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.
Tim Harrison, Research Manager, JLL
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 $195 million over two funding rounds throughout the past year and will soon occupy 78,000 square feet at Columbia Tech Center.
Still, challenges undoubtedly remain. A record development cycle fueled deliveries of more than 5.6 million square feet of new and renovated office space to Portland’s downtown core with just under 1 million square feet delivering in 2020 alone. Combined with decreased demand, increasing sublease space and a pullback of space by the City of Portland, vacancy has risen to an all-time high of just under 20 percent. While the supply spigot is now off as the city works through the existing development pipeline, vacancy is likely to remain elevated for some time. This will likely disincentivize any new large construction projects.
Portland will remain resilient, however. After the financial crisis, Portland’s urban core led the metro out of the recession with high levels of in-migration of young and well-educated Millennials moving to the city for a better quality of life and a lower cost of living compared to its West Coast neighbors. Companies soon followed, with many Big Tech firms opening and growing new offices in Portland over the past 10 years. For the first time in a while, Portland has large blocks of high-quality space available. There are now 10 blocks of Class A space larger than 100,000 square feet available in the urban core, a prospect that simply wasn’t available to tenants just five years ago.