The coronavirus pandemic interrupted a years-long run of growth for the Portland office sector. Office demand contracted as most employees shifted to a work-from-home approach. In the past few years, Portland office vacancies have benefited from strong tenant demand and limited speculative supply. However, some high-profile, recent speculative deliveries are lingering on the market: Of space delivered since 2018, about 20% remains available for lease. After peaking at about 7% growth in mid-2015, annual rent gains were decelerating even prior to the pandemic's outbreak. Office rents are now down 0.7% year over year.
Just under 1.1 million SF of new office supply hit the market in 2020, after a quiet 2019 when less than 100,000 SF came online. While around 1.4 million SF is currently under construction, many of the largest projects are build-to-suit and/or owner-occupied and won't significantly impact market dynamics.
Portland office investment slowed sharply as the pandemic upended the local economy. Annual sales volume exceeded $1 billion each year from 2015–19, but that run came to an end in 2020. Sales volume has been expectedly muted in 2021, save for one or two outsized deals. However, growth is likely to be somewhat restrained in the near term as buyers and lenders seek to understand the emerging dynamics in a newly mobile office workforce. Valuations will remain sensitive to investor sentiment, and sellers may find that buyer uncertainty impacts underwriting assumptions, bids, and negotiations. (Source: CoStar)