Developers are pumping the brakes on massive mixed-use buildings slated for the center of Bend, holding back badly-needed housing supply and flattening growth in an area envisioned for redevelopment.

Millions in tax exemptions haven’t been enough for builders to break ground.

“Interest rates and construction costs are putting all the major projects we thought would be starting construction on hold,” said Allison Platt, the city of Bend’s project manager for the Core Area Urban Renewal District. “There’s too many unknowns in the market right now.”

With 1,600 housing units, mixed-use buildings up to 75 feet tall and pedestrian and bicycle-friendly streets, the Timber Yards development will be the city’s densest to date, but it’s delayed. It promises to urbanize a swath of vacant former industrial land east of the Box Factory and Old Mill District in the shadow of the Bend Parkway.

Development of the 20-acre former KorPine particle board mill site will occur in six to seven phases costing anywhere from $60 million to $150 million apiece — each similar in scale to the Jackstraw mixed-use development under construction nearby, Platt said.

In addition, there’s an option to develop another 9 acres farther southeast toward the highway, currently operated by construction materials company Hooker Creek.

“I don’t think a lot of our developers get an opportunity to develop something of that size and scale in the middle of the city,” Platt said.

Timber Yards developer Kennedy Wilson, a Beverly Hills-based global real estate company, is still committed to building out the old industrial site, just not immediately, according to Keith Herren, managing director of multifamily development with the company.

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“We will begin working on ramping up infrastructure work on-site when we have a plan in place that aligns with market conditions, and delivers on our commitment to build an extraordinary development, the community can be proud of,” he said in an email.

The first 250-unit phase will cost $117 million to build, according to a financial report from earlier this year. It’s slightly smaller and less expensive than the Jackstraw apartments.

Rent for a one-bedroom apartment will cost $2,139.

Herren cited “costs, rents and interest rates” as the market conditions holding back development. The company did not grant a request for an interview.

Tax breaks not enough

Developers got encouraging news Sept. 18 when the Federal Reserve lowered interest rates for the first time in four years. But it will take time for those effects to trickle down, and costs of labor and materials are still high, said Katy Brooks, CEO of the Bend Chamber of Commerce.

Those macroeconomic factors are outside the city’s control.

And what aid the city can provide hasn’t been enough.

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Timber Yards is on hold despite an $8.4 million tax exemption the city granted earlier this year. That brought the project to the cusp of its minimum return on investment, 6%, according to the financial report.

Three of the four projects approved through the Multiple Unit Property Tax Exemption Program are still on hold. The city decided to scrap the program earlier this year after awarding a $10.4 million exemption for the Jackstraw development, which had already broken ground.

Last week, the city approved a replacement program offering similarly valued tax rebates, this time with a sharper focus on affordable housing and job growth.

Growth slows in urban renewal area

Last year a $4.4 million exemption went to a project across the parkway on Franklin Avenue, where two five-story apartment buildings, including 200 units, retail space and a transformed street, are slated for the site of the old Les Schwab Tire Centers shop.

Called “The Platform,” it could set the tenor for the future character of the Bend Central District, which is envisioned as a vibrant mixed-use neighborhood, said Chris Jones, chief executive with Portland-based developer Project%5E, formerly Project PDX.

“It’s an exciting opportunity,” Jones said.

But plans have been on hold for 18 months. In addition to national economic factors, Jones said he’s waiting to align construction with work on the adjacent Franklin Avenue underpass, where the city is planning to improve safety, which could include bike lanes, lighting, landscaping and signs.

Franklin Avenue is one of three midtown thoroughfares where the city is fusing the central district to downtown by enhancing bicycle and pedestrian crossings of the Bend Parkway and Burlington Northern Santa Fe Railway, major barriers between east and west Bend.

The package is fueled by tax increment financing dollars from the Core Area Urban Renewal District, established in 2020. The district — which stretches from just west of the parkway west to Fourth Street, and from Wilson Avenue to north of Revere Avenue — captures property tax revenue on new developments and funnels it to redevelopment in the core area.

Across the district, collections are capped at about $190 million over the district’s 30-year lifespan. A $10.5 million spending plan is in place, with about $3 million apiece set for the Hawthorne Avenue pedestrian bridge, Franklin Avenue improvements and Second Street construction.

But stunted development has limited spending beyond those initial projects, said Platt, the core area manager. After healthy growth to the core area tax base after 2020, the rate flattened to nearly nothing in 2023 and 2024.

The longer developments sit paused, the less redevelopment money the district will be able to collect by the time it sunsets in 2050, Platt said.

Timber Yards alone is expected to generate $75 million in urban renewal financing.

Key public projects taking shape

The first urban renewal spending in the core area is taking shape. Second Street work is underway. Franklin Avenue is scheduled to begin next summer, while the $30-$40 million Hawthorne Bridge is fully funded and on track to be completed by the end of 2027.

After a slow start, those are positive indicators for developers, said Brooks, of the Chamber of Commerce.

“That is the premise of how urban renewal areas work,” Brooks said. “The core area, specifically, really can’t work until the city starts.”

Another good sign for developers came on Sept. 18, when the city bought the final properties needed to construct a new City Hall, housing and public plaza on the north side of Franklin Avenue. The seller, Taylor Brooks, a partnership between Brooks Resources and Taylor Development, is sitting on two other properties nearby where they envision mixed-use buildings.

After buying an old car dealership property on the corner of Franklin and Second in 2018, Brooks Resources put plans on ice for 150 housing units above a floor of retail after spring 2022 cost estimates came in 25% higher than before, said Kirk Schueler, president of Brooks Resources.

Schueler said the company also forecasted a pipeline of units would flood the rental market and make those less competitive in the central district, where builders are “pioneering.”

But private money will likely follow public investment, Schueler said.

“We’re on the cusp of seeing all these things happen,” he said. “That’s going to be encouraging for the whole district.”