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April 24, 2024
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Uncharacteristically Slow Start for Portland’s Industrial Market not Considered a Trend


This report provided by real estate services firm Kidder Mathews

Market Highlights

• Asking lease rates have steadily increased from $0.86/sf NNN to $0.88 since 1Q 2023.
• Direct vacancy rates increased by 130 bps YOY to 3.9%.
• Total net absorption in 1Q 2024 was -763.7k SF.

Market Drivers

• Average asking lease rates saw slight increases both year-over-year (YOY) and quarter-over-quarter (QOQ); Starting at $0.86/sf NNN in 1Q 2023, increasing to $0.86/sf NNN in 4Q 2023, and ending at $0.88/sf NNN in 1Q 2024. Although face rental rates remain stable, net effective rates persist at lower levels, primarily attributed to heightened instances of rental abatement and above-standard tenant improvements.
• Direct vacancy rates grew 130 basis points (bps) YOY from 2.6% in 1Q 2023 to 3.9% in 1Q 2024. Total availability rates increased by 300 bps YOY from 4.7% to 7.7% in 1Q 2024. This increase is just below the five-year high of 4.0% measured in 1Q and 2Q of 2021.
• Leasing activity decreased 40.0% YOY from 1.9 msf in 1Q 2023 to 1.1 msf in 1Q 2024. This is the lowest recorded quarter in the past two decades. Throughout 2023, there was 9.8 msf of activity, the lowest since 2020. To reach these marks, there will need to be a large uptick in activity in the following quarters.
• Industrial sale activity dropped from 1.2 msf in 1Q 2023 to 360.3k sf, a steep departure from previous quarters. Although activity is down, owners and investors may be forced to
• 2.5 msf of industrial space was delivered in 2023, with another 3.2 msf of industrial space under construction.

Economic Review

• In February, the Manufacturing sector within the Portland-Vancouver-Hillsboro MSA fell slightly by 3.7% YOY to 122.5k jobs. The Trade, Transportation, and Utilities sector also fell YOY by 2.1% to 220.7k jobs.
• The statewide unemployment rate in Oregon was 4.2% and the Portland-Vancouver-Hillsboro MSA reported 4.7%.

Near Term Outlook

Direct vacancy and total availability ticked up quarter-over-quarter to 3.9% and 7.5% respectively.
Net absorption totaled 13.6k sf in 2023, the lowest annual total recorded this century. The Rivergate submarket accounted for negative 1.3 msf of the region’s net absorption in 2023, and continues to drag the region down, accounting for 68.2% of the negative 763.7k sf.

The information in this report was composed by the Kidder Mathews Research Group, led by Director of Research Gary Baragona.

Data source: CoStar, U.S. Bureau of Labor Statistics

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