Q4 2022 Multifamily Real Estate Report: Portland, OR
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Hosting the headquarters of major companies like Nike and Precision Castparts, Portland is the largest city in Oregon and the 25th largest in the US.
Portland’s population is currently growing at a rate of 1.03% and has a population of over 673,000 people.
Unemployment also increased quarter-over-quarter going from 3.8% to 4.2%, which was above the national rate of 3.4%
Elevated interest rates and higher living costs instigated a cooling effect that brought another quarter of decreased occupancy.
However, some positive indicators, such as increased investment, also occurred in Portland’s multifamily market.
General Area Overview & Demographics
The city is approximately 64% White, 7% Black or African American, 11% Asian, and 12% Hispanic or Latino of any race. Portland is home to various cultures and communities, including Native Americans, Pacific Islanders, and immigrants worldwide.
Economic demographics are also just as varied. The city has a median household income of $60,827, higher than the national average. Additionally, the poverty rate in Portland is lower than the national average at 11%.
Portland has long been known for its higher education opportunities. It offers various educational opportunities with over 11 universities, including the University of Portland, Oregon Health and Science University (OHSU), Portland State University, Reed College, Lewis & Clark College, and many more.
The more popular attractions in Portland are the Oregon Zoo, the International Rose Test Garden, Portland’s Japanese Garden, and Forest Park.
It’s known for its mild climate, with temperatures ranging from highs of 80°F in summer to lows of 35°F in winter. In addition to relatively pleasant temperatures year-round, Portland has distinct wet and dry seasons, with an average annual rainfall of 37.7 inches.
Summary of Portland Multifamily Real Estate Performance in Q4 2022
Multifamily real estate in Portland showed a combination of positive and negative indicators in Q4 2022.
Absorption improved quarter-over-quarter but was at -367 units absorbed. Q3 2022 was at -816 units. This is a far fall from last year, seeing positive absorption of 1,580 units during the same quarter in 2021.
Vancouver’s submarket posted positive absorption at 156 units, while East Portland was negative at -239 units.
Occupancy declined from 96% in the third quarter to 95.5% in the fourth. Year-over-year shows a steeper decline, as occupancy was 97.2% in Q4 of 2021.
Every submarket had a year-over-year occupancy decline. East Beaverton held the highest occupancy at 96.8%, while Central Portland brought in the lowest at 93.4%.
What are multifamily rents like in Portland?
Averaging asking rent increased quarter-over-quarter.
Q3 of 2022 was around $1,775 per month, but the fourth quarter grew to an asking rent of around $1,817 per month.
Rents have steadily increased for eight consecutive quarters beginning in the first quarter of 2021.
The average monthly rent was the highest in the Hillsboro submarket at $2,092 per month. The lowest was seen in East Portland at $1,644 per month.
Central Portland posted the highest rent per square foot at approximately $2.45.
Purchase & Leasing Activity
Sales volume in Q4 totaled over $824 million, a 31% rise over the five-year trailing average. Year-over-year, this is a far cry from Q4 2021, posting nearly $1.8 billion.
The average cost per unit increased 12.5% quarter-over-quarter translating to a price of $286,000.
Cap rates fell in 2022 from 5.1% to 5%.
Notable Multifamily Real Estate Deals in Portland in Q4 2022
There were several deals for multifamily real estate in Portland.
- One Jefferson sold for $124 million at $357,000 per unit.
- Timbers at Tualatin sold for $96.5 million at $321,000 per unit.
- Avery at Orenco Station sold for $96.2 million at $364,400 per unit.
- Skyline at Murrayhill sold for $90 million at $288,500 per unit.
These are a few among other transactions that took place.
New Multifamily Real Estate Development Activity in Portland in Q4 2022
Portland had over 230,500 units available across all submarkets.
In Q4, only around 570 units were delivered across six submarkets, with approximately 8,680 remaining in the pipeline. This is a slight decline from the third quarter’s delivery of 716 units and a far drop when compared to 2021’s fourth quarter of 1,535 units completed.
Market Forecast for Portland’s Multifamily Real Estate Market
Occupancy rates will likely continue to fall as more properties come online, but demand remains subdued. These factors will probably drive down rent and lessen investment activity.
If Portland is looking to make a comeback, it’ll likely need economic and job market stimulation.
Takeaways for Multifamily Real Estate Investors
Multifamily real estate in Portland has stalled, with indicators that the market will decline in the near term. That said, the city is still considered to be one of the most prosperous in the country.
Whether this is an opportunity or a caution is yet to be seen.
For investors looking for a market with lead measures of future activity, consideration should likely be placed elsewhere.
Stay diligent and happy investing.
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