MARKET DRIVERS
DIRECT VACANCY RATES set a record high of 12.6% last quarter which was broken again when it reached 13.3% this quarter.
NET ABSORPTION was -506.4k SF this quarter, the fourth straight quarter it’s been negative. There have only been five positive quarters recorded since Q1 2020, making this quarter not much of an outlier and more of a continuation of trends.
DESPIRE THESE FIGURES leasing and sales activity are keeping pace with last years numbers, indicating that the vacancy and absorption trends are due to companies exiting the marketplace or downsizing at a higher rate due to continued work from home policies.
ECONOMIC OVERVIEW
AS OF APRIL 2024, the unemployment rate for the Portland-Vancouver-Hillsboro MSA was 3.6%, up from 3.0% at the same time last year. This is compared to 4.2% for the state of Oregon and 4.0% for the nation.
PORTLAND’S ECONOMY exhibits moderate growth. While healthcare and technology sectors remain robust, recent downsizing in key industries has tempered overall job creation. Housing affordability is improving, attracting new residents, but downtown vacancy rates suggest lingering challenges for some businesses.
NEAR-TERM OUTLOOK
DUE TO CONTINUED WORK FROM HOME POLICIES tenant demands are pressuring landlords to lower rates, increase concessions, and raise tenant improvements (TI’s). Despite these adjustments, increases in vacancies is anticipated to continue with interest rates and economic uncertainty adding volatility in an already chaotic environment.
ONE DEVELOPMENT TO KEEP AN EYE ON would be office to residential conversions. If these come to fruition, it will ease the oversupply of product and help bring a more balanced marketplace. This will not happen overnight however, so landlords will need to exercise patience or adjust rates in the near term while they navigate this period of adjustment.
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