Oregon Retail Center Sale Shows Why Vacancy Can Create Opportunity for Owner-Users

A $19 million retail property sale outside Portland offers an interesting lesson for commercial real estate investors and business owners throughout the Northwest—including here in Boise.

The property wasn’t fully leased. In fact, roughly one-quarter of the space was vacant.

But instead of that vacancy killing the deal, it appears to have helped create the opportunity.

According to reporting by Aaron Tamblyn with CoStar AI and CoStar Research, two private investors purchased Cascade Boulevard Center in Tigard, Oregon, for $19 million. The buyers are expected to occupy the property’s vacant space themselves.

You can read the original CoStar News report here: https://product.costar.com/home/news/781860894

For those watching Boise commercial real estate, the transaction is a good example of how an owner-user strategy can change the economics of buying a larger investment property.

A $19 Million Retail Deal With Room to Grow

Cascade Boulevard Center consists of two neighboring, single-story retail buildings totaling approximately 100,371 square feet.

The reported purchase price of $19 million works out to roughly $189 per square foot.

At the time of the transaction, the center was about 75% occupied. Approximately 25,460 square feet remained vacant.

Normally, that amount of empty space would be one of the first things an investor studies.

Vacancy means lost rental income. It can also mean additional leasing commissions, tenant improvement costs, free rent and potentially months—or years—before the space produces stabilized income.

But this deal has an important twist.

The buyers reportedly plan to occupy the vacant space themselves.

Their specific business use has not been publicly identified, but occupying approximately one-quarter of the property changes the investment equation significantly.

Instead of purchasing a retail center and immediately searching for a tenant to fill a large vacancy, the buyers potentially become both the owners and occupants.

That’s a very different strategy.

Why Owner-User Buyers Can See Value Differently

Traditional real estate investors usually focus heavily on net operating income, capitalization rates, lease terms, tenant credit and future rental growth.

Owner-users have another factor to consider:

What would it cost to lease comparable space somewhere else?

That can make partially vacant properties particularly interesting.

Imagine a business already paying significant rent for 20,000 or 30,000 square feet.

Instead of continuing to lease, that company may be able to purchase a larger property, occupy part of it and collect rent from other tenants.

The existing tenants help support the property’s operating costs and debt service, while the buyer gains control of its own location.

Over time, the owner also participates in potential appreciation rather than simply paying rent to another landlord.

This doesn’t mean every partially occupied property makes sense.

The business still needs to analyze financing, property taxes, maintenance, improvements, management and the risks associated with owning additional rental space.

But when the numbers line up, an owner-user can sometimes justify a purchase differently than a traditional investor.

Why This Matters for Boise Commercial Real Estate

This strategy is worth watching in the Treasure Valley.

Boise, Meridian, Nampa, Eagle and surrounding communities have a large base of growing privately owned businesses. Some eventually reach a point where leasing is no longer their only real estate option.

That creates opportunities beyond traditional freestanding owner-user buildings.

A company needing 15,000 square feet, for example, doesn’t necessarily have to buy a 15,000-square-foot property.

It could potentially purchase a 30,000- or 40,000-square-foot building, occupy the portion it needs and lease the remainder.

The same idea can apply to retail centers, industrial buildings, flex properties, medical buildings and office properties.

This can be especially interesting when a building already has tenants producing income.

For Boise investment property buyers, that means vacancy shouldn’t automatically be viewed as a negative.

Sometimes it is the feature that makes the acquisition possible.

Vacancy Can Mean Risk—or Upside

Investors usually prefer stabilized properties because the income is easier to predict.

But stabilized assets often come with a price premium.

A partially vacant property can offer a different equation.

If a buyer believes the empty space can be leased, occupied by the buyer’s own company or repositioned for another use, that vacancy may represent future value.

This is where basis becomes important.

The Tigard center reportedly traded for approximately $189 per square foot.

For an investor evaluating a similar property, the next questions would be straightforward: What would replacement cost be? What rents can the occupied space support? What will it cost to improve the vacant portion? And what could the entire property be worth once stabilized?

Those questions are just as relevant when evaluating Boise commercial property.

The best opportunity isn’t always the building with perfect occupancy and fresh leases.

Sometimes it is the property with a problem the next buyer knows how to solve.

Local Insight: Look Beyond the Current Rent Roll

One of the first things investors examine when evaluating commercial real estate is the rent roll.

That’s important—but it shouldn’t be the end of the analysis.

A 75%-occupied property may look weaker than a fully leased property on paper. But if the vacancy fits the buyer’s own space requirement, that same property can suddenly become much more attractive.

I think this is particularly relevant in the Boise market.

Growing local companies should periodically compare the cost of continuing to lease against the possibility of buying a larger property and becoming a landlord themselves.

For some companies, purchasing commercial real estate can turn an occupancy expense into a long-term asset.

For investors, meanwhile, properties with meaningful vacancy deserve a closer look when the purchase price reflects that risk.

There may be an opportunity to lease the space, reposition it, divide it for smaller tenants or eventually sell a stabilized property at a higher value.

The key is understanding exactly why the space is vacant.

Poor location, weak access or declining demand are very different problems from an otherwise solid property that simply needs the right tenant.

What Boise Buyers Can Learn From This Deal

The Tigard transaction is a reminder that commercial real estate deals aren’t always simply investments or owner-user purchases.

Sometimes they are both.

A buyer can acquire an income-producing property, operate its own business from part of the building and collect rent from the remaining tenants.

That hybrid model can create opportunities that aren’t obvious when looking only at cap rates.

As commercial real estate values, financing costs and lease rates continue to influence buying decisions across the Northwest, I expect owner-user investors to remain an important part of the market.

For businesses considering their next location in Boise or the Treasure Valley, the question may no longer be just, “What space should we lease?”

It may also be, “What property could we own?”

Mike Gioioso (joy-OH-so) has for 16+ years been helping companies of all sizes buy, build, and lease perfect places for business in greater Boise, Idaho and beyond.
www.streetsmartidaho.com mike@streetsmartidaho.com 208-209-9166

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