UGB: Growth pain relief years away in Bend

Long process of expanding Bend is driving up real estate costs, panelists say

By Joseph Ditzler / The Bulletin / @josefditzler

The last time Bend expanded its urban growth boundary, Phil Donahue was still a popular talk-show host, AIDS was a new term and Brian Fratzke was a freshman in high school.

The year was 1981, Fratzke said Wednesday during the Bend Chamber Real Estate Forecast Breakfast, which drew about 400 attendees to the Riverhouse Convention Center. Now a commercial real estate broker and principal at Fratzke Commercial Real Estate Advisors, Fratzke and four other panelists explained why the long process to bring more territory into the city of Bend is driving up the cost of residential and commercial real estate.

“Here’s why you should care,” he said. “How many of you have a business where you pay rent, you pay a lease, you own a building?” Lease rates for industrial space, for example, have nearly doubled in Bend in three years as the available space has shrunk from 1.9 million square feet to 288,000 square feet, a decline in vacancy rates from 38 percent to 5.76 percent, Fratzke said.

“Back in 2012, if you wanted to lease some industrial space you’d pay 35 cents per (square) foot per month. That’s your base rent. It’s almost doubled,” he said. “And we have some buildings that are listed as high as 80 and 90 cents a foot in town right now.”

The city in 2009 proposed bringing another 8,400 acres within its limits, a plan the state Land Conservation and Development Commission returned with a remand order, “like a teacher grading your very, very complex paper,” said panelist Brian Rankin, Bend city planning manager. Bend City Council is on track to address the state critiques in a new plan by June 2016, with possible state adoption by June 2017, he said. City elected officials, City Hall staffers and citizen volunteers have worked together, some on technical advisory committees, to revise the plan.

“This is not a complete do-over,” Rankin said. “We’re keeping elements the state approved and then we’re working on the things they told us to improve.”

With land in short supply and demand for homes in Bend increasing, the cost of housing is also increasing beyond the average worker’s ability to pay, said panelist Bill Duffey, vice president of land development for Hayden Homes. System development charges, the fees imposed on developers by the city and the Bend Park & Recreation District, add another 2 percent to 10 percent to costs, depending on the type of construction, said panelist Ron Ross, a broker with Compass Commercial Real Estate Services.

Duffey calculated that entry-level homebuyers in Bend are earning about $76,000 annually, or about $20,000 more than the median income in Bend, which he pegged at about $56,000.

“That space (between the two incomes) is a market that we’re really having a hard time trying to serve right now,” Duffey said.

Even if the state approves the revised city plan for expansion, three to five years will pass before it affords any relief to builders, employers and homebuyers who must shoulder the cost of a tight real-estate market, the panelists said. Fratzke suggested several moves they all could make in the meantime.

Commercial tenants may want to talk with their landlords about renewing their leases at affordable rates; tenants who can afford to do so might consider purchasing their own property, he said.

Developers should look for opportunities to redevelop existing properties while keeping an eye on lease rates to know when they warrant new construction, Fratzke said.

Citizens should get involved by making their opinions known to the City Council and state Land Conservation and Development Commission and Land Use Board of Appeals, he said.

“Bend’s gonna continue to grow. This is the greatest city in America,” Fratzke said. “People are going to keep moving and demand’s going to outstrip supply. So let’s keep on top of it.”

— Reporter: 541-617-7815,