Drive-thrus driving property sales in Portland

In a trying time for commercial real estate transactions, one small submarket is showing signs of strong demand: The humble drive-thru.

Portland has banned the construction of new drive-thrus in its Central City since Aug. 10, 2020, when the Central City 2035 Plan took effect two years after the package of zoning updates was adopted by the City Council .

Portland’s strict zoning rules appear to have boosted the values of properties with existing drive-thrus. Comprehensive data was not available, but brokers said drive-thru properties are yielding a premium.

“In very broad strokes, they’re intrinsically valuable because of supply and demand,” said Nick Bushong, a retail broker at Fulcrum Pacific in Portland.

Portland zoning bans new drive-thrus in the Central City, which includes downtown, the West End, University District, South Waterfront, Old Town Chinatown, the Pearl District, Goose Hollow, Central Eastside, Lloyd District and Lower Albina.

Outside the Central City, Portland’s rules on drive-thrus vary but are generally restrictive.

“There are very limited opportunities, and it’s complex because of plan districts and overlays,” Eden Dabbs, spokeswoman for the Bureau of Planning and Sustainability , stated in an email.

New drive-thrus are allowed in Commercial Employment zones, which include high-traffic corridors such as Southeast Powell Boulevard and 82nd Avenue, and Southwest Barbur Boulevard. Other zones, such as General Employment and General Industrial zones, also allow drive-thrus.

Existing drive-thru properties “have some flexibility to rebuild,” Dabbs said.

Many drive-thru properties on the market are former banks, as large financial institutions pull back on in-person banking. At the same time, fast-food restaurant groups are “in expansion mode,” said Dale Bernards, owner and principal broker of Canterbury Commercial in Portland.

In March, a former Wells Fargo bank property with a drive-thru at 5615 S. Macadam Ave. sold for $2.6 million, or $564 per square foot, higher than the $2.5 million asking price.

In comparison, another former Wells Fargo bank, a downtown location that does not have a drive-thru, sold for $2.025 million, or just $280 per square foot.

The Macadam property was snapped up by local real estate investor Stuart Lindquist. An early assistance request shows Lindquist plans to turn the building into a McDonald’s restaurant , with reconfigured driveway and parking areas. He did not respond to a message seeking comment through his attorney.

Drive-thrus are hot properties, said Bernards, who is serving as leasing agent for the Macadam property.

“They’re definitely much more valuable,” he said. “If you have a drive-thru that’s available, that definitely creates more value to the real estate.”

Sites measuring 1 acre or larger are in higher demand, as they can accommodate more drive-thru users, Bernards said.

Bushong, of Fulcrum Pacific, represents a vacant former Bank of America drive-thru property on Northeast Sandy Boulevard. The asking price is $3.395 million for the 7,540-square-foot building ($450 per square foot) and nearly 1-acre lot.

An online listing makes the pitch: “The standout feature of this property is the elusive drive-thru lane, a valuable amenity that’s notoriously hard to secure in Portland due to stringent regulations.”

Drive-thru retail locations can earn significantly more revenue and demand higher rents than those without drive-thrus, Bushong said. Dutch Bros properties can fetch $1,000 per square foot at sale, he said.

Some fast-service properties without drive-thrus are closing. Starbucks, for example, has in recent months closed several Portland-area locations that lacked drive-thrus.

Others are adapting: Chipotle , the fast-casual Mexican chain, has raised eyebrows with its “Chipotlane” strategy, which skirts drive-thru restrictions with mobile ordering and a pickup lane.

Bernards said he’s happy to see national companies again showing interest in Portland after years of negative publicity dented the city’s image.

“It’s a good thing we’re getting companies that are wanting to come back into Portland right now,” he said. “We’re busy, but a little bit of it is just being optimistic that Portland is going to come back.”

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