Set to dwindle from its post-recession peak, the Portland, Ore., metro is expecting slight vacancy increases along with a precipitous contraction in rent growth in the coming years, this as construction bounces back from its 2011 lows. Nevertheless, with employment continuing to grow and renter demand steady, the MSA remains attractive to developers and investors alike.
Hendricks-Berkadia reports that Portland is expected to add over 53,000 jobs over the next two years, subsequently boosting headcounts by 5.3 percent. A great bulk of these will be attributable to the city’s Five-Year Economic Development Strategy, which was adopted in 2009 and includes policies and initiatives to spur private-sector growth.
Among the plan’s initiatives is financial assistance to small business, which has facilitated the creation of new companies and helped diversify the local economy. Hendricks-Berkadia notes that more than 22,000 new business licenses have been issued since the program’s inception.
Such a favorable economic climate has obviously boosted the confidence of local developers, who began increasing deliveries in 2012 and are expected to continue over the next two years. 470 units were completed last year, which dwarfs the 70 units completed in 2011, and Hendricks-Berkadia projects that 2,340 units will be added through 2014, boosting market-rate inventory by 1.4 percent.
As a result of the new supply, vacancy will tick up for the first time since 2009, this after the overall rate fell to 2.2 percent last year. Yet the upward trend will be slight, and analysts expect the metro average will remain below 3 percent through 2014.
Furthermore, 2013 will be a year of record high rent growth—coming in at 4.1 percent and boosting average rents to a record $924 per month. Yet, as operators take into consideration the saturation of new supply, this figure will fall drastically to 1.9 percent in 2014.
Overall, the Portland metro area continues to outpace the rest of the nation in employment growth and occupancy, and this trend is expected to continue through the foreseeable future.