As local businesses reopen and the state continues to rebound from the effects of the pandemic, the Omicron or other variants may hinder a more robust recovery. Yet, there is strong optimism that current demographics and consumer spending will drive the Portland economy forward within the next 12 to 24 months, according to Kidder Mathews’ latest Portland office report.

Kidder’s report includes three overarching points: direct vacancy rates increased to 11.2 percent, net absorption reported negative 108,537 square feet by the end of fourth quarter 2021 and construction projects have slowed, with more than 812,000 square feet of office developments in the pipeline. In addition, there are several market drivers at play.

• Office direct vacancies continue to climb past all-time highs across the Portland metro, increasing by more than 20.4 percent year-over-year to 11.2 percent at quarter’s end
• Asking lease rates remained stable, reporting $28.00 per square foot full service by the end of the fourth quarter as landlords offer concessions in order to maintain rental rates
• Coming off strong leasing activity from the quarter prior, leasing activity experienced a decrease in fourth quarter 2021 with 646,511 square feet. Total class-A lease activity reached 212,622 square feet with sublease activity reporting 41,994 square feet for all class types
• Office sales in fourth quarter 2021 fell to 74 transactions, averaging $241.83 per square feet with cap rates settling at 6 percent

Major projects underway in Portland include 503 on Tenth (269,908 square feet) and Block 216 (169,188 square feet). In total, 812,755 square feet remain under construction.

Unemployment rates reached a high 13.1 percent in April 2020 due to the COVID-19 pandemic. Since then, unemployment has gradually fallen, standing at 4.1 percent in November 2021, according to the report.