Office Market Soars Through 2017
- The Portland region’s office market ended the year with another quarter of reliably strong fundamental results in space absorption, rental rates, development, and investment.
- A net total of 780k SF of space was absorbed by new tenant occupancies over the year, amidst 600k SF of new product deliveries. With 300k SF of the year’s absorption taking place in Q4, the market ended 2017 at a vacancy rate of 9.2%.
- Although political instability and tenant downsizing resulted in unusual fundamentals in the first quarter of 2017, the office market subsequently recovered and performed consistently for the remainder of the year. (See Colliers’ Q1 2017 office report for further discussion.)
- In terms of rental rates, quoted direct full service pricing remains on an upward trajectory. Class A CBD rates reached $34.15 PSF full service at the end of the year, while the submarkets adjacent to the CBD trended closely at $32.24 PSF full service.
- The construction pipeline remains highly active. 1.15M SF of developments are physically under construction with 31% of this inventory preleased. If recent absorption trends continue, the remaining 69% (or about 800k SF) will likely be leased during 2018 and early 2019. For example, recent leases have been announced or are in final negotiations at Leland James (Jet Reports), Custom Blocks (Archrival), Broadway Tower (Markowitz Herbold), and Heartline, which are not yet showing in the Q4 data.
- Sales volume ticked up in the final quarter of the year to reach $461M. CBD investment sales represented $387M of this total. While no Q4 transaction reached the per-squarefoot records set earlier in the year, the institutional viability of downtown Portland’s office product remained on display. This was exemplified by transactions such as Wells Fargo Center and 400 SW Sixth, the latter of which is newly represented by Colliers.
- This quarter, Colliers introduces a revised suite of market surveys which more accurately measure the regional commercial office market. For questions or full data history, please contact Colliers Portland Research.
Quick Fact: $461 Million
- 6 CBD investment sales totaled $387M and averaged $293.59 PSF
- 5 suburban investment sales totaled $63.5M and averaged $139.52 PSF
- 1 CBD owner/user sale totaled $4M at $402.50 PSF
- 2 suburban owner/user sales totaled $6.5M and averaged $254.31 PSF