Market Reports

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Portland’s Industrial Market Maintains the Balance

by Jeff Shaw August 25, 2023

— By Kenny Houser and Mike Hale, Principals, Capacity Commercial — The industrial real estate sector has experienced a noticeable deceleration with a decline in leasing and sales activities. This trend is particularly evident in Portland where commercial property sales transactions have been steadily decreasing. There was a quarter-over-quarter decline of almost 29 percent in the second quarter of 2023, resulting in a sales volume of $3.4 billion, the lowest recorded since late 2014. The Federal Reserve’s decision to pause its rate hike campaign in response to inflation concerns has impacted the market. With borrowing costs fluctuating, the disparity between buyer and seller expectations has created challenges in determining agreeable property valuations. Simultaneously, leasing activity has also slowed, indicating a return to normalcy in Portland’s industrial market. Total deal volume in the first quarter of this year reached about 1.7 million square feet, a 35 percent decrease compared to the average of 2.6 million square feet per quarter over the previous two years. Despite the slowdown in leasing, the limited amount of industrial space under construction in Portland is expected to maintain a balance between supply and demand. The current construction activity accounts for 1.1 percent of the total inventory, …

August 25, 2023

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Portland Office Market Looks to Reclaim its Vibrancy

by Jeff Shaw August 18, 2023

— By Samuel Hatcher, Field Research Manager, CBRE — Portland’s historically vibrant office market finds itself at a crossroads, striving to regain its footing in the wake of economic headwinds. The city’s unique blend of natural beauty, progressive culture and thriving tech scene has been a magnet for young professionals seeking an exceptional quality of life. However, recent shifting market dynamics have cast a shadow of uncertainty, compelling stakeholders to navigate a path to recovery with adaptability and resilience. Portland’s overall office market vacancy is currently 22 percent across the metro area. Downtown vacancy — which includes the Central Eastside, Northwest Close-in and Lloyd District — is at about 28 percent. Of that vacant space, 3.3 million square feet is Class A. Moreover, sublease availability across the overall office market is up 67 percent year over year and investment remains paused. Capital is waiting on the sidelines due to elevated interest rates and generally tighter financial conditions. Despite these stats, the market is showing some bright spots. The rate at which newly available sublease space is being put on the market has slowed compared to when this narrative was dominating headlines. There’s even a chance of a slight quarter-over-quarter decrease …

August 18, 2023

Industrial Market Reports Oregon Western Western Market Reports

Portland Industrial Poised for Growth, Despite Rising Subleases

by Jeff Shaw August 11, 2023

— By Keegan Clay, Executive Director, Cushman & Wakefield — The Portland metro industrial market is well poised for investment and rent growth into 2024, despite an increase in sublease space coming to market. Portland has experienced many great trends, particularly in the past few years, including year-over-year double-digit rent growth, compressed cap rates, positive net absorption (occupancy growth), strong tenant demand, all-time low vacancy at 2.5 percent and land prices tripling in a short timespan. Such movement has led to increased competition and investment in the Portland region. We have seen an increase in sublease space hitting the market over the past five months to the tune of more than 2 million square feet. The majority of this relinquished space has stemmed from just a few users. Many of these subleases are a result of acquisitions with companies looking to increase efficiencies by eliminating redundancies. Some industrial users have consolidated out of market, including a major home goods business (648,000 square feet), while others have grown their real estate position in Portland. This includes a leading B2B electrical and industrial distribution company (293,000 square feet). Year to date, we have yet to see any of the larger …

August 11, 2023

Market Reports Multifamily Oregon Western Western Market Reports

Portland’s Housing Rollercoaster: The Impact of Protests, Pandemic and Population Loss

by Jeff Shaw August 4, 2023

— By Daniel Natsch, Senior Managing Director and Partner, Ethos Commercial Advisors — Portland made it onto the national scene even before the last economic cycle. It’s a charming and relatively inexpensive West Coast market that boasts a great culinary scene, never-ending outdoor activities and its own sense of weirdness. It’s no wonder that Portland’s ticket to the “big time” came by way of population growth throughout the 2010s, spurred by young, highly educated professionals. Alongside that growth came the need for more housing. Institutional capital took note and began targeting Portland for investment. The development boom of the 2010s eventually began to slow. Portland’s multifamily industry took another blow when Inclusionary Zoning legislation was passed. To beat affordable requirements, developers grandfathered as many projects as possible, creating a huge wave of entitled properties. Many of these projects would see their way through permitting, and the pre-inclusionary housing moniker became more valuable to investors. At the time, it appeared that significant in-migration would offset the significant deliveries stacking up in the pipeline. Then came 2020. Downtown Portland became a ghost town as employees stayed home amid the pandemic. It was quiet until large crowds took to the streets to speak …

August 4, 2023

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Portland’s Multifamily Market Positioned to Weather the Storm

by Jeff Shaw August 19, 2022

By Jordan Carter, Executive Vice President, Kidder Mathews Much like the city itself, Portland multifamily owners are no stranger to adversity — whether that refers to the weather, news media or the instability of today’s economy. There’s no doubt the rising interest rate environment will have an impact on the lending market for both refinances and sales in the short-term, but the good news is market fundamentals in the Portland metro remain solid. At 4.53 percent, our vacancy rate sits well below the national average of 4.98 percent, per CoStar. The average apartment rent is now $1,600 per month, thanks to year-over-year rent growth of 8.5 percent, which CoStar projects to remain near 5 percent for the next couple years. New construction, which peaked at nearly 13,000 units in 2018, has slowed dramatically due to legislative and policy changes that have disincentivized developers. These challenges have been magnified by elevated material costs and an arduous permitting process. Year-over-year deliveries of 4,000 units illustrate the dramatic slowdown, as they’re well below the supply needed to meet a demand of more than 10,000 new units annually. The hot single-family home market also continues to push prospective home buyers out of the market. …

August 19, 2022

Market Reports Office Oregon Western Western Market Reports

Portland’s Office Market Continues its Evolution

by Jeff Shaw August 5, 2022

By Mike Holzgang and Brad Christiansen, Executive Vice Presidents, Colliers Portland is seeing a number of employers reassess their post-pandemic workplace. Generally, this translates to companies downsizing to account for hybrid work models, with smaller/shared workstations and more conferencing space. New development has slowed in anticipation of an increased interest rate environment, historically high construction costs and supply chain constraints. Construction timelines are protracted due to all of those issues by as much as 50 percent to 100 percent. Most of the new construction coming online in Portland was initiated before the pandemic. Notable downtown projects include two mixed-use developments named 11W and Block 216. Both of these projects will add significant office space to the city’s popular West End district. The first, 11W, should deliver this year, while Block 216 will deliver in 2023. Construction in the suburban submarkets has also been slow, but we wouldn’t be surprised if it starts to pick up within the next 18 months or so. Interest and Effect Depending on where you are looking, the market is favorable for both landlords and tenants. It is a landlord’s market in the suburban areas, particularly in those south and southwest of Portland. The Central City …

August 5, 2022

Life Sciences Market Reports Office Oregon Western Western Market Reports

Portland Office Demand Returns as the City Reopens

by Jeff Shaw August 18, 2021

By Tim Harrison, Research Manager, JLL After one the strictest and longest shelter-in-place orders in the nation, Oregon is officially back open for business and all signs point to a strong recovery in Portland. People are travelling again, with airline passengers through Portland International Airport totaling more than 1 million in May. This represents about 63 percent of the normal 2019 monthly average, according to the Port of Portland’s aviation stats. Perhaps most importantly, people are returning to the downtown core for both business and pleasure with weekly visits through Pioneer Mall — the center of downtown — up to about 70 percent of 2019’s average weekly visits, per Placer.ai. This optimism is transferring to the office market, where Portland leasing activity is up more than 33 percent year over year. The recovery is being led by industries old and new. Out in the suburbs, Portland’s largest apparel companies are expanding on campus, while new leases were signed by Lululemon and On-Running in newer creative spaces on the urban fringe. Portland’s life sciences sector is approaching a critical mass as Bay Area company Twist Biosciences entered the market by absorbing 215,000 square feet. Meanwhile, Vancouver, Wash.-based AbSci raised more than …

August 18, 2021

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COVID Impacts Central Oregon’s Commercial Real Estate Market

by Jeff Shaw August 3, 2021

By Pat Kesgard, Compass Commercial Real Estate Services When COVID-19 hit Central Oregon in April 2020, commercial real estate transactions effectively came to a halt. Transactions were either delayed or canceled and virtually no new deals started. We were back to almost normal by the beginning of the third quarter of 2020. Miraculously, the fourth quarter was above the previous year’s activity. Hospitality The hospitality industry suffered tremendously through the pandemic. The labor shortage extended the challenge of operating at full capacity, and this is still impacting businesses today. Fortunately, landlord and government subsidies helped many in the industry survive. Retail Transactions in 2021 Compass completed more than 31 retail leases that totaled more than 85,000 square feet since January 1, 2021. The current retail vacancy rate is 5.86 percent with 264,077 square feet available for lease. We noted some softening in rents in 2020, and are now starting to see asking rates returning to normal. The redevelopment of older properties continues, along with new localized projects in areas outside of downtown Bend. We expect to see this trend continue for the unforeseeable future. Large retail spaces opened up when the former Sears and Shopko closed in 2020. Both buildings were eventually …

August 3, 2021

Industrial Market Reports Oregon Western Western Market Reports

Portland Industrial’s Market Experiences Steady Growth

by Taylor Williams October 18, 2019

The Portland industrial market continues to be strong despite softening from a few leading indicators. The overall market vacancy rate is 4.3 percent, which is up from 3.4 percent in the third quarter of 2018, while absorption during this period was 832,000 square feet. Historical absorption during the current cycle has averaged 3.8 million square feet. Almost 5 million square feet came on line in 2018, 2 million of which was speculative space that was 85 percent available in July 2019. This impressive amount of growth expanded the existing overall market size by 2.2 percent. Top tenants have been Amazon’s fulfillment centers, which occupy 918,000 square feet in the Rivergate Industrial Park in North Portland and 857,000 square feet in Troutdale. Both facilities were developed by Trammell Crow. Amazon also signed a lease in Hillsboro in 2016 for 303,000 square feet of space that was developed by Majestic. A United States Postal Service processing and distribution facility moved from a confined, central city location into 818,000 square feet in the Airport Way industrial area in Northeast Portland. Other large users include third party logistics, retailers/wholesalers and local market distributors. Intel announced an additional 1.5-million-square-foot expansion of its existing 2.2 million …

October 18, 2019

Market Reports Multifamily Oregon Western Western Market Reports

Tides Change in Portland as a Rising Multifamily Market Begins to Normalize

by Taylor Williams October 12, 2019

As brokers, we are often asked our opinion on the local market. The topic seems to have garnered even more interest than normal as of late. There is a multitude of variables investors will point to as they attempt to define what is happening in the market. The new legislation coming down the pipeline has probably caused the biggest challenges to the local multifamily market. Nationally, there are a lot of people worried about a recession because of the inverted yield curve. However, a recession hasn’t occurred every time the curve has inverted. There is no crystal ball to look at and make our investment decisions, but I think the outlook for Portland is still rosy. What appears to be happening is we are going from a rising market to a more normalizing market. In a rising market, prices increase, buyer demand increases, velocity increases, yield spread narrows and inventory moves fast as investors speculate on the market. In a normalizing market, prices become more realistic for in-place yield, there are fewer buyers in the market, velocity drops and the buyer/seller gap widens, which causes assets to sit or not sell. This seems to be the case here in Portland …

October 12, 2019

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