Economy: Resilience for Industrial Sector
Portland’s economy continues to find its footing as the region works toward a more stable post-pandemic baseline. Year-over-year (YOY), total nonfarm employment declined 1.7% to just over 1.2 million jobs, while the unemployment rate remained steady at 5.0%, 80 basis points (bps) higher than the national rate of 4.2%. Although employers continue to exercise caution in hiring and expansion plans, industrial real estate fundamentals have proven more resilient than broader economic indicators suggest.
Supply and Demand: Signs of Stability Emerge
The Portland industrial market continued to show signs of stabilization during the third quarter as tenant demand strengthened and construction deliveries were limited. Overall vacancy increased 50 bps YOY to 6.7%, while availability stood at 8.5%, up 90 bps YOY. Year-to-date (YTD) net absorption totaled nearly 890,000 square feet (sf), supported by more than 812,000 sf during the third quarter alone. YTD leasing activity remained healthy with approximately 3.8 million square feet (msf) executed, led by activity in the Vancouver/Clark County, North/Northeast Portland, and Southwest submarkets. While 3.4 msf remains under construction, only 121,000 sf has delivered YTD, reflecting a significant slowdown in new supply. Positive absorption across several major submarkets, including Vancouver/Clark County and East Columbia, suggests market fundamentals are gradually rebalancing as occupiers digest recently delivered inventory.
Pricing: Rate Variance Across Submarkets
Average monthly net asking rents held steady at $0.89 per square foot (psf) market-wide despite elevated vacancy and availability levels. Rental rates vary substantially by submarket, with stronger pricing concentrated in Northwest submarkets such as Hillsboro/Sunset Corridor ($1.15 psf), Beaverton/Highway 217 ($1.16 psf), and Tigard/Lake Oswego ($1.10 psf). Concessions and flexible deal structures remain common as landlords compete for tenants, particularly in submarkets with higher vacancy, including Tualatin/Sherwood and Rivergate. However, sustained leasing activity and limited new deliveries have helped prevent significant downward pressure on asking rents, demonstrating the resiliency of Portland's industrial market.
