Q1 2023 - Portland Office Market Report

With the new year and a new quarter, comes a renewed sense of optimism for the future! Well...most of the time! Q1 2023 saw some bright spots, with leasing activity having a slight upward trend from its historic low in Q1 2021, but that remains a fairly low bar. Some of the same tones continue to ring true: substantial sublease space remains on the market, continued rightsizing of space from occupiers and the belief that the grass is greener outside Multnomah County. The reality is, that grass is only greener where it’s watered, and as we’ve seen from recent surveys/reports from PSU/Corenet and others, the grass is not getting watered downtown and in Multnomah County. We are still seeing significant incentives for rent abatement, tenant improvement costs, move allowances, etc., while face rents are attempting to stay strong. As future leases get set to expire in the coming 18-24 months, many tenants will likely rightsize their footprints or relocate to higher quality assets (flight to quality), and we believe buildings with high vacancies may start to default and become troubled assets, and in some cases be returned to the lenders. This is something we are making sure we keep an eye out for. We’ve seen some of this happen already with more on the horizon.