Portland Condo Market Skyrockets

High Priced Sales Ensure a Profit

Building a condo can be a dangerous thing. Contractors are faced not only with the normal risk of being sued, but with the chance that they will be sued for construction techniques that vary millimeters from the standard.

"We knew the threat of lawsuits would be coming here," said Craig Payne of JBL & K Risk Services, an insurance brokerage in Portland. "Everything with a homeowners association attached to it can expect a lawsuit the first few years after a building is built."

The lawsuit trend started in California, where lawyers routinely approach homeowner's associations when the builders' warranty is about to expire. A building inspector is hired to document anything that deviates, from studs off center, to plumbing out of plumb. Even if the building functions, the contractor loses the suit, because the construction is not according to specs.

The result is sky high insurance with prices running about two percent of construction costs. Contractors can't afford the coverage, so owners are carrying wrap around policies that cover themselves and everyone involved in construction.

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High insurance rates and certain lawsuits discourage many developers, but with condos selling at as much as $400 per square foot, there's plenty of incentive to build. Contractors are improving the odds of success by taking every step possible to avoid lawsuits.

"We are being fastidious in our construction methods and record-keeping, said the project manager at 1620 Broadway, under construction by Swinerton Builders in Portland. Swinerton is working with BEE Consulting, a Portland consulting company that advises owners and contractors on the best building systems and methods to use in order to avoid construction defects.

The condo project is the only one being built in the northeast section of the city. Owned by Aiyana LLC and designed by Aiyana Group Architects, Portland, it uses an unusual wall system, which allows water to penetrate the outside layer and run vertically down an interior membrane. The system is designed to protect against leakage to the interior of the building, a common factor in many lawsuits because it causes mold.

Though it is being built outside of the downtown core, the building takes advantage of its neighborhood near the ritzy Irvington and Lloyd intersection. The area has one of the highest per-capita incomes in Oregon, and condo buyers will be surrounded by boutiques, restaurants and historic homes.

The building will contain 116 units and Zupan, a gourmet grocery store on the bottom floor.

Prices for the top-floor units, with a view of the Willamette River and downtown Portland, run about $750,000. The neighborhood and easy parking in that area of the city add to the appeal.

The real haven of condo construction is in the Pearl District, immediately south of the Portland retail and business core and on the west side of the Willamette. Currently six condo projects are nearing completion on a 10-block area.

At the Elizabeth Lofts, recently completed in the Pearl District, water intrusion and mold were the prime consideration behind the design of the wall system. Designed by Ankrom Moisan and built by Howard S. Wright Construction, both of Portland, the team took great care in developing the mechanical systems.

The mechanical engineer, Interface Engineering of Portland, designed a system that included outside air supply to each unit's return air plenum, minimizing negative air pressure that draws moisture into the building.

One of the most unusual condos is McCormick Pier, located on the banks of the Willamette River. It consists of 301 apartments in eight buildings and each is being converted from apartments into condos by general contractor Yorke & Curtis of Portland.

Several of the buildings sit on a pier built in 1890. Part of the project calls for rebuilding the pier, which will still provide structural support for the buildings. Under construction for several years already, the project will come to a close next fall.

Because all the work is being done within the original building footprints, the owner avoided the need to get new building permits. "Now environmental restrictions would prevent construction that close to the river," said Cathy Green, the real estate broker and owner's representative.

The McCormick Pier condos marketing themselves as a lifestyle choice, rather than a place to live, Green said. Each apartment is gutted and reconfigured. Extras such as 300-sq.-ft. decks are added. The complex includes a 112-slip marina, swimming pool and fitness center.

Units are selling at the rate of about 14 a month, mostly as second homes for professionals. A one-bedroom unit costs $239,000, and a two-bedroom, two-bath, 1,100-sq.-ft. unit is going for $425,000. "Prices have gone up since we started construction," Green said.

Up and coming are several condos planned for the South Waterfront area, future home of the Oregon Health Sciences University's new campus.

Gerding/Edlen Development Co. and Williams & Dame Development Inc. are pairing to build a $110 million condo that would bring another 312 condo units to the downtown area. Proposed cost of the units is between $200,000 to $2 million, the highest so far of any condos in the downtown area.