Oversupply Softens Rent Growth in Portland
A healthy job market and strong population gains continue to sustain multifamily demand across the metro, where more than 5,000 apartments are scheduled for delivery in 2018.
By Adina Marcut
A wave of new inventory and historically high rents moderated Portland’s average rent growth to just 0.8 percent year-over-year in 2017, 170 basis points below the national rate. However, a healthy job market and strong population gains continued to sustain multifamily demand. The metro added 22,500 jobs in the 12 months ending in October, which kept the unemployment rate at 3.9 percent.
The mining, logging and construction sector added the highest number of jobs (8,100 positions), followed by the education and health services sector (4,700). Although the construction industry is facing labor shortages at the national level, local projects such as Legacy Health’s $210 million replacement and expansion of its Legacy Emanuel Medical Center and the more than 1.1 million square feet of office space under construction across the metro are helping the sector lead employment growth in Portland.
Investor appetite slowed in 2017, with $960 million in multifamily properties changing hands, a significant downshift compared to 2016’s cycle peak of $2.4 billion. But even though transaction volume dropped, prices continued to rise, reaching a new cycle high of $207,300. The metro’s multifamily pipeline is robust, with more than 7,000 units underway as of December and another 11,000 in the planning stages. Yardi Matrix forecasts 5,300 deliveries for 2018. As a result, rent growth is expected to stay tepid, at a projected rate of 1.5 percent in 2018.