Central Oregon’s most diverse commercial real estate company analyzes the successes of 2018, indicators for this year’s market.

As national media continues hailing Bend as one of the top places to live and work, Compass Commercial Real Estate Services wrapped up 2018 as its best year in the company’s twenty-year history. Factoring the current state of the economy, along with all indicators pointing to a strong commercial real estate market, they anticipate another great finish in 2019.

Market data from the national level and locally in Central Oregon tells a compelling story. Fourth-quarter economic reports from the U.S. Commerce Department revealed a 2017 growth rate of 2.6 percent, continuing one of the longest periods of economic expansion in U.S. history.

The Q4 2018 Compass Points® market report forecast was correct. “We’d predicted this trajectory would energize our ability to deliver the results you can expect from a team that has many professional accreditations, decades of experience and industry knowledge, and is dedicated to serving the needs of each client,” said Howard Friedman, partner and the managing principal broker for Compass Commercial.

A favorable market wasn’t the only factor driving remarkable results for Compass in 2018. Their expertise as the only commercial real estate firm in the region offering in-house asset and property management and construction services led to an exceptional year as well.

“Whether you want to buy, sell or lease commercial real estate, schedule tenant improvements, or consult with an asset and property manager to protect and grow your investment, we provide this for everything from office, retail and industrial to land and multifamily property investments,” Friedman said.

Why the 2018 Market Mattered

From Bend’s office and retail market to industrial and multifamily trends, the successes of 2018 were due to factors that will support another prosperous year. Bend’s office market vacancy rate dropped from 3.6 percent in Q4 2017 to 3.4 percent in Q4 2018. Lease rates held steady, too.

Last year, the office vacancy rate dropped for the eighth year in a row. In 2010, vacancies were 22 percent of the total market. Today it’s a fraction of that, with just over 87,000 square feet available.

Bend’s retail vacancies dropped at the end of last year, landing at less than 3 percent in Q4 2018, while rental rates held strong. “Restaurants and new retail projects are commanding high rates, despite the construction of many new projects,” Friedman said.

In the industrial sector, Bend’s vacancy rate dropped for the fifth consecutive year, from 3.3 percent in 2017 to an amazing 1.7 percent last year. In Redmond, those vacancy rates dropped for the seventh consecutive year, from 3.5 percent to just 1.9 percent in Q4 2018.

Office rental rates will remain strong as the supply in Bend remains tight. “This mirrors national trends as the economy continues its steady growth,” Friedman said.

Meanwhile, strong construction and labor costs continue locally. Some companies cite tariffs contributing to price increases in steel and appliances. This will continue to squeeze the office market’s supply. “Projects like Crane Shed Commons and Deschutes Ridge Business Park saw successful leasing during 2018, and there are few new office projects on the books for 2019,” Friedman said.

Robust Sectors and the Rent Question

Central Oregon’s retail market continues its robust growth and low vacancies. Last year, Compass Commercial cited a few projects that are still in the beginning stages, including the former Ray’s Food Place, to become Westside Village Marketplace, a mixed-use retail and multifamily complex, currently under construction. “Many redeveloped retail properties also saw strong absorption in 2018,” Friedman said.

In the industrial sector, rents are strong as the supply remains limited in Bend and Redmond. However, a decade-long collaborative effort was approved for industrial development on 949-acres south of the Deschutes County Fair & Expo Center in Redmond.

Multifamily building in Central Oregon continues. This has eased the housing crunch, but affordability is still an issue. Local community leaders are attempting to ease this, but it is challenging.

Oregon enacted residential rent control this year. “Something must be done to help our neighbors live and work without fearing homelessness or displacement from our growing region,” said Friedman, who is also CEO and board president of the Bethlehem Inn homeless shelter in Bend.

What’s Ahead

Some predict a national economic slowdown, but Central Oregon’s commercial real estate is not expected to be affected. “We predict it will continue to be strong, with rent increases slowing, but values staying robust in 2019,” said Friedman. “Capitalization rates (the rate of return on an investment property based on the income it’s expected to generate) should rise a bit considering increases in interest rates. All in all, we see a bullish market ahead.”

Do you have questions about Central Oregon commercial property market trends? Would you like expert consultation on leasing or selling commercial property, property management or tenant improvements? If so, the experts at Compass Commercial are ready to help. Give them a call at 541-383-2444.

*Statistics and quotes are from the Q4 2018 Compass Points®. To subscribe to the quarterly market report, go to compasscommercial.com/market-research.

A public snub turns into marketing gold for Lora DiCarlo, a sex-tech startup in Bend.

Lora Haddock, founder of Bend-based robotic sex toy startup Lora DiCarlo, has an uncanny knack for making what seem like taboo topics—orgasms, anatomy, sex devices—a comfortable part of regular conversation. That skill came in especially handy earlier this year, when Haddock’s startup went viral.

Lora DiCarlo got the world’s attention in January when the company revealed they’d received a prestigious robotics innovation award from the Consumer Electronics Show, only to have it taken away a month later after the conference organizers deemed the product obscene. At issue: The startup’s handsfree, vagina-focused device for blended orgasms.

Haddock penned an open letter that took off on social media and prompted national news coverage, saying that rescinding the award illustrated a gender double standard for the long-standing tech event. Everyone from the New York Times to TechCrunch to Glamour Magazine picked up the story.

While losing the award was disappointing to Haddock and her team, she notes that the viral moment provided a silver lining—an outpouring of support for her product and company from around the world.

“That was gratifying,” she said. “It’s not just about the product, but about a shift in society and promoting change toward sex positivity for women and non-gender conforming people.”

An Engineering Problem

Haddock was 28 when she had what she calls the holy grail of orgasms—a blended orgasm. “It kind of landed me on the ground, and I was like, ‘How can I do that again?’ ” The question stuck with her, and she eventually left her job in healthcare with the intention of creating a device that could replicate the perfect orgasm.

“There’s no product on the market that speaks to female physiology and vaginal physiology,” Haddock said.

Coming from a long line of engineers, she began by getting better anatomical data—asking people to measure different aspects of their vaginas—so she could develop a device that could fit a multitude of bodies.

Then in 2017, Haddock reached out to John Parmigiani, head of Oregon State University’s Prototype Development Laboratory. Haddock arrived for the meeting with not just a host of market measurements, but also a list of fifty-two functional engineering requirements.

“It was a very well-posed mechanical engineering problem,” Parmigiani told the Bend Bulletin.

The Business of Pleasure

Haddock created a team of student and professional engineers at the OSU Corvallis campus, and they built the first device, called Osé, within a year. The feedback from young women engineering students who worked with the company stuck with Haddock.

“They said that they’d never had female role models before and now they have many,” she said. “That’s the kind of company I want to build.”

And she’s well en route. The startup’s staff is mostly women, and includes a doctoral student in mechanical engineering and another engineer with a Ph.D in AI and robotics. Their flagship product, Osé, is already subject to several robotics-related patent applications.

With $1.1 million in funding, Lora DiCarlo is readying to manufacture and have the device for sale by year’s end. In the meantime, Haddock will continue to speak out about the taboo around female sexuality.

“This is about human needs, being sex positive, and having an honest conversation about our bodies and something that is part of our everyday lives.”

Windflower Farm, an artisan farm on the edge of the high desert, swims against the current.

Spring at Windflower Farm in Alfalfa may appear much as it has for the past fourteen years, with a couple of thoroughbreds loping on twenty acres shared with hens, goats, honeybees, and planted with flowers. Here, at the edge of the Badlands about fifteen miles east of Bend, Gigi Meyer is considering her next move.

Since 2005, Meyer has poured her commitment to biodiversity into her land, creating a small-scale sustainable farm that has supplied stellar produce and eggs to some of the area’s best chefs and discerning consumers. It has also been a working classroom for area college students and aspiring farmers.

The animals provide fertilizer composted on-site, crops are rotated, and flowers are planted to attract insects that support a vibrant ecosystem before the blooms are sold to restaurants and boutique markets. The farm isn’t certified organic, but Meyer uses no pesticides, even those approved for certified organic farms. Meyer found that by continually caring for the soil, strategic seed selection and time-sensitive planting, she didn’t need any chemicals.

“It’s my own baroque artist thing—I bring it all in and distill it into a system that works,” said Meyer. “That’s my M.O., a microcosm of the natural process.” Meyer grew up on a ranch in Eastern Oregon, studied art at the New York Studio School in Manhattan, lived in Italy and trained racehorses in Southern California before returning to her home state.

Now, the farm is symbolic of concerns about Oregon’s agricultural future. The average age of Oregon farmers is 60, up from 55 in 2002. As farmers retire, more than 10 million acres—64 percent of Oregon’s agricultural land—will be sold. The potential change in use could massively affect Oregon’s economy, environment and food sources, which calls for thoughtful succession planning.

At age 60, after decades of intensely physical work and riding crazy, young thoroughbreds, Meyer is looking for a young farmer to take the reins. She wants to stay on the farm, but return to her earlier artistic pursuits, writing and painting. “I’ve built something that’s productive to society, the community, and the landscape. There are farmers like me all across the country, and I’m proud of what I’ve created.”

Others are, too. Owen Murphy, assistant professor of Health and Human Performance at Central Oregon Community College, said, “Windflower is such a valuable learning experience for my students because of how diverse it is—vegetables, flowers, herbs, milk and meat. It’s a wonderful example of smallscale, polyculture-based agriculture.”

Last year, Murphy brought his Sustainable Food Production Systems class there. “It was the dead of winter, but we helped weed, mulch and prep the beds for spring,” he said. “Then we gathered around for dinner with ingredients sourced from the farm. It was cold and dark outside, but full of warmth and conversation inside. Gigi helped the students understand some of the hard work and joy associated with small-scale farming.”

Epic Aircraft’s new plane has the Bend company posed for a second chapter.

Every Thursday afternoon, Epic Aircraft employees gather in a showroom hangar for some food and drink. In late January, the crew was also asked to do something a little different during the event: sign their name to an airplane cowling, its hood, and typically one of the last pieces of a plane put in place.

The signatures were at the request of the aircraft’s owner as Epic neared completion of its fifty-fourth and final experimental kit. That plane will mark the end of an era for Epic, which has been designing and manufacturing carbon fiber, high-performance turboprop “kit” planes since 2004.

Today, a new $3.25 million plane currently being assembled at Epic’s Bend headquarters is poised to help the company truly take off. After seven years of design, manufacturing and rigorous testing, the Epic E1000 is set to become the company’s first FAA-certified, fully factory-built aircraft, fulfilling a goal the company had from the beginning.

“It also signals the arrival of a truly game-changing aircraft,” said Epic CEO Doug King. “One that is going to disrupt the aviation industry, setting a new standard for innovation, performance and price. Now that is very exciting.”

Epic’s first five factory-built E1000 aircraft are in production, in various stages of fabrication, bonding and final assembly. They are expected to be delivered to customers later this year.

“We have a large order book of more than eighty airplanes, we just need to start delivering planes, and we intend to do that this summer,” King said. “This is a big year for us.”

From Kit to Complete

The coveted FAA certification is “a done deal,” said Gale Evans, Epic’s marketing manager. “The only question is exactly when it will be a done deal.”

The experimental kit plane process Epic gained national recognition for involved the company designing and manufacturing the aircraft, but the FAA required customers to build 51 percent of the plane. The process often took several years to complete with customers spending weeks at a time at Epic putting together the planes under close supervision.

The new FAA certificate, expected this summer, allows Epic to design and build the plane from start to finish and ramp up production considerably. Since 2004, just fifty-two planes were sold and built. Epic now expects to build more than fifty planes a year and already has orders from customers in the U.S., Australia, Europe and Russia.

“We’re expanding our market from 10 percent [of the general aviation market] to all of it,” King said. “And instead of requiring a deep personal commitment to the kit-plane process, now all a potential customer has to determine is whether it’s capable enough for them and whether they can afford it.”

King said his customers are folks who run small to mid-sized businesses—construction contractors, developers, doctors or entertainers. They are people who have money and who need to move around quickly. Because of its smaller size, the E1000 is able to land and take off from some of the hundreds of smaller airports situated around the country, an intriguing benefit for many potential customers.

Epic touts the E1000 as cheaper and faster than its competitors. The six-seater can fly from San Francisco to the Mississippi River on a single tank of gas, cruising at 375 miles per hour fully loaded.

“It expands their ability to get around at near airliner speeds at relatively low costs,” King said.

Pia Bergqvist, executive editor at Flying Magazine, has been monitoring Epic and the certification process for years. She flew in one of the test E1000s a few years ago and said, “The performance truly is spectacular” and seconds Epic’s claims that the new plane is much more capable than its rivals.

“Airplanes not only have to perform really well, but they have to be sexy for people to want to buy them,” she said. “It’s a cool looking plane and it has terrific performance. I think it’s going to be a winner once it’s out.”

New Plane, New Culture

It’s definitely been a long trip for Epic and King. Just ten years ago, King was an Epic customer and in the middle of building his own kit plane when the company went bankrupt, mothballing his project for a while.

A year later, he formed an investment group of kit-plane owners who bought and rescued the company. In 2012 King sold to a private Russian investor, solidifying the company’s financial future and ensuring funding would be in place for FAA certication. King stayed on board as the CEO.

“That was an interesting time and the decision I had to make was, do I walk away from it or do I go all in,” King said. “A lot of people thought I was nuts investing in an airplane company in 2010 [in the midst of the recession]…but the airplane is really a star. I had a chance to do it and it turned one dream into a different dream.”

Epic has reason to be optimistic about the future market for its new plane. There were close to 400 turboprop deliveries through the third quarter of 2018—up nearly six percent from 2017 according to the General Aviation Manufacturers Association. Officials there are bullish about the $12.7 billion industry’s future performance, in part, due to new products set to be introduced.

“The industry is very excited,” Evans said. “The FAA has been supportive of us too. Aviation needs more innovation and we’re offering the market something new, something that will redefine expectations in the industry.”

The projected increase in production means they’ll also need to increase the current workforce at Epic, which already hovers around 250 people. King said Epic could hire as many as 100 new employees in the coming year, to do everything from fabrication to final inspection.

“We’re always hiring here,” King said. “And it’s a good job that someone with or even without a degree can begin a good career in Bend. That’s the biggest reason for our outreach in the area. We’re not trying to find customers here, but we are trying to find employees.”

Epic discontinued its kit plane program in 2013, preparing for the FAA certification. When the final experimental plane is ready, they’ll bring it to the showroom hangar— complete with a giant bow. Evans said they will probably involve the entire Epic staff and give the plane a special send-off, effectively turning the page for the company.

“It’s closing one chapter,” Evans said, “and starting a very exciting next chapter that everyone has their eyes focused on.”