The amount of unoccupied office space in Portland increased at an unprecedented rate in 2020 as companies vacated their buildings and new spaces sat empty.
Empty space was especially pronounced downtown, as the pandemic, protests and sporadic vandalism and violence reduced the appeal of the city’s core. Forecasters expect a modest rebound in 2021, provided vaccines prompt a return to office work later in the year.
For 2020, Portland’s office market suffered its worst year in at least two decades in terms of net absorption, which measures the net change in occupied office space over a specific period of time.
The amount of empty office space in the city increased by 1.7 million square feet between the first and fourth quarters of last year, according to a report by real estate company Colliers International. That’s the most in the nearly two decades for which Colliers has data.
Office vacancy rates in Portland jumped considerably, increasing from 10.7% to 13.6%. The increase was particularly stark in Portland’s central business district, which includes downtown, Old Town and the Pearl District. There, vacancy jumped from 15.1% in the first quarter to 18.1% in the fourth quarter of last year, according to Colliers.
The data doesn’t take into consideration the large percentage of companies that have so far retained their offices, but continue to ask employees to work from home due to the coronavirus pandemic.
Asking rents in Portland’s central business district remained fairly stable in 2020, but landlords became more likely to offer concessions to retains tenants, according to Colliers.
Other cities have seen office vacancy rates spike during the pandemic as well with employers continuing to ask employees to work remotely and some businesses rethinking their long-term office options.
Jacob Pavlik, research manager for Colliers, said in October that few companies have been willing to commit to long-term office leases in downtown Portland during the pandemic.
Other employers are still deciding whether they will bring employees back full time to office buildings once the pandemic recedes, raising questions about whether more companies could look to vacate their office spaces later this year.
Downtown Portland is also facing unique challenges that could impact the office market. Small-business owners and large employers in downtown have expressed concerns for months about ongoing protests, which have given Portland a reputation for upheaval, and led to frequent acts of vandalism, including graffiti, window smashing and burning of debris and dumpsters.
The amount of space available for sublease in downtown jumped by 36% last spring as tenants sought to vacate offices and storefronts in the early months of the pandemic, according to data provided by real estate firm CBRE in October. Craig Sweitzer, a landlord and the founder of commercial real estate firm Urban Works Real Estate, said in October that the spike in subleases could be attributed both to the pandemic and to the uncertainty facing downtown Portland specifically.
However, Colliers anticipates that Portland’s office market could see improvements in 2021 as more people are vaccinated against COVID-19 and employers become more confident in having their employees return to offices.
“Portland faces a year likely to be marked by moderate improvements over 2020,” Colliers said. “Once the COVID-19 vaccines are widespread enough, people will have more confidence returning to their offices, which will be a game-changer toward late 2021 and into 2022. There will be a reckoning on Portland’s reputation after a year of disproportionate and negative media coverage.”