MARKET DRIVERS
Market fundamentals have softened further in 2025, and vacancies have risen steadily over the past 13 quarters. This pushed the market wide vacancy rate to a historical record high of 15.4% at year-end, an increase of 170 basis points (bps) quarter-over-quarter (QOQ).
Weak demand throughout 2025 resulted in a record-low annual leasing volume of 2.7M SF, with Q4 marking the lowest quarterly total on record at just 460K SF. Tenant advantages are expected to persist, as the market continues to favor small- and mid-sized offices that offer immediate occupancy and operational flexibility.
Despite weak leasing fundamentals and elevated vacancy, sales activity in Portland has reached a seven-year high, posting 5.8M SF in volume. Opportunistic buyers are taking advantage of steep pricing discounts and the growing availability of distressed or value-add properties, acquiring assets below replacement cost with potential for long-term repositioning or conversion.
ECONOMIC OVERVIEW
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.
Portland’s efforts to stimulate economic growth come as Oregon’s labor market shows signs of weakness, with nearly 25,000 jobs lost over the past year. However, select industries such as healthcare, professional services, and technology continue to show modest job gains, signaling areas of resilience within the state’s economy.
NEAR-TERM OUTLOOK
Office market conditions remain subdued amid economic uncertainty, with workforce reductions and federal spending constraints prompting many employers to delay decisions, reduce space, or rethink workplace strategies. Vacancies are projected to rise modestly in the coming quarters, while rent growth is expected to remain soft and below the national trend through the next year. With extremely limited new supply and continued demand for quality space, the market’s recovery is expected to be gradual but steady, even as potential future job losses may add moderate upward pressure on vacancies.
4Q 2025 Portland Office Market: Key Data Points
Explore our full Portland office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Hits Record High: Direct vacancy climbed to 15.4%, up 170 basis points quarter-over-quarter and 170 bps year-over-year.
- Average Asking Rents Rise Slightly: Asking lease rates averaged $29.88 PSF FSG, a 6% increase year-over-year.
- Leasing Activity Declines Sharply: Quarterly leasing totaled 461K SF, contributing to a 26% annual decline in leasing volume.
- Net Absorption Remains Negative: Q4 posted -252K SF, marking continued contraction in occupied space.
- Sales Volume Surges: Annual sales reached 4.8M SF, a 30.5% increase year-over-year, despite weak leasing fundamentals.
- No New Deliveries: Construction pipeline remained inactive with 0 SF delivered in Q4.
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