After seven years, a multifamily building opens

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Home(/) > News(Https://Djcoregon.Com/News/Category/News/) > Construction(Https://Djcoregon.Com/News/Category/News/Construction/) > Aftersevenyears,amultifamilybuildingopens

Merx,inPortland’sSlabtownneighborhood,has126apartmentsand911squarefeetofretailspace.(ChuckSlothower/DJC)

Aftersevenyears,amultifamilybuildingopens

By: Chuck Slothower

16, 2024 // 4 Minute Read

Ocially,therealestateinvestors,architectsandconstructionexecutiveswhogatheredinNorthwestPortlandlast weekcametogethertocelebratetheopeningof Merx,a126-unitmixed-usebuilding. Butinasense,theywerecelebratingthelastbreathofthepre-pandemicrealestatecycle. Merxwasconceivedin2017,beforeCOVID-19delayedprojectsaroundthenationandsentconstructionprices spiralingbymakingeverythingfromloanstoconcretemoreexpensive.

“Westartedthisprocesssevenyearsago,sothelandscapewassomewhatdifferent,”saidprojectco-ownerRichard Smith,founderof DeaconDevelopment.HeundertooktheprojectwithSteveDeacon,founderandboardchairmanof DeaconConstruction.Thetwoarelongtimecolleagues—SmithwasDeaconConstruction’srstfull-timehirein1982 asprojectengineer.

Merx,at1910N.W.PettygroveSt.,waspartofawaveofprojectssubmittedjustbeforePortland’sinclusionaryzoning rulestookeffect,requiringaffordableunitsinapartmentbuildingsof20unitsormore.Thepropertywaspurchasedfor $2.55millioninOctober2017.

DeaconConstructionbeganconstructionofthe57,412-square-footbuildinginAugust2022,enduringpandemicrelateddisruptionsandworkforcechallenges,ahistoricicestormanddeliverydelaysofconstructionmaterials.

OnJuly10theMerxprojectteamheldagrandopeningforthebuilding,whereleasinghasbegun.Thepropertyispart ofagenerationofmultifamilybuildingsinthe Slabtown neighborhood—aformerindustrialareaborderingthe Pearl District

“Thisone’sbeenintheworksforquiteawhile,”saidAndrewNaegeli,CEOofDeaconConstruction,whichservedas generalcontractorforitssistercompany,DeaconDevelopmentGroup(thecompaniesareoperatedseparately).“It wasadicultprojecttogetstarted.”

Throughoutconstruction,pricesrose.

“Assoonaswecould(valueengineer)it,thepricewouldgoup,”Naegelisaid.

Financingalsoprovedachallenge.Initially,projectownersSteveDeaconandSmithapproachedthe U.S.Department ofHousingandUrbanDevelopment fornancing.HUDwasnotinterestedinexpandingitsportfolioinPortlandatthe time,Smithsaid.

“Wehadtostartoverfroma nancingperspective,”hesaid.

Eventually,theinvestorssecuredaloanfrom OregonCommunityCreditUnion

Now,thebuildingisopen.ItcomesasPortland’sonce-tightrentalmarkethasseensomeloosening,withvacancies risingto6.2percent,accordingto MultifamilyNW’sspring2024report.

Merxstandsoutasoneofthefewmultifamilyprojectsdeliveringthisyear.Multifamilypermitapplicationswereon tracktofall82percentto393throughMayonanannualizedbasis,accordingtocensusdataanalyzedbybrokerage HFOInvestmentRealEstate

“Themultifamilyhousingmarket,nationallyandwithinthePortland(metropolitanstatisticalarea),isexperiencing signicantchallenges,”HFOwroteinarecentreport.“Highinterestrates,materialandlaborshortagesandregulatory hurdlescontributetodecliningnewmultifamilyhousingstartsandpermits.”

Merx’sunitsareallstudiosorone-bedroomunits,withanaverageofonly320squarefeet.Theapartmentsarestyled forurbanlivingforsinglesorcouples,withfullkitchensandMurphybedsincertainunits.Someoftheapartmentsare laidoutinshotgunfashion,muchlongerthantheyarewide.

DeaconDevelopmentisnotaloneindeliveringsmallunitstoPortland.Thecityhadthenation’ssecond-smallestnew apartmentsin2023,accordingto resultsofa RentCafe study(https://www.rentcafe.com/blog/rental-market/marketsnapshots/national-average-apartment-size/) releasedinJune.Portlandapartmentsaveraged685squarefeet,down 7.3percentinthepastdecade.Seattlehadthenation’ssmallestnewapartmentsonaverage–661squarefeet.The nationalaveragewas916squarefeet.

Merxfeaturesatwo-storyconcretepodiumtoppedby vewood-framedstories.Thebuildinghas911squarefeetof retailspace.

Thebuilding’sdesignchangedafterprojectentitlements,saidAlexYale,presidentof YBAArchitects (/prole/267681/yba-architects),whichdesignedthebuilding.Nineteenapartmentswereadded,aparkingpodium wasremoved,andarooftopamenitydeckwasadded.

“Wewantedtodifferentiatewithdesign,”hesaid.

Theprojectwouldbediculttobegintoday,saidIanLewallen,presidentofDeaconDevelopment.

“It’dbereallychallenging,”hesaid.“Wehavefourprojectsthatareessentiallypermit-readyrightnow,butjustgiventhe natureofthecapitalmarketsrightnow,it’snotreallyfeasible.”