MARKET DRIVERS
Average asking lease rates fell year-over-year (YOY) and quarter-over-quarter (QOQ); dropping $0.04 and $0.01 respectively to $0.83 to end the year.
Direct vacancy rates grew 120 basis points (bps) YOY from 3.7% to 4.9%, while total availability rates also increased by 180 bps YOY to 8.4% in 4Q 2024, both posting 10-year record highs at year-end. Net absorption posted negative 610.2K SF for 4Q 2024, and the cumulative year ended at negative 1.9M SF which is a record high for the Portland industrial market.
Leasing activity decreased approx. 67% YOY from 2.5M SF to just over 800K SF in 4Q 2024. This sharp dip in leasing volume marks an approx. 15-year record annual low.
Industrial sale activity jumped this quarter to 1.56M SF in 4Q 2024 from just under 1M SF in 4Q 2023, and sales are up 54.2% cumulatively for the year.
Deliveries have reached 2.2M SF for industrial space at year end 2024, with another 2.7M SF of industrial space under construction.
ECONOMIC REVIEW
In October, the Manufacturing sector within the Portland-Vancouver-Hillsboro MSA decreased by 1.3% YOY to 121.7 jobs, and the Trade, Transportation, and Utilities sector fell by 0.6% to 225.4k jobs.
The statewide unemployment rate in Oregon increased slightly to 4.1% QOQ, while the Portland-Vancouver-Hillsboro MSA reported 4.0%, unchanged from last quarter.
NEAR-TERM OUTLOOK
Weak tenant demand over the past year has led to record high vacancy and availability rates throughout the market. Consequently, asking lease rates have dropped steadily over the past few quarters and tenants seeking space are capitalizing on these lower rates as well as taking advantage of the increase in TI allowances and concessions. This trend of vacancies expanding and activity remaining low are expected into the new year as the market navigates a slowdown in tenant movement.
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