MARKET DRIVERS
Market fundamentals remain challenged, though conditions showed early signs of stabilization in Q1. Vacancy held relatively flat quarter-over-quarter, suggesting the pace of deterioration may be slowing after a prolonged period of expansion. Availability increased modestly to 18.2%, as sublease offerings and unutilized tenant space continue to add to overall supply.
Despite the slowdown in deal volume, the market posted positive net absorption of 217K SF, marking a notable improvement from the negative trends observed since 2020. This suggests that while overall leasing velocity remains uneven, tenants are beginning to re-engage in the market, particularly for smaller, high-quality spaces offering near-term occupancy.
Investment activity cooled from Q4’s surge but remains elevated on a year-over-year basis, with volume up more than 70% compared to Q1 2025. Buyers continue to target discounted and repositioning opportunities, though capital markets remain selective, and transaction momentum is likely to remain uneven in the near term.
ECONOMIC OVERVIEW
As of December 2025, the most recent available unemployment rate for the Portland-Vancouver-Hillsboro MSA was 4.9%, up from 4.1% at the same time last year. This compares to 5.2% for the state of Oregon and 4.4% nationally.
Population growth continues at a more moderate pace, as in-migration is balanced by ongoing affordability constraints. While the region retains long-term appeal, near-term growth dynamics remain tempered by economic uncertainty and slower job expansion.
NEAR-TERM OUTLOOK
The office market is expected to remain tenant-favorable in the near term, though Q1 activity suggests the market may be moving toward a more balanced phase. Stabilizing vacancy and positive absorption are encouraging signals, but sustained recovery will depend on consistent leasing velocity and broader economic improvement. Asking rents are likely to remain under pressure, particularly for commodity space, while well-located, high-quality assets should continue to outperform. With minimal new construction and ongoing adaptive reuse considerations, future supply remains constrained.
1Q 2026 Portland Office Market: Key Data Points
Explore our full Portland office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Stabilizes at Elevated Levels: Direct vacancy measured 15.2% in 1Q 2026, relatively flat quarter-over-quarter but still near historical highs.
- Asking Rents Decline Year-Over-Year: Average full-service asking rents decreased to $29.76 per square foot, reflecting a 1.2% annual decline amid competitive leasing conditions.
- Positive Net Absorption Returns: The market posted nearly 217,000 SF of positive net absorption in 1Q 2026, marking a notable turnaround after consecutive years of negative absorption.
- Leasing Activity Slows: Total leasing activity reached 542,020 SF, down 28.5% year-over-year as tenants remain cautious and space decisions skew smaller and higher-quality.
- Sales Volume Increases Sharply: Office sales volume rose to 918,389 SF, representing a 70.5% year-over-year increase as investors pursued value-add and repositioning opportunities.
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