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Portland Office Market Report

1st Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

OFFICE DIRECT VACANCIES continued to trend upwards across the Portland metro, increasing by over 15.8% YOY to 11.7% to conclude the first quarter.

ASKING LEASE RATES decreased in 1Q 2022, reporting $27.92/SF full service as landlords begin to offer attractive rates and concessions in order to draw in new tenants.

LEASING ACTIVITY picked up from the year prior with over 940K SF leased, up 19.4% YOY. Total Class A lease activity reached 343,339 SF with sublease activity reporting 115,544 SF for all class types.

OFFICE SALES IN 1Q 2022 fell to 72 transactions, averaging $309.04/SF with cap rates settling at 6.0%.

MAJOR PROJECTS underway in Portland include 503 on Tenth (269,908 SF) and The Trailhead (200,200 SF). In total, 974,988 SF remain under construction.

ECONOMIC OVERVIEW

UNEMPLOYMENT RATES reached its peak in April 2020 at 13.1% due to the COVID-19 pandemic. Since then, unemployment has decreased steadily, standing at 3.9% in January 2022. Total non-farm employment increased across the metro by 6.56% YOY to 1,207,100.

THERE IS STRONG OPTIMISM that current demographics and consumer spending will drive the Portland economy forward with then next 12-24 months.

NEAR-TERM OUTLOOK

WE CAN EXPECT MOVEMENT ACROSS THE METRO to gradually improve in 2022 as companies hire at rapid pace and tenants begin to finalize back to office procedures.

PORTLAND’S SUBURBAN MARKETS will likely outperform the Downtown market as these buildings remain attractive for many tenants due to the amenity packages and a vibrant mixed-use offering.

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

 
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