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Rental Vacancy Rates in Portland Shrink Again

Findings by a real estate advisory company and shared with its Portland clients were grim: Vacancies are rapidly declining, rent continues to rise, and development of new multifamily units is slowing.

CoStar Market Analytics, a commercial real estate advisory service, released a memo Sept. 9 to its Portland clients detailing the stock of apartment buildings in the city and the pace of new construction.

The findings were grim: Vacancies are rapidly declining, rent continues to rise, and development of new multifamily units is slowing.

That slowdown, CoStar reported, is partially due to skilled labor shortages and more expensive raw materials throughout the pandemic: “This, coupled with a skilled labor shortage, had many developers likely struggling to make projects pencil out.”

But the company also blamed an inclusionary zoning policy adopted by the Portland City Council in 2017 that requires buildings over 20 units to reserve 20% of them for affordable housing.

CoStar reported Portland had the fifth-fastest declining vacancy rate among the top 50 metro areas in the country, dropping to 4.7% in the third quarter of 2021—down from 6.9% in mid-2020.

As Portland struggles with mounting homelessness, CoStar warned its clients the worst is yet to come: “The market is currently in dire need of additional units to satisfy this ferocious leasing appetite and surging rent growth, but current statistics indicate construction activity is slowing and has been for some time.”