By Mick Harris
Downtown Portland’s vacancy rate stood at approximately 26% in the second quarter of 2022, up from 13% during the same period in pre-pandemic 2019. Additionally, another two million square feet of downtown office space may hit the market in the next 12 to 18 months, according to a recent report in the Portland Business Journal. This ominous news likely makes some nervous about the overall state of commercial real estate deals—but downtown Portland commercial real estate does not tell the whole story. In fact, according to PwC’s Real estate: Deals 2022 midyear outlook, in the face of uncertainty, real estate momentum continues, following a trend from 2021.
The PwC mid-year analysis listed these areas of commercial real estate strength:
- Industrial and multifamily assets continued to drive growth in transaction volumes
- Niche sectors, such as cold storage, data centers, life sciences, and content/media-related real estate are cornerstones of real estate investment activity
- There has been increased attention to experiential assets, such as marinas, ski resorts, golf courses.
The report’s conclusion? Commercial real estate transaction activity continued its post-pandemic surge. During the first three months of 2022, total volume was up 68% compared to the same period for 2021.
The report’s strongest deal-volume segments for first quarter 2022 versus the same period in 2021 were:
- Retail up 104%
- Hospitality up 101%,
- Industrial up 76%
- Office up 62% (driven by a trend toward returning to work or hybrid work models)
“In the face of uncertainty on many fronts, we continue to believe that deal activity in the second half of 2022 will be robust,” according to the PwC analysis.
This relatively rosy outlook for overall commercial real estate, seems to be holding true for the local Portland market, as well. In a July 2022 article, the Portland Business Journal reported that OnPoint’s commercial real estate lending increased, even as inflation rose. “Properties such as medical office buildings, multifamily housing, self-storage buildings, warehouses and other industrial facilities continue to perform well in the Portland market,” according to the report.
Unfortunately, Portland’s downtown market does not live up to the strength shown in other markets, and recovery may take some time. In August 2022, the Portland Business Journal reported on an analysis from the University of California, Berkeley’s Institute of Governmental Studies that ranked Portland’s central business district as 60th out of 62 tracked cities, in terms of pandemic recovery. While the vacancy rate of Portland’s central business district gets a lot of attention, the commercial real estate market is large and diverse; and it appears that there are many areas that are following national trends, which indicate a healthier deal environment overall.