Light touch being used to reposition Montgomery Park

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Menashe Properties made a $33 million bet last year on the future of Portland office space when it purchased Montgomery Park.

Now the local real estate investment firm is leading what CEO Jordan Menashe called a “soft reposition” of the property with an eye toward attracting tenants looking for a deal.

Menashe said he’s encouraged by early signs of a bounce-back in the office market. He noted increasing competition from institutional investors in cities such as San Francisco, which was hit hard by pandemic shutdowns. Companies large and small have ordered employees to return to offices, at least part time.

“Office is back,” Menashe said in an interview.

Whether Menashe Properties is successful in turning around Montgomery Park will say much about the post-pandemic office market in Portland and whether it has hit bottom.

Montgomery Park is a sprawling, aged asset. Its 768,443 square feet make it Portland’s third-largest commercial property, behind only the U.S. Bancorp Tower — better known as Big Pink — and Wells Fargo Center.

In competition for tenants, Menashe representatives are carefully positioning the property as a value. Built in 1921 as a Montgomery Ward & Co. warehouse, the building offers different space than in sleek 21st-century towers such as Block 216 and Eleven West. Montgomery Park tenants will not share the building with a cantilevered swimming pool, nor Ritz-Carlton condos.

“We will be the value proposition for tenants in the market, offering a great building with unique views, great parking and amenities,” Menashe Properties President Ross Kelley said.

Montgomery Park’s future was the focus of a luncheon last week hosted by the Portland chapter of CREW (Commercial Real Estate Women) Network.

“The thesis was this was a terrific asset — great location, great parking,” Kelley said at the luncheon. “With a reset basis and bringing in some new amenities, we’re really excited to continue the reposition.”

What Kelley called the reset basis — commercial real estate lingo for a lower initial investment — is key to making Menashe’s purchase work. The 2024 sale price valued the building at only $42.95 per square foot, a deal that would have been unheard of before the COVID-19 pandemic. The building in 2019 sold for $255 million — more than seven times the price later paid by Menashe Properties.

After paying a modest amount, the new owners don’t necessarily need to command market-leading rents. That strategy leads to a light touch with the repositioning. Menashe Properties is focusing on the bottom floors with changes that visitors and tenants will notice immediately, such as better lighting and new furniture.

Walen Construction is serving as the general contractor for the update, which is being designed by West of West.

The ownership has also applied for permits to add a gym in another bid to attract tenants.

“Everyone knows, it’s just a massive building,” said Clayton Taylor, partner at West of West. “So, you want to reposition the building, you want to get activation going. You want to show action in the market — that something’s happening. But you’re trying to do it across a three-city-block scale of interior space that you’re trying to touch at once. So how do you do that in a nominal way?”

Montgomery Park is no stranger to cost-conscious cosmetic updates. When the iconic sign atop the building was changed, only two letters were swapped to transform “Montgomery Ward” into “Montgomery Park.”

Menashe Properties is working to create foot traffic in part by improving the experience in the entrance and lower floors. An escalator takes visitors to the second floor, where the Adidas employee store acts as a retail anchor. Banks of elevators chime as they move up and down at the rear of the atrium. On a recent visit, a pianist was playing to a light lunch crowd while a few workers pecked away on laptops.

The building is also host to a rotating cast of food carts for employees and visitors. On Monday, Smak Dab’s sold burgers next to the building’s artificial-turf putting green.

The tenants offer a mix of uses including health care services such as WebMD and Pediatric Associates of the Northwest, and professional services. Avangrid Renewables has its headquarters in the building. Daimler Trucks North America has an office there, as does a law firm.

Some analysts have observed signs of life in the office market.

“Tenant demand in Portland is showing signs of recovery and the market should continue to stabilize in 2025,” JLL stated in a recent report.

Another developer, Vanessa Sturgeon, who leads Sturgeon Development Partners, pointed to strengthening sentiment in the office market.

“I do think we’re starting to see the market shift a bit,” she said. “It’s starting to bottom out, and it’s starting to turn a bit, and I think people are recognizing the need to support business.”

Menashe Properties is confident that its recent acquisition will appeal to prospective tenants.

“Montgomery Park sells itself,” Menashe said. “All you have to do is open the doors and take care of people.”