Portland Office Market Shows Signs of Life, Brokers Say

In terms of office real estate, the Portland metro area looks like a doughnut.

Downtown is still struggling, while office complexes in the suburbs boom. The city’s western suburbs have just a 12% vacancy rate, according to real estate firm JLL, the second lowest of any major city, compared with about 30% in the central business district.

It’s not hard to figure out why. During the pandemic, and the riots that followed the murder of George Floyd, lots of firms packed up their cubicles and moved south to Kruse Way or west to Beaverton.

Now, that migration is ending, says Annalore Rodman, a senior vice president at JLL, and trends are regressing to the mean. About half of all companies shopping for space in Portland are looking downtown, Rodman says. That’s close to the pre-pandemic norm, indicating better sentiment about the central city compared with the ’burbs, she says. And there are deals to be had.

“There are a lot of good options downtown,” Rodman says.

It’s far too early to call a robust turn in downtown’s fortunes, but there are anecdotes to back up a more optimistic view after years when almost every big metro area outperformed Stumptown.

Since the summer of 2023, brokers for the Fox Tower, a bellwether for high-end Portland office space, have signed 10 leases, including expansions and renewals, says Jeff Falconer, a broker at Capacity Commercial Group. Six of those are new leases, representing 43,276 square feet of office space.

Among the new arrivals: a global design and engineering company, one of the country’s largest banks, and several law firms, both local and national, Falconer says.

“Two tenants have expanded their presence in the building this year, and we are in active negotiations with another to grow its premises in 2025 by approximately 50%,” Falconer says.

There is interest in less-fancy digs, too. An entity called PDK317 LLC paid $2.8 million for the Hamilton and Loyalty buildings at Southwest 3rd Avenue and Alder Street. The two properties went into receivership in 2022 after an entity controlled by Manchester Capital Management, a firm that caters to wealthy families, failed to make loan payments.

PDK317 LLC may have gotten a deal. The Manchester Capital entity bought the buildings for $12.5 million in 2013, back when Portland was still Portlandia, according to property records.

To be sure, it will take more Portland-curious companies looking for deals to offset announced departures that have yet to occur. U.S. Bank doesn’t plan to renew its lease on 222,000 square feet of space in the U.S. Bancorp Tower, aka Big Pink, as The Oregonian reported in September.

“Portland’s office market continues to face severe challenges,” analysts at Colliers said in their third-quarter report. “As tenants continue to shed space, particularly in the downtown market, it is expected that the inventory of distressed assets will expand.”

One person keen to get bodies back into downtown offices: Mayor-elect Keith Wilson. Earlier this month, Wilson held a virtual town hall with 1,400 city employees and said he wanted them to spend four days a week in the office, up from about two and a half, according to Oregon Public Broadcasting.

City employees pushed back, peppering the virtual meeting’s chat with complaints about child care, parking fees, and climate impacts from driving, OPB reported. (If these objections sound familiar, that’s because they are not new.)

Despite Big Pink’s impending loss, and grumpy city employees, JLL remains upbeat.

“The tenants that wanted to leave are gone,” said Patricia Raicht, JLL’s head of research for the Western U.S. Another positive sign, according to Raicht: The vacancy rate at new buildings across the metro area stands at 12.7%, almost as low as what prevails at all properties in the suburbs.

It turns out that if you build it, they just might come, even to Portland.