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Portland Office Market Report

4th Quarter 2021

Posted In — Market Research | Market Report

MARKET DRIVERS

OFFICE DIRECT VACANCIES continue to climb past all-time highs across the Portland metro, increasing by over 20.4% YOY to 11.2% to conclude the fourth quarter.

ASKING LEASE RATES remained stable, reporting $28.00/SF full service by the end of the fourth quarter as landlords offer concessions in order to maintain rental rates.

COMING OFF STRONG leasing activity from the quarter prior, leasing activity experienced a decrease in 4Q 2021 with 646,511 SF. Total Class A lease activity reached 212,622 SF with sublease activity reporting 41,994 SF for all class types.

OFFICE SALES IN 4Q 2021 fell to 74 transactions, averaging $241.83/SF with cap rates settling at 6.0%.

MAJOR PROJECTS underway in Portland include 503 on Tenth (269,908 SF) and Block 216 (169,188). In total, 812,755 SF remain under construction.

ECONOMIC OVERVIEW

AS LOCAL BUSINESSES REOPEN and the state continues to rebound from the effects of the pandemic, the new Omicron variant may hinder a more robust recovery. Yet, there is strong optimism that current demographics and consumer spending will drive the Portland economy forward within the next 12-24 months.

UNEMPLOYMENT RATES reached a high 13.1% in April 2020 due to the COVID-19 pandemic. Since then, unemployment has gradually fallen, standing at 4.1% in November 2021. Total non-farm employment increased across the metro by 5.62% YOY to 1,212,000.

NEAR-TERM OUTLOOK

MOVEMENT ACROSS THE METRO should gradually improve in 2022 as tenants who have been in temporary spaces or worked from home 100% of the time will need to make decisions on office requirements.

PORTLAND’S SUBURBAN MARKETS that offer buildings with amenity packages and a vibrant mixed-use offering should continue to drive demand in the following quarters.

WITH MINIMAL CONSTRUCTION in the pipeline for 2022, we can expect downward pressure on availabilities as tenants absorb existing inventory.

 
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