Jan 22, 2024 - Real Estate

Office vacancies still plague Portland

Metro area office vacancy rate, Q4 2023
Data: Moody's Analytics; Chart: Axios Visuals

There's a growing number of vacant offices in Portland.

State of play: As companies continued to shrink their footprints to account for more remote and hybrid work, 16.4% of office space in the Portland metro area was vacant at the end of last year, according to Moody's Analytics data shared with Axios' Emily Peck.

  • However, things are a lot emptier downtown. Local commercial real estate firms Kidder Mathews and CBRE put office vacancy in Portland's central business district for the last quarter of 2023 between 24% and 29%, respectively.
  • Portland's office market as a whole is in its fourth consecutive year of negative absorption, meaning more tenants have moved out than tenants who've moved in.

Why it matters: Demand for office space in the Rose City remains weak, and experts told Axios they predict vacancies will continue to rise — albeit slowly because there are minimal projects in the pipeline — as the market adapts to new working norms.

  • "The runway to recovery is likely going to be a bit longer than much of the country as vacancy is not expected to plateau until late 2025," Gary Baragona, vice president of research at Kidder Mathews, told Axios.

But that doesn't mean all new leasing activity is dead.

What they're saying: "Many tenants that reduced the size of their office leases in the past few years to address underutilized space are now reconsidering their long-term needs," Lana Baldock, who oversees office transactions in the Pacific Northwest for CBRE, told Axios.

  • One example Baldock gave is Deloitte, which signed a lease at M Financial Plaza back in November, expanding its NW office space.

Zoom in: The completion of both the Ritz-Carlton's Block 216 and 11W last year brought 300,000 square feet of new space to Portland's downtown market.

The big picture: One huge office project could soon introduce lots of office space in the region.

  • The Terminal 1 site on the Vancouver Waterfront aims to bring 1.7 million square feet for mixed commercial use (retail, restaurants and offices) to the market when construction is completed.
  • ZoomInfo inked its lease on 366,00 square feet of space at Terminal 1 years ago, but will move in starting in 2025.

The bottom line: Despite Portland Mayor Ted Wheeler and others calling for big corporations to bring their workers back into the office for at least 20 hours a week, many company leaders have already moved past that idea.

  • Just six out of 158 U.S. CEOs said they'll prioritize bringing workers back to the office full-time in 2024, according to a new survey released by the Conference Board.
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