If you’re considering negotiating your lease for a more affordable rent, the time is now.
Two recent reports from Portland commercial real estate specialists Norris Beggs & Simpson and Marcus & Millichap offer a window into a market in serious decline, with vacancy rates rising, construction slowing and rents falling. Even the until-recently soaring market for rental housing has turned sour as job losses spread and the conversion of failed condo projects to apartments creates a bulging oversupply problem.
An excess of inventory is already devastating metro Portland’s industrial market. The vacancy rate for industrial properties has soared to 13.87% and rents are projected to drop 5% by the end of 2009. Building has all but halted, with 633,000 square feet expected to be completed this year compared to 2.7 million last year.
The office market may be even worse off. Rents are projected to drop by 6.4% by the end of 2009, the suburban vacancy rate has soared to 19%, Tom Moyer’s Park Avenue West tower is on hold due to lack of financing and new mortgage originations for office properties are down 66% year over year. With 3 million square feet in the planning pipeline, expect more projects to be delayed or abandoned.
Rents have held up slightly better in the retail market, but they are still expected to fall by 3.8% this year. The recent liquidation of Joe’s sporting goods stores and other key tenants leaves gaping holes that will be difficult to fill with anything remotely upscale. Two of the largest lease deals closed in recent months have been with the Salvation Army and the Dollar Store.
But there are bright spots, particularly for those rare cash-rich investors who have not gone the way of the passenger pigeon and the dodo bird. Among the areas of opportunity are the coming extension of MAX light rail from downtown Portland to Clackamas Town Center, the expansion of the Portland Streetcar to the Central East Side, SolarWorld’s growing presence in Hillsboro and a new FedEx facility due to be completed in Troutdale by July 2010, creating hundreds of increasingly precious new jobs.