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The office vacancy rate in greater Portland rose to a record high 26.6% in the third quarter from 25.9% in the quarter just before, as buildings lost tenants and companies looking for space continued to shun most parts of the metro area, real estate company Colliers said.
Downtown Portland fared even worse, with the vacancy rate rising to 34.6% in what Colliers calls the central business district, from 33.3% in the second quarter. Downtown property owners have said that it’s likely much higher.
Only two submarkets saw the vacancy rate fall: the area around Interstate 5 south, where vacancy fell to 23.7% from 24.7%, and Clark County, Wash., where the rate fell to 10.9% from 11.3%, Colliers said in its third-quarter report.
The latest report shows that companies are still leaving downtown Portland. Landlords cite a number of reasons. Among them are high taxes. A report from Fidelity Investments shows that Oregon has the highest effective tax rate in the nation, both for single people (28.1%) and married people filing jointly (20.6%). Add in taxes from Metro, Multnomah County and the city of Portland, and that rate goes even higher.
“With no new construction on the horizon and continued tenant downsizing, the Portland office market is expected to remain tenant-favorable through the end of 2025, Colliers said. ”Landlords, particularly in the central business district, are expected to continue offering aggressive concessions to attract and retain tenants."
Austin McElroy, the Colliers analyst who prepared the report, said the silver lining is that two submarkets saw more vacant space get filled.
“We’re encouraged that people want to lease space, at least in the suburbs,” McElroy said in an interview. “We would love to see more activity downtown.”
“Negative absorption,” industry jargon more space going vacant that getting leased, was highest in the central business district, where another 265,000 square feet became available, Colliers said.
The Colliers report hit the same day as a monthly report from state economist Jake Procino, who covers Multnomah County.
Once again, the county led the region in in job losses, Procino wrote. Nonfarm payrolls fell by 10,000, or 2%, in the county, compared with a loss of 0.3% for the Portland-Vancouver-Hillsboro Metropolitan Statistical Area, and a drop of 0.9% for the state.
