Portland Office Market

D CoStar Office Statistics ©2018 CoStar Group, Inc.

Portland – Mid-Year 2018 Mid-Year 2018 – Portland

Portland Office Market

©2018 CoStar Group, Inc. CoStar Office Statistics 1

Overview

Portland’s Vacancy Stays at 6.6% Net Absorption Positive 1,160,537 SF in the Quarter

The Portland Office market ended the second quarter 2018 with a vacancy rate of 6.6%. The vacancy rate was unchanged over the previous quarter, with net absorp-

tion totaling positive 1,160,537 square feet in the second quar-ter. Vacant sublease space increased in the quarter, ending the quarter at 334,810 square feet. Rental rates ended the second quarter at $23.81, no change over the previous quarter. A total of five buildings delivered to the market in the quarter, with 2,503,330 square feet still under construction at the end of the quarter.

AbsorptionNet absorption for the overall Portland office market was

positive 1,160,537 square feet in the second quarter 2018. That compares to negative (187,283) square feet in the first quarter 2018, positive 304,580 square feet in the fourth quarter 2017, and positive 438,026 square feet in the third quarter 2017.

Tenants moving out of large blocks of space in 2018 include: Symantec Corp moving out of 300,000 square feet at 555 International Way and Oregon Department Human Service moving out of 68,363 square feet at Capitol City Business Center.

Tenants moving into large blocks of space in 2018 include: Fiserv moving into 65,496 square feet at Creekside Corporate Park and Vacasa moving into 60,152 square feet at Heartline Building.

The Class-A office market recorded net absorption of positive 960,030 square feet in the second quarter 2018, com-pared to positive 64,757 square feet in the first quarter 2018, positive 94,726 in the fourth quarter 2017, and positive 329,734

in the third quarter 2017.The Class-B office market recorded net absorption of pos-

itive 163,340 square feet in the second quarter 2018, compared to negative (173,327) square feet in the first quarter 2018, posi-tive 251,794 in the fourth quarter 2017, and positive 95,013 in the third quarter 2017.

The Class-C office market recorded net absorption of positive 37,167 square feet in the second quarter 2018 com-pared to negative (78,713) square feet in the first quarter 2018, negative (41,940) in the fourth quarter 2017, and positive 13,279 in the third quarter 2017.

Net absorption for Portland’s central business district was positive 224,250 square feet in the second quarter 2018. That compares to negative (469,530) square feet in the first quarter 2018, positive 165,269 in the fourth quarter 2017, and positive 153,670 in the third quarter 2017.

Net absorption for the suburban markets was positive 936,287 square feet in the second quarter 2018. That compares to positive 282,247 square feet in first quarter 2018, positive 139,311 in the fourth quarter 2017, and positive 284,356 in the third quarter 2017.

VacancyThe office vacancy rate in the Portland market area was

unchanged at 6.6% at the end of the second quarter 2018. The vacancy rate was 6.2% at the end of the fourth quarter 2017, and 6.3% at the end of the third quarter 2017.

Class-A projects reported a vacancy rate of 8.0% at the end of the second quarter 2018, 7.7% at the end of the first quarter 2018, 7.1% at the end of the fourth quarter 2017, and

Vacancy Rates by Class 2003-2018

Source: CoStar Property®

Absorption & Deliveries U.S. Vacancy ComparisonPast 8 Quarters Past 8 Quarters

Source: CoStar Property® Source: CoStar Property®

0%

2%

4%

6%

8%

10%

12%

14%

16%

2003 1q 2004 1q 2005 1q 2006 1q 2007 1q 2008 1q 2009 1q 2010 1q 2011 1q 2012 1q 2013 1q 2014 1q 2015 1q 2016 1q 2017 1q 2018 1q

Vac

ancy

Rat

e

A B C Total Market

0.49

0.30

(0.08) (0.03)

0.44

0.30

(0.19)

1.16

0.130.22

0.120.04

0.270.19

0.43

1.19

(0.4)

(0.2)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2016 3q 2017 1q 2017 3q 2018 1q

Millions

SF

Net Absorption Deliveries

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2016 3q 2017 1q 2017 3q 2018 1q

Vac

ancy

Rat

e

Portland United States

Offi ce Market Report | Q2 2018

The second quarter in the Portland Offi ce market ended with a 6.6% vacancy rate. While net absorption totaled a positive 1,160,537 square feet, vacant sublease space increased to 334,810 square feet. The quarter fi nished with rental rates at $23.81, which remained the same from the fi rst quarter. Five buildings were delivered to the market with 2,503,330 square feet under construction at the end of the quarter.

The offi ce market was positive 1,160,537 square feet in net absorption, compared to negative 187,283 square feet in the fi rst quarter of 2018. The most notable tenants moving out of space include: Symantec Corp (300,000 SF) and Oregon Department Human Service (68,363 SF).The following tenants moved into large blocks of space: Fiserv (65,496 SF) and Vacasa (60,152 SF). Class A: positive 960,030 SF Class B: positive 163,340 SF Class C: positive 37,167 SFNet absorption for Portland’s CBD was positive 224,250 square feet and 936,287 square feet for suburban markets.

The vacancy rate was unchanged from the previous quarter at 6.6%, still slightly higher than the 6.2% vacancy rate at the end of 2017. Class A: 8.0% Class B: 7.0% Class C: 4.6%In the CBD, the overall vacancy rate was 10.0% and in suburban markets the vacancy rate increased to 5.7%.

PORTLAND MARKET SNAPSHOT

VACANCY

OVERVIEW

ABSORPTION & DELIVERIES

Vacancy Rates by ClassYears 2003 - 2018

Absorption & DeliveriesPast 8 Quarters

16%

14%

12%

10%

8%

6%

4%

2%

0%

3.0

2.5

2.0

1.5

1.0

0.5

0.0

(0.5)2016 Q3 2017 Q1 2017 Q3

DeliveriesNet Absorption

900 SW 5TH AVENUE, 17TH FLOOR | PORTLAND, OR 97204 | 503.223.3171 | WWW.NORRIS-STEVENS.COM

VACANCY RENTAL RATE

CONSTRUCTION ABSORPTION

6.6%

2,503,330 SF

$23.81

1,160,537 SF

Source: CoStar Property

Source: CoStar Property

2018 Q12003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1

A B C Total Market

2018 Q1

1.61.4

0.7

(0.1)

1.4

0.6

1.3

0.6

2.8

0.5 0.7

1.5

0.3

1.7

0.70.6

DELIVERIES AND CONSTRUCTION RENTAL RATES

For all classes, the average quoted rental rate was $23.81. Class A: $30.11 Class B: $22.27 Class C: $18.47The average rental rate in Portland’s CBD was $31.57 and $21.26 in suburban markets.

Five buildings were completed in the second quarter, compared to 11 buildings in the fi rst quarter. 2,503,330 square feet remains under construction at the end of second quarter. Of the buildings completed, notable deliveries include the Nike North Expansion Building A (412,000 SF) and Field Offi ce (165,653 SF).Both the Nike North Expansion Bldg B (1,003,585 SF) and Block 29 Center for Health & Healing (360,000 SF) are 100% pre-leased and still under construction.

3.0

2.5

2.0

1.5

Construction Starts Deliveries

Mill

ions

SF

1.0

0.5

0.0

1.3

7 0.6

0.3

1.2 1.2

2.6

1.21.4

0.7

0.2

0.6

1.1

2015 1q 2017 1q2016 1q

Historical Construction Starts & DeliveriesSquare Footage Per Quarter

MarketUnder Construction Inventory Average Bldg Size

# Bldgs Total RBA Preleased SF Preleased % All Existing U/C

Northeast 11 2,493,946 1,804,529 72.4% 38,157 226,722

Marion County 2 1,033,420 1,018,020 98.5% 24,465 516,710

Westside 3 471,160 190,000 40.3% 45,290 157,053

I-5 Corridor 5 292,981 67,050 22.9% 36,978 58,596

Clark County 5 133,857 127,137 95.0% 30,168 26,771

Lane County 7 121,896 36,000 29.5% 24,835 17,414

Cowlitz County 1 110,000 70,400 64.0% 25,081 110,000

Yamhill County 3 79,000 69,000 87.3% 25,270 26,333

Deschutes County 3 46,219 20,701 44.8% 15,800 15,406

Southeast 4 35,455 16,455 46.4% 23,946 8,864

All Other 3 28,968 7,000 24.2% 30,747 9,656

Totals 47 4,846,902 3,426,292 70.7% 30,275 103,126

Construction Activity | Markets Ranked UNDER CONSTRUCTION RBA

Source: CoStar Property

Source: CoStar Property

2018 1q

1.7

0.5 0.4

2.1

1.5

1.0

1.71.5

0.21.7

1.00.6

0.50.60.50.3

1.3

For detailed information regarding this report, and to discuss how Norris & Stevens can assist with your real estate needs, please

contact us at (503) 223-3171 or visit us at www.norris-stevens.com.

900 SW 5TH AVENUE, 17TH FLOOR | PORTLAND, OR 97204 | 503.223.3171 | WWW.NORRIS-STEVENS.COM