Portland Office Market Reflects Continuing Sector Struggles

Kidder Mathews has released its third quarter office CRE market update for Portland, OR and it details the ongoing challenges in the office sector. Direct vacancy rates increased to 11.6%, leasing volume dropped 40% year-over-year and the construction pipeline is at a 10-year record low.

Average asking lease rates increased slightly to $28.44/SF, and newer buildings that offer top quality amenities are performing better across all submarkets. Meanwhile, sublease availability is increasing steadily as companies are still evaluating post-pandemic needs, with many downsizing to account for hybrid work models.

The Kidder report indicates that while the Portland economy continues to recover, the near term office outlook for Downtown Portland remains shaky. Suburban markets outperforming urban will persist, due to employee proximity and lower crime rates. Additionally, new development will remain slow thanks to rising interest rates, high construction costs and ongoing supply chain constraints.