Q4 2022 Industrial Real Estate Report: Portland, OR
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Portland is known for its innovative artistic culture and diverse food scene. Tech, athletic and outdoor apparel, and manufacturing are major industries that contribute to the city’s economy.
Unemployment in the city rose from 3.7% in Q3 to 4.1% in Q4 of 2022, higher than the national average of 3.5% at that time.
The population of its metro area increased by 23,000 residents in 2022, a 1.05% increase from 2021.
Portland’s industrial real estate market saw rents remain relatively steady, vacancy decrease, and positive absorption in the fourth quarter.
General Area Overview & Demographics
The population of Portland, OR currently stands at 641,162 people. Of that population, 80.2% are White, 7.1% are Hispanic or Latino, 7.8% are Asian, 4.5% are African American or Black, and 0.7% are Native Hawaiian or other Pacific Islander.
Portland, OR Median Household Income & Population
The median household income for Portland stands at $62,243. That is slightly lower than the average of Oregon, which is $63,217, but higher than the national average of $57,652.
Regarding age demographics, 18.4% of the population is under 18, and 17.9% are 65 and older. Nearly a quarter (24%) of Portland residents are between 25 and 44. The median age is 36.3 years, slightly lower than that of Oregon (38.2 years).
Portland State University, the largest university in the city, serves over 28,000 undergraduate and graduate students from any area of study. Other universities include Reed College, Oregon Health and Science University, and Multnomah University.
One of Portland’s most famous landmarks is the International Rose Test Garden. Located in Washington Park, the garden is home to over 10,000 varieties of roses worldwide. Other popular attractions include Pioneer Courthouse Square, Portland Japanese Garden, and The Grotto.
The climate in Portland is mild, with four distinct seasons. Summer is generally warm and sunny, with temperatures ranging from the mid-60s to the low-80s. Winter is more temperate, with temperatures averaging between 35 and 45°F.
Summary of Portland Industrial Real Estate Performance in Q4 2022
Overall industrial vacancy in Portland decreased quarter-over-quarter from 3.7% in Q3 to 3.4% in Q4.
Westside, I-5 South, and Southeast recorded the lowest vacancies at 2.8%, 2.9%, and 2.8%, respectively. Central City was the highest at 6.1%, with Clark County second at 4.1%
Vacancies declined quarter-over-quarter across all submarkets except for Southeast and Clark County.
Absorption modestly lowered from 1.56 million square feet in the third quarter to 1.54 million in the fourth. Net absorption for the year was positive, totaling 4 million square feet.
What are industrial rents like in Portland, OR?
Average rent for industrial real estate in Portland was $0.87 per square foot in Q4 2022, with Q3 recording $0.86.
Central City was the only submarket to break the $1 mark with its average of $1.09.
Salem recorded the lowest rents for the quarter at $0.70 per square foot.
Purchase & Leasing Activity
Sales volume totaled $6.5 million in 2022, the city’s lowest sales volume since 2017. 2021 posted sales volume of nearly $11 million.
Despite this decrease in volume, average price per square foot for Portland industrial real estate reached a record-setting $160.
Leasing activity declined year-over-year, going from around 3 million square feet to 1.5 million.
Northeast, Northwest, and Clark County accounted for most of that activity, recording 566,000, 335,000, and 362,000, respectively.
Notable Industrial Real Estate Deals in Portland in Q4 2022
Several notable deals took place for Portland’s industrial real estate:
- Site Solutions LLC purchased 105,000 square feet for $31.7 million.
- TA Realty purchased 144,000 square feet for $28.1 million.
- Thermal Supply leased 172,000 square feet.
- Prologis leased 142,000 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Portland in Q4 2022
Portland’s industrial real estate market added nearly 950,000 square feet of new product in the fourth quarter of 2022.
All of these deliveries took place in Eastside and Westside submarkets, with Westside accounting for over half of the quarterly total, recording 596,000 square feet.
Completions for 2022 totaled 4.8 million square feet, with an additional 4.3 million remaining in the pipeline at that time.
Market Forecast for Portland’s Industrial Real Estate Market
During 2022, Portland’s industrial real estate market recorded strong performance.
Economic headwinds and rising interest rates should moderate investment activity and new industrial development.
Despite this, the city’s tight construction pipeline coupled with its high demand should lead to positive trends in 2023.
Takeaways for Industrial Real Estate Investors
Portland’s industrial real estate market has high potential but limited options, and the growth the city experienced in 2022 may create resource deficiencies that will be difficult to fill.
Rents and sale prices increased as vacancy lowered and net absorption remained positive. While high demand will likely sustain the market’s momentum, supply is the weak chain in the link.
An investor that can locate the right opportunity could see promising returns.
Do your research, stay diligent, and happy investing.
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