Portland Office Leasing Fundamentals Mixed at Mid-Year Mark

Larger Blocks of Space Signed for Downtown

Office market challenges in Portland, Oregon, continue into the third quarter of 2023, despite some heavy leasing activity in the downtown core. Utilization patterns suggest a normalization for many employers may be months away, which has resulted in additional space scrutiny from potential and in-place tenants.

Over the preceding three quarters, the number of leases signed and average lease size points to several noteworthy indicators.

Total volume has increased over the first quarter of 2023 and the fourth quarter of 2022. However, at approximately 800,000 square feet, second-quarter leasing activity still stands 14.5% lower than the 2015-2019 quarterly average. The number of leases signed — which trended upward in the first quarter — has dwindled to its lowest mark since the fourth quarter of 2021 and is now 15% below pre-pandemic averages.

The slowdown in lease signings and uptick in volume boosted the average lease size to nearly 1% higher than the 2015-2019 quarterly average.

This anomaly is largely attributable to several firms and government agencies taking on large blocks of space in downtown Portland. Outsized deals included Law firm Davis Wright Tremaine LLP, which signed for 19,100 square feet at Block 216 and will abandon their current post at Wells Fargo Center. The five-star Block 216 complex is part of a new 1.1 million-square-foot mixed use tower that will also house the Ritz-Carlton hotel and luxury condominiums. Additionally, Cascade Energy will leave its current location in the Lloyd District’s Eastside Exchange building and move into a 10,152-square-foot space at the historic Kress Building, near Pioneer Courthouse Square.

Commitments such as these are a good sign that local businesses still see value in Portland’s struggling office core, but they underscore a trend of companies fleeing second-tier space for lower lease costs or five-star amenities. The result is net loss in occupancy, as a healthy majority of these tenants are choosing to move and downsize at renewal. Availabilities continue to tick higher, now at an all-time high of 15.4% across the metropolitan area.