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May 18, 2024
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Portland Office Market Seeing Continued Strong Activity


The Portland MSA unemployment rate tumbled to 3.6% in the second quarter, down 120 basis points (BPS) from the 4.8% one year ago, the lowest figure in at least 30 years, according to Cushman & Wakefield's Q2 2017 Portland office market report. Office-using employment added approximately 6,000 positions year-over-year, which translates to 30% of all new jobs created over the period.

Thanks to both direct and sublet availability falling, the overall vacancy rate slid 50 BPS quarter-to-quarter to close at 11.2%. Portland's CBD led the charge with its vacancy rate dipping 100 BPS to 10.4% while the suburban markets recorded a 20 BPS decline to 11.9%.

Significant occupancy growth in the second quarter triggered the net absorption figure to climb to 262k sf following a -55.8k sf in the first quarter. Both the CBD and suburban markets closed the first half of 2017 in the black—each around the 100k sf growth mark—to combine for a total of 206.2k sf of net absorption at midyear. Although less than the 392k sf recorded at the same time last year, it indicates Portland’s office sector maintains good momentum.

Gross leasing activity in the second quarter held strong with 489.3k sf, which, combined with the even more robust 685.4k sf observed in the first quarter, brought 2017's total midyear figure to 1.1 msf of activity. This is 40.3% higher than at midyear 2016.

The biggest issue likely to affect the Portland office market in the near future is the delivery of new or renovated product to the tune of 701k sf in 2017 with approximately 25% currently pre-leased and another 774k sf to be completed in 2018 with 15% of that now pre-leased. There is the potential of an increase in vacancy along with a hit to net absorption, albeit temporarily, as C&W is still forecasting continued office job growth in the range of 2.0% to 3.0% annually through the end of the decade.

“Portland is maturing as a city and is attracting larger institutional landlords, which in turn is driving many new construction and redevelopment projects within the urban core,” noted Mark Carnese, Executive Director with Cushman & Wakefield’s local Portland office. “There will be a significant impact on the market dynamics in the next 24 months when the majority of these projects are delivered.”

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