MARKET DRIVERS
Leasing activity slowed in Q3, contributing to higher vacancy levels marketwide. Asking rates continue to average in the low $0.80s to low $0.90s PSF NNN; however, increased concessions such as free rent and above-standard TI’s are applying downward pressure on net effective rental rates, while new construction continues to command premiums above $1.00 PSF NNN. Direct vacancy rates increased by 110 basis points (bps) YOY to a 13-year record high at 5.7%. Similarly, availability rates rose by 270 bps YOY to 10% in Q3 reaching a 15-year record high.
Inflation and economic uncertainty have led tenants to rethink expansions and reduce space needs, contributing to a sharp decline in large-block leasing. Leasing activity in the past year has averaged less than 2M SF in each quarter, whereas the pre-pandemic average was approx. 3M SF. Industrial sales volume dropped 36% QOQ, posting just over 1M SF in Q3. Elevated interest rates continue to limit access to capital, keeping acquisition activity relatively muted. 598K SF of new industrial space delivered in Q3, with another 3.5M SF of projects currently underway. Portland’s construction activity has decreased YOY by almost 50%, reflecting a cooling in development in recent quarters.
ECONOMIC REVIEW
In August, the Manufacturing labor sector within the Portland-Vancouver-Hillsboro MSA decreased by 4.7% YOY to 117.7K jobs, losing 6,200 jobs in the past year. Major employer Intel Corp. cut approx. 2,329 of its factory workers across Hillsboro. As of August 2025, the unemployment rate for the Portland-Vancouver-Hillsboro MSA was 5.3%, up from 4.3% at the same time last year. This is compared to 5.0% for the state of Oregon and 4.3% for the nation.
NEAR-TERM OUTLOOK
Despite tariff uncertainties and broader economic headwinds, Portland’s industrial market remains relatively stable, supported by modest year-to-date absorption and a disciplined development pipeline. However, rising vacancy rates and slower leasing activity suggest that tenants and investors are approaching the market with increased caution. Limited new construction should help prevent oversupply, but demand has softened versus prior years. With ongoing economic pressures, the market is expected to stay steady yet subdued in the near term, with a cautious growth outlook.
3Q 2025 Portland Industrial Market: Key Data Points
Explore our full Portland industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Climbs to 13-Year High: Direct vacancy rose to 5.7%, up 110 bps year-over-year.
- Asking Rents Hit Record High: Average asking lease rate increased 7.1% YOY to $0.90 PSF NNN.
- Leasing Activity Declines: Total lease transactions dropped 23% YOY to 6.1M SF YTD.
- Net Absorption Turns Positive: Portland posted 153K SF of net absorption in Q3, reversing prior negative trends.
- Construction Pipeline Contracts: New deliveries totaled 598K SF in Q3, with 3.5M SF underway—down nearly 50% YOY.
- Sales Volume Rebounds Slightly: Industrial sale transactions rose 12.5% YOY to nearly 4M SF YTD.
Click here to subscribe to Kidder Mathews market research.