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September 22, 2021
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Return to the Office is Key to the Industry’s Future in Portland

7/27/21


Portland’s office market is beginning to show signs of life, giving office professionals some cautious optimism. As the second quarter came to a close, the determining factor for office recovery and expansion lies in bodies returning to the office and companies resuming in-person work activities. With tenants assessing their reopening strategies, dates and protocols vary by tenant, with the larger consensus aiming for more concrete reentrance plans in fall 2021. While many national tenants have announced return to in-person work or a hybrid strategy, it will be difficult to determine the effects on flexible workplace solutions until the end of the year.

Office activity in Portland has picked up in flurries, with the majority of tenants in the market focused on suburban options near I-5 or fringe downtown markets. Sublease space has continued to increase with the largest availabilities found within the downtown submarkets. Tenants are actively looking for space, but the largest pressure point for office leasing lies in a lack of new inbound business. Due to the pandemic, tenant expansion all but halted new interest in Portland, but with many companies solidifying their long-term office and return-to-work strategies, there is hope for new opportunities on the horizon.

VACANCY & ABSORPTION

• Portland office vacancy increased by 110 basis points (bps) in Q2 2021, to 17.0%. Total office availability increased from 20.2% to 20.9%, quarter-over-quarter (QoQ).
• The suburban market recorded a 10-bps vacancy increase to 12.1%, with 26.5k sf negative net absorption. Downtown, the vacancy rate was 21.6%, with 508.3k sf negative net absorption
• Total absorption for Q2 2021 was negative 534.8k sf, bringing the total for the five quarters since the pandemic began to negative 1.9 msf
• While Q2 2021 absorption remained below the previous quarter total, the Downtown market logged the largest negative net absorption since the pandemic began. The primary contributor to this was previously available space becoming vacant.

AVERAGE ASKING LEASE RATES

• Average asking lease rates decreased from $31.58 to $30.54 per sf, full-service gross, QoQ
• Downtown rents were the primary contributor to this decrease, shrinking from $34.80 per sf to $33.55 per sf QoQ
• Once again, the suburban market logged an increase with a mid-year total of $26.80 per sf. Kruse Way had the largest increase with rates jumping from $34.97 per sf to $35.50 per sf
• According to CBRE’s Econometric Advisors, Portland office rents are forecasted to decrease through 2021 and remain stagnant for the next few quarters. This is followed by aggressive growth starting again in 2024

DEVELOPMENT

• The Portland office market currently has 424.7k sf of space under construction and 484.3k sf in office renovations
• With over 1 msf of additional office space proposed in the development pipeline for Portland, it remains to be seen what projects will move forward and which will be stalled as the workforce reopens and a new normal is established.


This report was prepared by:

ASHLEY CONNOR
Field Research Manager
CBRE

CAROLYN DAVIS
Research Manager
CBRE




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