Should investors bet on Portland office properties? Ten-X Research chief economist Peter Muoio said yes, Portland is a buy market.
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"In our analysis of every major metro in the country, Portland ranks as the top office 'buy' market because of its robust economy and strong real estate fundamentals," Muoio said. "The city is currently at record employment and the unemployment rate is lower than at any point in the prior cycle."
As of December, the Portland MSA's unemployment rate was 4%, down from 4.8% a year earlier. Another factor in Portland's favor: over the last year, Portland’s population has risen 1.7% — more than double the U.S. rate.
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As the city continues to add both population and jobs at a rapid pace, Portland's economic health appears built to last. "Office vacancies have fallen close to pre-recession levels at 12.2% — well below national figures — and we expect rents to surpass historic highs this year and surpass $20/SF in 2018," Muoio said.
Rents have been growing steadily over recent quarters, and are up more than 4% year-over-year. Despite a cyclical downturn scenario in 2020, NOI should continue to grow by an average of 2.9%, Ten-X predicted, making Portland the most promising market for office investors.
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Cushman & Wakefield Portland managing director Matt Johnson said Portland's office market still has momentum, largely because of tech and other creative industries. “Over the last few years Portland’s CBD and close-in Eastside office markets have benefited from its growing tech and creative service sectors, which led the way for creative office build-outs."
Last year, Elemental Technologies inked the largest office lease of the year at 101k SF, and 17 of the top 25 deals were to firms that built-out with creative space, Johnson said. "What was most notable about 2016 was that many of the larger lease expansions were companies that started in Portland, such as Puppet Labs, Vacasa Rentals and Simple. Portland’s growing startup scene should continue to fuel the office market going forward.”
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