Market Insights for Commercial Real Estate in Salem, OR

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

Stay up-to-date on Salem, Oregon 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.

Salem Multifamily Commercial Real Estate

The strength of Salem’s apartment sector prior to the pandemic is helping the metro weather this period of uncertainty amidst lingering effects of the pandemic. For the past decade, Salem has exhibited a tight and growing apartment market. The local vacancy rate of 2.3% as of the third quarter of 2021 is well below the 4.9% national figure. Continued demand for apartments has fueled rent growth, now performing near the top of all Oregon metros, and cumulative rent gains outpace Portland’s performance by approximately 10%. With developers seeking to capitalize on Salem’s strong fundamentals, the metro has seen significant new supply in the past decade. New communities have exhibited rapid lease-up. However, institutional investment seldom targets Salem, and even the largest transactions often involve local individual investors.

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Salem Retail Commercial Real Estate

The coronavirus pandemic altered the demand outlook for Salem retail in 2020. Lockdowns forced many nonessential retailers to close and as a result, vacancies rose and rents compressed. Now, with vaccine distribution in full swing, restrictions are beginning to ease and retail properties such as restaurants are permitted to serve in-person meals in limited capacity again. In the coming months, as more people receive the vaccine, life should begin to gradually return to normal.

While few large leases are signed in Salem, vacancy is tight, hovering around 3% for the past three years. Rent growth has not been especially strong at any point in the past decade, and rates have seen a cumulative increase of about 13.5% since bottoming out in 2013. Developers largely focus on build-to-suits, and inventory has increased by just 1.7% in the past decade. Though assets are occasionally swept up into large bulk portfolio deals, Salem investment is largely regional and smaller scale.

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Salem Office Commercial Real Estate

Office absorption in Salem turned sharply negative during the pandemic-induced second and third quarter of 2020. However, 21Q2 absorption figures are on pace to exceed 100,000 SF for the first time since 2016. The bulk of this leasing activity came in the form of a 51,096 SF lease at the 3 Star Broadway Office building in north Salem along the Parkway. The tenant is still undisclosed.

As schools, businesses, and other ventures transition back to some form of normal amid rapid distribution of vaccines to combat the coronavirus, the office sector looks poised to capitalize. Salem should benefit from the lack of competition from new supply and could recover quicker than larger markets where institutional presences have been developing large speculative spaces.

As Oregon’s state capital, virtually all of Salem’s largest office tenants are government entities. Construction levels have consistently been below the metro’s historical average throughout the post-recession era. Investors are generally local and often owner/users. While sales volume was exceptionally high in 2019, Salem office assets typically see lower annual investment than metro retail, multifamily, or industrial assets.

Read the entire report HERE!

Salem Industrial Commercial Real Estate

Salem’s industrial sector will face some lingering uncertainty due to the coronavirus pandemic. Still, the sector is better positioned to navigate COVID-19 than many other commercial sectors.

Prior to the pandemic, the strong fundamentals of Salem’s industrial sector had long been evident. Benefiting from strong demand, vacancies have significantly tightened in the past five years from their high of 12% at the end of the Great Recession. In the past decade, rents increased by about 54%. And with Amazon’s new 1-million-SF fulfillment center raising the profile of Salem’s industrial sector, speculative construction was on the rise. However, the bankruptcy of NORPAC Foods did prompt some local turmoil.

Several large trades closed in January 2020, most related to the NORPAC bankruptcy. In July 2019, the Amazon building sold for $105.5 million, likely marking Salem’s largest-ever industrial deal. By contrast, the metro’s historical average for industrial sales volume is near $30 million, and both buyers and sellers are typically local.

Read the entire report HERE!

Source: CoStar

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