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Portland Office Market Report

4th Quarter 2024

Posted In — Market Research | Market Report
MARKET DRIVERS

DIRECT VACANCY RATES have risen steadily over the past eight quarters, reaching a new historical record high of 13.5%.

AFTER FIVE CONSECUTIVE QUARTERS of posting negative net absorption, 4Q 2024 posted a positive net absorption of 282K SF. However, the net absorption for 2024 on an annual basis posted negative 964K SF which is the fifth year in a row in which absorption has been negative for the Portland office market.

LEASING ACTIVITY fell almost 50% for 4Q 2024 year-over-year, posting at a record low of 524K SF. Sales activity was down in 4Q when comparing YOY, ending at 503K SF in volume. However, sales volume did increase almost 40% on an annual basis, with 3.4M SF sold for the year.

ECONOMIC OVERVIEW

AS OF OCTOBER 2024, the unemployment rate for the Portland-Vancouver-Hillsboro MSA was 4.0%, up from 3.6% at the same time last year. This is compared to 4.1% for the state of Oregon and 4.1% for the nation.

IN THE LAST DECADE, Portland’s economy was among the fastest growing in the country. Although population growth has slowed notably since then, the area still attracts
residents from pricier markets in California and Washington. While it has shown modest improvements, the economy continues to recover from challenges faced during the
early stages of the pandemic.

NEAR-TERM OUTLOOK

THE PORTLAND OFFICE MARKET is expected to continue to face challenges into the new year. Despite a record low construction pipeline that will help mitigate any more upward pressure in vacancies, many companies have announced they will be trimming footprints even if they don’t intend to move spaces. As such, vacancy and availability rates are projected to climb and rent growth will be minimal.

INVESTMENT ACTIVITY has been well below the 10-year average, reaching record low volumes in the past couple years. The tight lending market coupled with soft tenant demand has dampened investor interest and continues to face steep hurdles.

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