Flex Market Cools in Q1

  • In the first quarter, the Portland region’s market of flex properties recorded decreased leasing activity, negative net absorption of space, and no overall change in quoted rental rates.
  • Around 165k SF of new lease executions occurred during the quarter, a 50% decrease from Q4 2016 and only 30% of the activity recorded one year ago.
  • The negative net absorption resembles Q1’s office market performance. In that sector, political uncertainty and tenant downsizing contributed to a similar pattern of increased vacancy.
  • Unlike the office market, however, some flex submarkets posted both quarter-over-quarter and year-over-year increases in quoted rental rates. Market-wide, though, the composite quoted rate remained unchanged from the end of last year at $1.03/SF/M.
  • Increasing quoted CBD and close-in office lease rates, especially in new-construction projects, should position the suburban flex markets attractively to expanding or renewing businesses with cost concerns or employee populations willing to relocate to the suburbs. As such, leasing activity could escalate later in the year.
     

Quick Fact: $2.85 Million

  • One investment sale and one owner/user sale totaled $2.85M in volume in Q1.