By Robert Sammons, Regional Director – Northwest U.S. ResearchI
I love to travel. Getting on a plane is almost always exciting for me. Want to go to London or Hong Kong for a weekend? I’m your guy. But even shorter trips are a good thing and I’m lucky that I get to do a little bit of that for my job. More than anything – for pleasure or for work – I love to explore the urbanism of a place. Does it have an active core? What is its transportation like? What type of industry is driving it? Are the residents excited about and involved in its future? Essentially – what makes it great or maybe not so great.
The Northwest Region, which I oversee for Cushman & Wakefield research, most certainly has markets that tick off a lot of the boxes on the “great” side of the column (and, admittedly, a few on the “not so great”). I just returned from a few days in Portland and have to say I really love that town. It doesn’t get as much coverage as San Francisco or Seattle – two markets which one can say it competes with. It’s a bit like Philadelphia on the east coast sitting between New York City and Washington, D.C. Philly has a lot going for it but sometimes it gets lost in the mix. That said, Portland is less and less a best kept secret as it continues to pop up on so many “best” lists.
If you ever watch “Portlandia” well you’ll see that show is certainly based on some fact though mixed with fiction too. I find the people very friendly, the airport more than functional (one of the best on the globe as many surveys have indicated) and the mass transit (for a city its size or any size) thorough and reliable. The city core is alive and well too (even with the downtown Macy’s shutting down which has much more to do with Macy’s than with Portland – additionally, that property is due for conversion to creative space). And there is most certainly a homeless issue as there is in almost every market in the U.S. today. Like San Francisco to its south and Seattle to its north, the “it” factor really has more to do with involvement by its citizens in running the city and attempting to make it as good as it can be. I could go on about all the redevelopment in various in-town neighborhoods, some really interesting architecture recently among some of the multi-family developments and the great local shops and restaurant and boutique hotels. Oh yes – and the wine and beer culture.
Let’s put those anecdotal comments up against some hard numbers shall we? I am, after all, in research and I do love to focus on data.
According to Moody’s Analytics, total job growth for metro Portland in 2016 increased by a healthy 2.4% with another 2.2% increase forecast for 2017. Since bottoming out at the close of the “great recession” total jobs have jumped by 18.7% or just over 181,000 new positions. And if that sounds like a big number, well that’s because it is! Office jobs have increased at an even faster pace over the past year – up 3.3% with another 2.9% rise expected in 2017. Tech employment, according to Moody’s, has grown by 13.9% over the past ten years with about the same rate expected in the next 10 years. Tech is currently about 7.5% of total employment in metro Portland compared to 15.7% for the San Francisco-San Mateo metropolitan division and 9.0% for metro Seattle. Meanwhile, manufacturing is still more of an employment driver in Portland as it is in Seattle at 10.6% and 9.4% of total employment, respectively. For San Francisco-San Mateo, it’s really become the forgotten industry segment at just 3.3% of total employment.
Well for the Portland office market, the vacancy rate did tick up in the fourth quarter but much of the reason for that was a rise in inventory – both new construction and redevelopment. Leasing activity was healthy throughout 2016 though some move-ins won’t occur until this year. And asking rents continued to rise for both the CBD and Suburban markets. There is just over 1.0 MSF currently under construction in this 44.7 million-square-foot (MSF) market with 83% of that to be delivered within the CBD. For a cool infographic on the office side of the Portland market take a look here.
Portland, like most U.S. markets these days, finds its industrial sector driven by warehouses which make up 71.2% of the 193.8 MSF of total inventory. The overall vacancy rate for warehouse has shrunk to a minimal 3.5% at the close of 2016 with almost 2.0 MSF of net absorption for that product type during the year. There is about 2.7 MSF of industrial space under construction (96% of which is warehouse) and set to deliver in 2017. Almost all of that is being built on a speculative basis but chances are it will all be leased upon completion.
That’s the short and the sweet on the stats for two of the primary property types. I hope you’ve enjoyed the rundown on certainly one of the hippest markets in the U.S. and one of the hottest as well.
By the way, you can find all of our latest market reports across the globe right here.
This post is guest commentary from the latest weekly edition of our Bay Area Research Rant, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Robert Sammons is a Research Director for Cushman & Wakefield. Based in San Francisco, Robert’s principal roles include working closely with the C&W research teams across the Northwest – including Northern California, Portland and Denver. Robert is author of numerous documents that delve into a wide variety of real estate and economic trends. He has been a quoted source for all manner of real estate and related economic information in many widely known media outlets across the country. Robert has 29 years of real estate experience as both an appraiser and researcher. He earned a BBA in Real Estate from The University of Georgia and an MS in Real Estate from Georgia State University. Robert is a member of the Urban Land Institute.