Businesses turn to suburban markets for more space and to be closer to workers.
The amount of available office space in Portland increased in the third quarter of 2020, compared with the previous quarter, as the pandemic caused companies to reevaluate the location and space they need for their employees.
Total available office space increased to 17% from 15.5% in the second quarter, according to a CBRE Group report. The commercial real estate firm says that although this dip is not unusual, it has grown due to more companies subleasing their office space or not renewing leases.
The pandemic has indelibly changed the nature of office work, with many employees working from home and a lot fewer workers coming into the office because of social-distancing requirements. Some businesses may choose to do away with their office altogether.
The trend has profound implications for Portland downtown businesses that rely on foot traffic from office workers, such as restaurants and retailers, and hotels that rely on business travelers.
The pandemic may lead to a renaissance of suburban-office markets. The vacancy rate for office space in the suburbs — such as Beaverton, Hillsboro, Clackamas and Tualatin — was 10.7% in the third quarter, virtually unchanged from the previous quarter.
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“Increased interest in the suburban market has been a standout trend for tenants interested in more space and being closer to their workforce,” according to CBRE Group.
Although downtown Portland had the largest jump in vacancy rates, the three biggest new deals of the third quarter were in downtown. “Concessions have also increased market-wide, with landlords and tenants becoming more creative in deal structure,” says CBRE Group.
Tenants have leaned toward flexible or short-term leases because of the uncertainty over the duration of the coronavirus and how the office market will adapt in the future.
A glut of office space could be in the offing for the Portland market. There are 389,400 square feet of space under construction and an additional 547,870 square feet under renovation, according to CBRE Group. Much of this is scheduled to be finished by the end of the year.
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