Though the multifamily market has dominated the headlines of late, according to the Portland State University quarterly report released last month, commercial real estate growth in Portland continues its steady rise.
Overall office vacancy continued its downward trend resulting in an 8.4% overall average vacancy rate in the Portland market. Class A properties experienced the most overall vacancy at 9.9% and Class C properties reported the least vacancy at 5.8%. The average asking rental rate of Class A properties during the first quarter came to $25.46 per square foot, up $.30 per square foot from the previous quarter while Class C properties reported an average asking rate of $16.84 per square foot. Out of all of the Portland metro area office sub-markets, the close-in SE outperformed all others with 124,359 square feet of positive net absorption followed by the Clackamas/Milwaukie sub-market with 27,180 square feet of positive net absorption. Tigard and the Lloyd District experienced the largest amounts of negative net absorption with 38,229 and 36,402 respectively. Two office building were delivered to market by the end of the first quarter of 2015, adding a total of 93,348 square feet. Only one 8,000 square foot building came to market the previous quarter. Currently the Portland metro office market has ten buildings under construction with a total area of 990,673 square feet.
Portland’s overall industrial vacancy rate has decreased 15% since this time last year, ending the first quarter of 2015 with an overall vacancy rate of 4.7%. The overall vacancy rate for flex properties ended the first quarter at 11.6% and the warehouse sector reported an overall vacancy rate of 4.4%. Predictably, the NW and I-5 corridor reported the lowest vacancy rates, reporting 3.1% vacancy in the NW and 3.6% vacancy in the I-5 corridor. The average asking triple net rental rate increased just over 2% during the first quarter of 2015 to $.46 per square foot per month. The flex sector ended the first quarter of this year at $.99 per square foot per month. Over the past year rental rates in the flex market have increased 6.8%. The flex market reported net negative absorption of 16,410 square feet at the end of the first quarter of 2015 whereas the warehouse market did significantly better with 1,016,516 of positive net absorption. The sub-market that experienced the greatest amount of positive absorption in the flex market was the west side with 46,354 square feet. The SW market saw the largest amount of negative absorption at 43,151 square feet. The NE was the most robust sub-market in the Portland metro area during the first quarter. The NE Columbia corridor has five significant projects due to deliver this year.
Portland’s overall retail vacancy rate ended the quarter at 4.8%, the lowest percentage since prior to the financial crisis. The overall vacancy rate for general retail was 3% (1,608,169 square feet out of over 54 million in total inventory). Power centers reported a vacancy rate of 4.3% followed by the mall market at 4.4%. The retail sub-markets with the lowest vacancy rates were close-in NE and Airport Way, both with 1.8%, followed by Tualatin at 1.9%. Higher vacancy rates were found in St. Johns/Central Vancouver at 8.6%, Central Business District/West Vancouver at 8.2% and Orchards at 9%. At the end of the first quarter of 2015, the overall asking retail rental rate was $16.82 per square foot per year, a 6.25% increase over this time last year. Power centers showed the highest overall asking rental rate at $20.03 per square foot per year, followed by the mall market with $19.36 per square foot per year and the shopping center market with $17.37 per square foot per year. Shopping centers experienced the greatest amount of net absorption with 134,922 square feet followed by power centers with over 48,470 square feet. Malls saw over 1,000 square feet of negative absorption at the end of the first quarter of this year. The Portland Central Business District experienced the largest amount of net negative absorption at 44,681 square feet. The Camas/Washougal sub-market saw the greatest amount of net positive absorption at 44,597 square feet. At the end of the first quarter of 2015, nine buildings were delivered to the market for a total of 122,734 square feet. Power centers saw the most leasable area delivered at 42,000 square feet followed by general retail which saw 30,279 square feet delivered.