New Inventory Steadies Vacancy
- Market-wide vacancy remained unchanged from Q2 to Q3 at 3.5%. This steadying comes on the heels of 3 consecutive quarters of vacancy declines on very strong net absorption, and 5 consecutive quarters of sub-4% vacancy.
- The 3.5% reading remained unchanged over the quarter because around 1M SF of new product was delivered, while simultaneously tenants took occupancy of around 1M SF of newly leased space throughout the market.
- The majority of Q3 deliveries stemmed from two large projects, LogistiCenter at 185 and Gresham Vista Logistics Park. The former’s 3 buildings totaling 234,308 SF featured one reported lease of 14k SF whose tenant was represented by Colliers International. The latter project delivered without any reported pre-leasing activity in its 3 buildings totaling 733,232 SF. In all, the 1M SF of new product in Q3 was 7% leased at delivery.
- The lack of sufficient available space suitable for large or institutional users constrains the market’s ability to satisfy demand. A vacancy rate of 6% would represent a market in equilibrium in which enough space would be available to accommodate tenant relocations/expansions and new-to-market users, while still enabling feasibility for developers.
- Projects physically under construction currently total 2.9M SF, all of which is speculative development. This pipeline is currently 38% pre-leased. Excluding Troutdale Logistics Center and its full-building lease by Amazon reveals 2M SF under construction, 19% of which is already committed. Q2’s adjusted pre-leasing rate was 12%.
- For a sixth consecutive quarter, both the nominal blended direct asking rental rate and its corresponding year-over-year (YOY) growth rate have increased to new record levels. The market-wide reading of $0.597 PSF per month is 14.9% greater than one year ago. Q2’s updated inflation rate is 14.3% and Q1’s is 13.3%. The last time the rate of YOY growth slowed was Q1 2016, which registered a 4.7% YOY increase versus Q4 2015’s 4.8% growth.
Quick Fact: $156 Million
- 10 investment sales totaled $140M and averaged $101.46 PSF
- 3 owner/user sales totaled $16M and averaged $105.66 PSF