Office Market Strong in Q3
- The Portland office market powered through the third quarter with results showing net positive space absorption leading to declining overall vacancy, continued growth in quoted rental rates, and record-setting sales.
- There is no doubt that market participants are monitoring the development pipeline in the context of the economic and real estate cycles. However, the net absorption and vacancy readings for Q3 do not yet show a technical increase in unoccupied space, because the amount of net absorption market-wide is greater than the amount of product delivered during the quarter. If future deliveries lease up slowly, vacancy may increase and decisions about prospective projects may be impacted.
- Quoted direct full service Class A rental rates are still generally trending up, although the rate of growth is slowing in some submarkets and accelerating in others. The composite market-wide rate of $29.80 PSF grew faster in Q3 at a 3% year-over-year (YOY) increase, whereas Q2 2017’s $29.06 PSF is about 1% greater YOY.
- Last quarter’s very slight YOY decline in quoted Class A CBD rates has reversed course as Q3’s $33.07 PSF is about 1% greater than the same period last year.
- The Class A rate in CBD Perimeter is about 3% greater than a year ago at $30.75 PSF, however in Q2 it was about 4% greater than Q2 2016.
- Class A Westside rates grew steadily, increasing by 1.9% YOY in Q3 versus a 2.1% YOY increase in Q2.
- Class A growth in the I-5 South cluster, which includes Kruse Way, accelerated to 5.1% YOY growth in Q3 versus 2.7% YOY growth in Q2.
- Suburban Eastside Class A rates saw positive YOY growth around 0.5% in Q3 versus a -4.7% YOY decline in Q2.
- Clark County has posted 4%+ YOY growth in the most recent three quarters, preceded by 6% YOY growth in Q4 2016.
- Around 1.3M SF of speculative projects are physically under construction and 18% pre-leased.
- The Wieden+Kennedy Building sale advances the trend of record sales at $583 PSF.
Quick Fact: $378 Million
- 7 CBD investment sales totaled $321.7M and averaged $379.09 PSF
- 10 suburban investment sales totaled $54M and averaged $216.46 PSF
- 2 suburban owner/user sales totaled $3M and averaged $123.81 PSF