By: Chuck Slothower

Schnitzer Properties has embarked on a major expansion of its industrial holdings, with seven separate projects totaling 2.25 million square feet rising in Oregon, Arizona, California and Nevada.

The largest is in the Portland-metro market, where the firm is developing the Sherwood Commerce Center – a three-phase light industrial development that will eventually encompass 994,600 square feet of leasable space.

The Sherwood Commerce Center’s 445,000-square-foot first phase is approximately 50 percent leased. Schnitzer Propertiesis preparing to break ground in spring 2025 on the second and third phases of the development. Mainlander Investments is serving as co-developer of the project.

The industrial play in Sherwood, approximately 15 miles southwest of Portland, represents more than a $200 million investment by the two companies. But for Schnitzer Properties, the Portland-based firm formerly known as Harsch Investment Properties and led by CEO Jordan Schnitzer, it’s only one piece of a larger bet on industrial warehouse space.

Industrial warehouses now make up 84 percent of Schnitzer Properties’ 33-million-square-foot portfolio, Jordan Schnitzer said in an interview.

“I first became enamored with industrial in the early 1980s,” Schnitzer said. His father, Harold, who founded the firm in 1950, “never liked industrial,” he added.

Schnitzer Properties is making a $464 million investment in industrial projects in a 12-month period, according to the company.

Schnitzer said he likes all real estate asset types, and he cautioned that the industrial sector, too, will become overbuilt.

“A wise real estate person once said the real estate industry has never failed to overbuild every asset class,” he said.

Indeed, the industrial market has shown signs of softness. Direct vacancies in the Portland area grew to 4.7 percent in the third quarter, up from 3 percent a year earlier, and asking lease rates fell to $0.84 per square foot, according to Kidder Mathews.

During 2015 and 2016, when capitalization rates fell, making development less attractive, Schnitzer Properties shifted to buying land. That’s now paying dividends as Schnitzer leads a one-company industrial building boom.

In addition to the Sherwood project, Schnitzer Properties has two industrial projects under way in the Tucson, Arizona, market, with 190,000 square feet and 150,000 square feet, respectively; a 290,000-square-foot project in Goodyear, Arizona; two in Las Vegas, with 290,000 square feet and 150,000 square feet, respectively; and a 190,000-square-foot project in Roseville, California, a Sacramento suburb.

For the Sherwood Commerce Center, Perlo Construction served as general contractor for the first phase, and Kerr Contractors performed exterior and site work.

Schnitzer Properties’ leasing strategy is to pursue small- and medium-size tenants — unlike large industrial developers such as Panattoni Development or Trammell Crow that typically seek to fill an industrial development with one large tenant.

“We take a different approach,” Schnitzer said. “It’s much more management intensive. You have to know your markets. And because we buy and build for our own account, if you make a mistake, you have to live with it.”

Space at the Sherwood Commerce Center is available in chunks of less than 8,000 square feet up to 190,000 square feet. The approach allows companies to lease larger spaces as they grow, Schnitzer said.

Tenants in Sherwood include Olympus Controls, which makes robotic equipment; Gaylord Marine Services Inc., which installs galley ventilation systems on U.S. Navy and private ships; and Studson Inc., a manufacturer of modern construction helmets.

“These are local companies that employ people and build strong communities,” Schnitzer said.