Commercial Real Estate and Office Space Market in Oregon
The commercial real estate market in Portland has clearly shown signs of recovery and is among the most robust property markets in the West Coast (1). Positive growth indicators are evident across all sub-markets, from industrial to flex space and including of course the office sector, as shown in the market snapshot that follows.
Office Space Market
Researchers at Cushman & Wakefield recently produced a snapshot of the office market in Portland, where they highlighted the link between the growth in private sector employment and the positive indicators of the city's office property market. Demand for office space in Portland is spearheaded by the professional and business services sector, and in particular by firms involved in insurance and human resources. At 9.7 per cent, vacancy rates in Portland's CBD are among the lowest in the US West Coast, with occupancy rates being at 94 per cent in John's Landing, 95 per cent in Wilsonville, and 93 per cent in Close-in Eastside.
Direct asking rents for Class A space have exceeded the $30 / sq ft mark and now average $30.39, with above-average rents being asked for properties in Close-in Northwest and East of Broadway. On the other hand, rates remain low in areas like Sunset Corridor ($22.08), suburban Vancouver ($22.10), and Washington Square ($22.27). As the supply of suitable office space dwindles, new developments are underway across Portland, but especially in Close-in Northwest, West of Broadway, Close-in Eastside, and suburban Vancouver. In Portland's CBD, more than 370,000 square feet of Class A space will be delivered by the end of 2016, and more than half of that space has already been pre-leased (2).
Click here for office space currently available in Portland, Beaverton and Lake Oswego.
Retail and Industrial Space Markets
According to the local Colliers International office, the most notable trend that has characterized the industrial market in Portland is the dramatic tightening of the flex space sub-market. Demand for this type of industrial space has been growing rapidly, leading to the lowest vacancy rates of the past 10 years. In Q2 2015, vacancy rates for flex space were down to 11.6 per cent and net absorption levels remained positive. Market analysts attribute this trend to the increasing demand coming from the high-tech and advanced manufacturing sector, which is clustered around the so-called Silicon Forest area. Most companies show a clear preference for flex properties in the Westside, but limited supply has seen some tenants looking for suitable space elsewhere, most notably in Clark County and the Northeast. Across Portland, rising demand has gone hand in hand with an increase in rental values, which have reached averages of $0.948 / sq ft (3).
On the whole, the industrial real estate market in Portland remains in good health and shows excellent prospects in the medium term, partly as a side effect of Measure 91, which has legalized the possession of marijuana and caused an increase in the demand for industrial space for marijuana growth purposes. Construction activity continues to rise, with a significant amount of space being developed in the north and northeast. Average vacancy rates are at a record low of 4.9 per cent, and are indeed lower in the CBD (1.2 per cent), Airport Gateway (4 per cent), and Clark County (3.8 per cent). While rents average $0.47 / sq ft, rental values have soared in areas like West and Central Vancouver ($0.95), and SE Close-in ($0.75) (4). For the time being, and at least until the end of 2015, the industrial market in Portland remains especially favorable to landlords. Speculative developments are mostly to be found around the East Columbia Corridor and in Tualatin (5).
Tax Breaks, Business Incentives and Support
Researchers at several prestigious organisations (including Ernst & Young, Forbes, and the Tax Foundation) have repeatedly listed Oregon as having some of the nation's lowest business costs. In fact, qualifying companies benefit from a business environment that is pretty much tax free, and this clear advantage is one of the main reasons why large multinationals have chosen to base themselves in this state (6). In addition to Standard Enterprise Zone tax incentives (which offer 100% tax exemption during 3 years on real estate and equipment), Oregon offers local businesses an Extended Enterprise Zone tax incentive scheme, which is available for a period of up to 5 years and applies to the production of both tangible and intangible goods (7).
In addition, Oregon-based businesses that operate in the traded sector (mostly manufacturing firms) have access to the Strategic Investment Program, which provides property tax relief for 15 years (8). Likewise, the Oregon Investment Advantage provides a multi-year tax break of up to 24 months and can effectively amount to paying no business income tax during that period (9).
A comprehensive list of tax incentive programs can be found https://www.edcoinfo.com/incentives-capital/ here.