well as folks weathered that closure period," said Hood, adding that they are now gaining momentum since the reopening. "So far, so good and (we) really want to encourage people to certainly come to see us."
Damin Tarlow, senior vice president at High Street Residential, said he has not experienced any material changes and that everything at the Mercantile Village development is continuing as planned.
The mixed-use Mercantile Village will consist of 206 apartments, parking and retail space, and is expected to be completed in spring 2021. The development plans to have several Portland restaurants including Grassa, Lardo, Oven & Shaker and Loyal Legion. And Tarlow said the tenants that have been announced thus far are still planning to move forward.
Tarlow said he has noticed it's been difficult for new tenants to make decisions and commit due to the unknown future in today's climate. The good news, he said, is that people are preferring less-dense areas like Lake Oswego as opposed to larger cities, so there is continued interest from tenants.
Miles Haladay, who owns The Beacon building that is home to an event center called Ironlight and Centrl offices, said things are progressing forward despite the chaos. He said they are on track with leases for the Centrl office space as more companies and people are opting out of Portland and are looking for office space closer to home.
Haladay said since the onset of the pandemic, he's seeing a huge trend toward flex office space. He said they have about 70 or so private offices at The Beacon — which also is where the Lake Oswego Chamber of Commerce is located — and about one-third are full.
"That's going about how we thought prior to COVID, which is amazing given what's going on," Haladay said.
He added that as more people opt to work from home, he believes there's a certain population of Lake Oswegans who would prefer to work near home.
The smaller office spaces are tending to fill up faster because people cannot congregate in the larger spaces, though he said that transition will occur post-COVID.
The private offices also have a good air infiltration system, which is helpful during the pandemic, Haladay added.
"There are more short-term annual leases. That's another advantage for the flex office space," he said. "I'd say our product is great. We couldn't have foreseen this by any means. The offering we have in our building matches what's going on well. We are very optimistic about the future (and) we are going to tread water until this thing gets better."
He said what the pandemic has done is accelerate a few trends that already were occurring.
"We're (Lake Oswego) becoming our own neighborhood," he said. "We are a bubble, which is good and bad. We're having a lot more services here. I think offices are the same way."
As for the event center located on the top floor, it's been pretty much closed, except for the occasional small wedding.
"That should change when we get to Phase 2," Haladay said. "I don't know where Phase 2 went. I feel like it went off the cliff."
Lola's Cafe on the first floor will hopefully open sometime in October, as construction is now complete. The exact date largely depends on the direction of the pandemic, according to Haladay.
"We are just being really cautious," Haladay said. "My crystal ball is as foggy as everyone else's."
While Sarah Zahn, development director with Urban Development + Partners (UDP), acknowledged that it's a difficult time for both restaurant and retail, she said it's important to note the North Anchor development isn't anticipated to be complete until late 2022 to mid-2023, depending on when construction begins.
"Our hope is at that point we will have found a vaccine and we will be in a moment of economic improvement, if not recovery," Zahn said.
The development proposal includes a hotel and residential complex, along with restaurant and retail space.
Zahn said it's unusual to sign a lease with a tenant before construction is complete. Zahn added that it's important to design the building for success, by creating it at the right size and not developing too large of a space. She said they plan to design the 6,600 square feet of ground-floor retail space for the residential buildings, so it can be easily divided into smaller spaces to attract different tenant sizes to provide more flexibility.
Zahn said UDP manages and owns other retail developments in Portland and said they've had to offer tenants more free-rent periods or slightly higher tenant improvement allowances — basically just being flexible in how they work with their tenants.
"It's a lot of a balancing act right now," Zahn said. "We're definitely seeing some changes in the market in terms of how we are dealing with existing tenants and potential new tenants.
"We are working closely with every one of our retail tenants to help them stay open or have a plan to stay in place and not all of them will be successful."
Zahn said the timeframe is in their favor for the Lake Oswego development and that they are still filling a need in the community, especially with the development of a boutique hotel.
"Lake Oswego is a community where people want to be able to shop downtown, walk around, go to restaurants and have that pedestrian urban core experience, and I don't see that changing in the long term," Zahn said.
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