Portland Light Industrial Market Update

 

Portland Light Industrial Market Update

After the close of 2018, the metro Portland industrial market remains tight on available space. We continue to experience increasing rents market-wide. Some vacancy relief is on the horizon with new speculative construction set to be delivered in 2019 and 2020. Rent relief on the other hand, is nowhere in sight. There was approximately 230 million square feet of inventory for year-end 2018 with an overall vacancy of 4.2 percent and with approximately 5.1 million sf of new construction planned or underway.  Rental rates have jumped 10 percent since 2017 and 32 percent since the beginning of 2014.

Overall this market information does not tell the full-story. There is a high level of demand for space of all sizes that is only partially being addressed with the new spec construction coming to the market. These deliveries are predominantly build-to-suits and spec warehouses over 100,000 sf. New inventory under 100,000 sf is limited (particularly under 50,000 sf). Thus, the majority of the increase is due to some oversupply of new/large spec warehouse space, but only in specific submarkets (i.e. Airport Way).

Asking rents are at all-time highs. New shell asking rates for some larger warehouse spaces are above $7.80 psf/year NNN. If future market conditions continue to remain at the current levels, higher rates and low vacancy will still limit occupier facility alternatives and make real estate pricing even more of a challenge.

Sometimes the best way for occupiers to manage their costs is by driving operational efficiencies (warehouse optimization strategies, supply chain analysis, labor studies, etc.) within existing facilities and/or considering out of area solutions versus focusing solely on facility rents and terms.

Cresa can help on all these fronts, even if existing leases and owner-user properties seem to be limiting factors.  Reach out to see what creative solutions we have to offer!

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