3Q 2021 Office Market Stats

Demand for local office space remains below pre-pandemic levels as businesses continue to scrutinize their space needs. In 2020, elevated vacancies, sublease space, and a sense of uncertainty on the future of the office market generated the first rent losses in the Portland office market since the last recession. Office rents most recently posted gains of 2.5% year over year, below the five-year average of 3.5%, as well as the ten-year average of 3.6%. Market rent of $28.49/SF as of the third quarter of 2021 offers a sizeable discount to the national index of $34.00/SF. High-end office product is currently faring the worst, as vacancies expanded more rapidly in this sector with the addition of several Class A properties that struggled to lease-up even before the pandemic's onset. 
(Source: Ladders, Inc.)
While Portland's office supply growth accelerated in the years prior to the pandemic, it trails far behind that of other West Coast metros like San Jose, Seattle, and San Francisco. Build-to-suit projects make up a majority of the metro's recent projects. Given Portland's historically strong fundamentals and startup-oriented workforce, creative office space is popular among both tenants and developers, with projects most often located in and around the CBD, Lloyd District, and SE Close-In submarkets. Though some creative office projects are built from the ground up, like Field Office, more are renovations of existing properties. 
As of the end of the first quarter, Portland saw nearly $50 million in assets change hands. As of the end of the third quarter, volume had picked up to nearly $350 million. Trailing year sales totaled $676 million, which is well below the five-year average of $1.3 billion. Over the past decade, Portland's structurally low vacancy rates, dynamic economy, and strong cumulative rent growth have heightened the metro's profile as an investment market. More recent slowing sales volume reflected uncertainty in the office market surrounding the spread of the coronavirus and the negative impact from national news coverage of civil unrest, but heightened distribution of vaccines and continued lifting of pandemic-era lockdowns should help to calm volatility somewhat. (Source: CoStar)