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Ma~t~cEr ANa~rs~s (continued) <br />While office market conditions are currently soft, there are two scenarios that would support <br />office development. First, if a developer were able to secure an anchor tenant prior to <br />construction, the likelihood of the market absorbing the remaining space is high. For <br />example, 28,000 square feet of office constructed on the subject's site could be 50-75% pre- <br />leased by an anchor tenant. This leaves 7,000 to 14,000 square feet to be absorbed by the <br />market. Given adequate parking, location, and new condition, this small amount of space <br />could be absorbed in a reasonable time frame. <br />Second, the Salem CBD is the governmental center of the State as well as the site of the <br />County seat and City center. As a result, there is a very large office market for govemment <br />use. This creates an added attractiveness to office development, particularly when <br />considering that Marion County or the Transit Department could absorb the space into their <br />existing inventory as needed. <br />Therefore, although market conditions appear soff for speculative office development, the <br />subject's owners could benefit from securing an anchor office tenant and/or utilizing all or <br />some of the space for their own office inventory. <br />SUMMARY <br />The viability of the central business district is strongly influenced by the proximity of the <br />governmental offices (State, County, and City) and the continued strength of the Salem <br />Center mall as a destination shopping area. Salem and the CBD should continue the <br />gradual expansion seen in the past several years, although current indications appear to <br />indicate slower growth. <br />Considering supply and demand conditions alone, it appears that: <br />1. Multi-family development has the highest probability of success. However one <br />must note that residential development in the Salem CBD is minimal, despite <br />attempts in recent years by several local developers. Thus, an additional element <br />of risk is associated with this type of development. ' <br />2. The retail segment is in a good state of balance but is currently experiencing no <br />growth translating to stagnant market conditions. Overall, new development has <br />a modest probability of success. <br />3. The office segment is soft and new speculative development has the least <br />likelihood of success in the near term, unless an anchor tenant can be secured. <br />P99239 PALMER, GROTH Sc PIETKA, INC. 20 <br />