Market Insights for Commercial Real Estate in Portland, OR

Download asset-specific market activity reports for Portland Commercial Real Estate!

Stay up-to-date on Portland MSA real estate market trends! Download Market Activity reports for each of the major commercial real estate asset types in one place. This information will help you and your clients strategize and guide them in the best direction to meet their real estate investment goals.

Portland Multifamily Commercial Real Estate

Portland’s multifamily sector is weathering the lingering effects of COVID-19 relatively well. Record-high job losses ate away at apartment demand in the early months of the pandemic, but leasing intensified in the first quarter of 2021 as the local economy found its footing. In contrast to many Western U.S. metros, vacancies declined slightly in Portland in 2020, and rent levels have fully recovered to eclipse pre-pandemic levels.

Portland is coming off a massive construction wave that boosted apartment inventory by about 28% over the past decade, including a 3.5% increase over the past year. The region’s affordability and high quality of life are driving robust in-migration, which underpins apartment demand. Some newly remote workers are leaving pricey coastal cities for less dense, less expensive options, and Portland seems to be reaping the benefits of that trend.

Sales volume eclipsed $2 billion in both 2018 and 2019, thanks to the strong presence of institutional and value add investors. The pandemic kept some investors on the sideline in 2020, and total volume expectedly fell to around $1.8 billion. The year ended on a busy note, though, with over $700 million in deals closed in the fourth quarter.

Read the entire report HERE!

Portland Retail Commercial Real Estate

The national retail sector had been struggling for years before the pandemic. The growth of e-commerce has severely undercut demand for brick-and-mortar retail locations, and the decade prior to the outbreak brought a steady stream of national retailers going out of business. In Portland, the healthy economy and growing population helped the local retail sector outperform the national picture, though signs of stress were still evident.

A year of intermittent lockdowns and social distancing caused many restaurants and retailers to close. The good news is that the state officially re-opened on June 30th, with all COVID-era business restrictions lifted by the governor. Portland retail demand could bounce back in response, as people venture out for more in-person activities and retail assets become more attractive. Already, total sales volume in 2021 is on pace to eclipse 2020 figures, and leasing volume rose proportionally
after restrictions were lifted.

One factor working in the region’s favor is a relatively light development pipeline. Retail construction was minimal even before the outbreak, as the growth of e-commerce made developers reluctant to break ground on new retail projects. Now, there are only a handful of smaller speculative projects underway across Portland. That will aid recovery when external conditions improve since there won’t be competition from new supply.

Average Portland retail rents are still up slightly year over year. Strip centers and neighborhood centers continued to post nominal gains during the pandemic.

Read the entire report HERE!

Portland Office Commercial Real Estate

The coronavirus pandemic interrupted a years-long run of growth for the Portland office sector. Office demand contracted as most employees shifted to a work-from-home approach. And a surge of sublease space indicates many employers are looking to downsize or exit existing lease commitments.

Negative net absorption caused office vacancies to creep upward for most of 2020 and into 2021, now sitting at roughly 11.4%. This led to the first year-over-year rent losses in the local office market since the last recession. Year-over-year, Portland office rents are down about -0.5%, while national office rent losses are about -1.5%

In a fortunate bit of timing, the speculative development pipeline is mostly empty, so there won’t be much competition from new supply. Most of Portland’s ongoing office development is build-to-suit, primarily campus expansions for Nike and Adidas.

Portland office investment slowed sharply as the pandemic upended the local economy. Annual sales volume exceeded $1 billion each year from 2015–19, but that run came to an end in 2020. Office properties here sell at lower prices than comparable assets situated in alternative West Coast metros, including San Jose, San Francisco, and nearby Seattle.

Read the entire report HERE!

Portland Industrial Commercial Real Estate

Portland’s industrial sector was displaying strength even before the pandemic, and thanks to the growth of e-commerce and delivery services, the industrial market was better positioned to navigate COVID-19 than other commercial asset types. Leading indicators like vacancy and rent growth have softened a bit but are still at healthy levels.

Portland’s current vacancy rate of 4.8% remains significantly below the metro’s long-term average, as well as the national average of 4.9%. Demand is contracting relative to the red-hot stretch at the end of the 2010s, but at the same time, the busy speculative development pipeline of recent years is beginning to thin.

There’s is still a sizable amount of industrial construction going on in Portland, but the bulk of it is owner-occupied or preleased, and thus won’t impact market dynamics significantly. Intel’s 1.5-million-SF expansion to D1X at Ronler Acres accounts for roughly half of the total industrial square footage under construction in the metro.

The industrial sector’s stability in the face of economic turmoil continued to draw investors to the region. The four-quarter stretch from 19Q2 to 20Q2 was the busiest for industrial sales in Portland’s history, though the bulk of that trading occurred before the pandemic. Still, more than $1 billion in industrial sales closed here in 2020. Average pricing, which more than doubled over the past decade, continued to rise at a steady pace, and average cap rates compressed below 6%. Favorable demographics, a structurally low vacancy rate, and exposure to trade by way of a moderately sized port continue to underpin the health of the local industrial market.

Read the entire report HERE!

Source: CoStar

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