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Portland Office Market Report

2nd Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

VACANCIES continued to increase, ending the quarter with a direct vacancy rate of 11.9% compared to 11.7% last quarter and 10.6% last year. Downtown Portland posted a direct vacancy rate of 19.9% while the combined suburban market was at 8.1%.

THE AVERAGE ASKING LEASE RATE increased to $28.42/SF full service, a 1.5% increase compared to the same time last year. As a result of the increasing vacancy, landlords are beginning to offer attractive concessions packages to attract potential tenants.

LEASING ACTIVITY averaged 1,066,282 SF per quarter during the first half of 2022, closely mirroring the rate in 2021 which averaged 1,038,400 SF per quarter. Downtown Portland experienced 31% of the year-to-date total (669,700 SF), while Class B properties led the way across the region, accounting for 53% of the total (1,122,827 SF), followed by Class A at 38% (812,626 SF).

OFFICE SALES VOLUME totaled approximately $117 million 2Q 2022, bringing the year-to-date total to nearly $282 million over 160 transactions while averaging nearly $282/SF.

ACTIVE DEVELOPMENTS totaled 386,266 at the end of the quarter, more than 303,000 SF of which is in the CBD with Block 216 at 900 SW Washington St (168,188 SF) and the Offices at 11W at 1106 SW Washington St (134,185 SF).

ECONOMIC OVERVIEW

THE UNEMPLOYMENT RATE continued to fall, dropping to 3.1% in May 2022 compared to 5.3% last year, but much lower than 13.5% at the height of the pandemic.

WHILE THE STATE added jobs at a faster clip than most other states in the past year, the total employment curve has been flattening year-over-year job growth stands at 6.1%.

HOWEVER added jobs at a faster clip than most other states in the past year, the total employment curve has been flattening year-over-year job growth stands at 6.1%.

NEAR-TERM OUTLOOK

ALTHOUGH THE PORTLAND office has shown recent signs of life, challenges and headwinds persist with economic uncertainty, increasing inflation, rising interest rates and an inconsistent labor market.

OFFICE TENANTS are expected to continue giving back space in the near term as they continue to navigate the delicate balance of on-site, remote and hybrid employees and the overall impact of space requirements.

SUBURBAN MARKETS will continue to outperform Downtown, as these submarkets and buildings remain attractive for many tenants due to employee proximity and various amenities.

 
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