Q4 2022 Office Space 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 hosts office locations for major businesses like Nike, Adidas North America, and Columbia Sportswear, among many other notable companies.
The city’s unemployment was at 4% as of December 2022.
The population of Portland in 2022 was nearly 2.2 million, a 1.6% increase from 2021.
Portland’s office market saw continued negative net absorption and high vacancy rates in Q4 2022.
General Area Overview & Demographics
Portland, Oregon is the most populous city in the state with a population of 653,115 as of July 2018. The metro area has an estimated population of 2.4 million people, making it the 25th most populous metropolitan statistical area in the United States.
Portland, OR Median Household Income & Population
The median household income in Portland, Oregon is $60,295 in 2019. This figure is slightly lower than the national average of $61,937. Over 60% of households earn over $50,000 a year, and 16% of households make over $100,000.
The age demographic of Portland is quite diverse, with the largest share of its population ranging from 25 to 44 years old at 27.9%. This is followed by those aged 45 to 64 (24.2%), 15 to 24 (14.7%), 0 to 14 (12.6%) and 65 and over (11.3%).
Several higher educational institutions are located in Portland, including Portland State University, Oregon Health & Science University, and Lewis & Clark College. There are also several community colleges in the area.
The city is home to a variety of attractions, from the famous International Rose Test Garden and Washington Park to the iconic Powell’s City of Books. Additionally, Portland is known for its craft beer culture, with more than 60 breweries in the metro area.
Portland experiences mild winters and warm, dry summers. Average high temperatures in July can reach up to 85 °F (29 °C), while lows in January dip to around 36°F (2°C). The city has an average yearly precipitation of 37 inches and experiences an average of 156 days of sunshine per year.
Summary of Portland, OR Office Space Performance in Q4 2022
The overall vacancy rate for Portland office space reached 17.9% in Q4.
Downtown Portland, which encompasses the CBD and CBD Perimeter, had the highest vacancy rate at 26.3% in Q4.
Net absorption for Q4 was -438,274 square feet bringing the total for the year to nearly -1.5 million.
What are office space rents like in Portland?
Average rental rates for Portland office space decreased quarter-over-quarter from $26.31 to $26.27 per square foot.
Asking rates were highest in the I-5 South submarket at $35.53 per square foot.
Rates were lowest in the Westside submarket at $21.72 per square foot.
Class A rents averaged around $32.43 per square foot.
Purchase & Leasing Activity
Sales volume for Portland office space in Q4 dropped to around 474,000 square feet. This was a 50% decrease year-over-year.
Sales volume totaled $21.2 million in Q4, an 84% drop from the previous year.
Only 574,000 square feet were leased in Q4 which was a record low. While leasing activity was at an all-time low, sublease availability was at a record high at 2.4 million square feet available at the end of the year.
Notable Office Space Deals in Portland in Q4 2022
There were several deals for Portland’s office space properties that took place in Q4 2022:
- Parkwood Place sold at $6.9 million for 41,056 square feet of space.
- Chkalov Building sold at $5.2 million for 44,382 square feet of space.
- iHeart Radio leased 24,739 square feet of space.
- Consor leased 17,891 square feet of space.
These are select examples among other activity.
New Office Space Development Activity in Portland in Q4 2022
There were zero square feet of inventory delivered in Q4; however, there are several potential new deliveries in the pipeline.
In Q4, there were 403,000 square feet of new Portland office space in construction.
Most of these new constructions are located in the CBD submarket.
Market Forecast for Portland’s Office Space Market
Portland’s office market saw many downward trends at the end of 2022, and the city remains to be one of the more riskier options for CRE investors.
The city’s office space market is still experiencing the effects of the COVID-19 pandemic: Returns to the office are slow, and many employers are still juggling hybrid and work-from-home schedules. This trend could continue into 2023 coupled with the potential threat of an economic recession.
Higher rates of vacancy and negative net absorption are expected to continue into 2023.
One potential positive for the market: The City of Portland will require that all employees return to work in the office at least three days a week starting in April 2023.
This should help decrease vacancies in Portland’s downtown office space in the coming months.
Takeaways for Office Space Real Estate Investors
The office market in Portland continues to trend downward heading into 2023.
Sales volume hit a record low and was down 84% from the previous year. Vacancy rates were high and are forecasted to stay relatively the same into 2023.
Net absorption rates were negative in Q4 2022 and are expected to trend downward throughout 2023.
While this means more space is becoming available, investors should still be mindful of the coming years’ potential economic challenges and subsequent trends in the market.
Do your research, stay diligent, and happy investing.
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