MARKET DRIVERS
The Portland office market reached a new record high in direct vacancy, climbing to 15.2% in Q3, an increase of 160 basis points (bps) quarter-over-quarter (QOQ). Vacancies have continued to rise for 12 consecutive quarters, and similar to other major Western markets, downtown Portland holds the majority of the market’s vacant space, representing over half of total vacancies.
Q3 leasing activity hit a record low of 641K SF, excluding the pandemic-disrupted third quarter of 2020, and the market remains on pace for its lowest annual volume on record. Average deal sizes have also declined, with leases now averaging under 3,000 SF — about 5% below the 10-year norm — as tenants continue to prioritize space efficiency.
Despite record-high vacancy rates and historically low leasing volume, sales activity has picked up in recent quarters, as opportunistic buyers respond to steep pricing discounts and growing availability of distressed or value-add assets. Many investors may see the current environment as an opportunity to acquire properties at 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
Leasing trends continue to reflect broader economic uncertainty, influenced by factors such as workforce reductions, ongoing tariff pressures, and cuts to federal spending. Although the labor market remains relatively constrained, early signs of softening are contributing to more cautious sentiment among employers. As a result, many tenants are opting to delay long-term decisions, scale back their space requirements, or reevaluate their workplace strategies entirely. Furthermore, persistent downtown vacancies are driving momentum for office-to-housing conversions as stakeholders seek to revitalize the urban core and spur investment.
3Q 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 rose to 15.2%, up 160 bps year-over-year.
- Asking Rents Continue to Rise: Average asking lease rate increased 6.4% YOY to $30.00 PSF Full Service.
- Leasing Activity Falls Sharply: Q3 leasing volume totaled 641K SF, down 25.9% YOY.
- Net Absorption Remains Negative: Portland posted -22K SF of net absorption in Q3, continuing a multi-quarter decline.
- Sales Volume Rebounds: Office sales reached 1.7M SF in Q3, up 7.8% YOY.
- No New Deliveries: The construction pipeline remained inactive with zero new deliveries in Q3.
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