An affordable West Coast multifamily market? Why not? Portland, Ore., has been attracting residents and investors alike for years, thanks to its high quality of life and low cost of living compared to other coastal metros. Pandemic-induced migration patterns have recently brought new residents to the metro, which contributed to steady—although uneven—rent growth throughout 2021.
And Portland continued to see strong performance in the first quarter of 2022 as well, with rent growth being supported by high occupancy rates, Cushman & Wakefield Director of Multifamily Insights Sam Tenenbaum told Multi-Housing News. In the interview below, Tenenbaum talks about the factors that make this West Coast metro a highly desirable multifamily market.
What can you tell us about multifamily investment activity across Portland? What sets this metro apart from other coastal markets?
Tenenbaum: One of the main differentiating factors is the cost of living. Most West Coast metros are synonymous with high prices—rents in San Francisco are nearly double the national average, and rents in Seattle average nearly $500 more per month than the broader United States. Meanwhile, Portland’s rents and sale prices are more in line with the broader U.S., one of the key drivers of the market’s success over the past decade.
Multifamily fundamentals improved significantly last year in the metro. Do you expect this trend to continue this year?
Tenenbaum: Portland’s apartment market should remain strong. Very little is in the construction pipeline, which will mean occupancies are likely to remain high. Today, there are about 5,000 units under construction, reflecting the lowest rate since 2012. While the market’s healthy fundamentals are likely to spur additional development, construction costs and delivery timelines continue to increase, allowing occupancies to remain higher for longer.
Which Portland neighborhoods are the most sought-after and why?
Tenenbaum: There are several neighborhoods that are attractive to renters and investors. On the west side, the Silicon Forest of Beaverton and Hillsboro, powered by major employers Nike and Intel, boast thousands of employees, many of whom want to live closer to work and who moved out of downtown Portland during the pandemic. Occupancies in Beaverton have approached 97 percent, and rent growth surpassed the metro-wide benchmark during the past year.
In downtown, renters and investors have favored the Pearl District, which is Portland’s main live-work-play node. The neighborhood features reclaimed warehouses, upscale restaurants, breweries and many of the fun cultural amenities that draw people to the city.
The South Waterfront is on the heels—developers have flocked to the neighborhood in recent years thanks to the growth at Oregon Health and Science University. The institution is planning to add a 184-bed hospital, which is expected to bring thousands of new, high-paying jobs right next to the South Waterfront. Additionally, if the grocery store that’s proposed as part of Alamo Manhattan’s project materializes, it will also help keep this neighborhood front-of-mind for renters.
What type of multifamily assets are most investors targeting in the Portland metro area?
Tenenbaum: With the relative value that Portland represents, it is hard to pinpoint any specific type of location or investment type that groups are favoring; rather, investors have demonstrated interest across the Portland metro. There has been plenty of activity in the value-add space as well as core institutional investors purchasing recently delivered product.
Tell us some details about a notable deal you closed in the metro in the last two quarters.
Tenenbaum: The Cushman & Wakefield Equity, Debt and Structured Finance team of Dave Karson, Chris Moyer, Alex Lapidus and Meredith Donovan served as exclusive adviser to an affiliate of Security Properties in the $71 million refinancing of Peloton Apartments, a three-building, 265-unit, Class A multifamily community in Portland.
Built in 2018, Peloton is located at 4141 N. Williams Ave. in the city’s North Williams District neighborhood. The community features studio, one- and two-bedroom layouts, in addition to live-work units. Peloton Apartments has performed exceptionally well throughout the COVID-19 pandemic, averaging over 96 percent occupancy.
The community’s North Williams District location offers residents a premier live-work-play residential experience. One of the most dynamic neighborhoods in Portland, the district has seen significant development in recent years, also featuring the city’s busiest bikeway, which sees more than 10,000 bikes pass daily outside the property.
To what extent is rising inflation causing concern among Portland investors?
Tenenbaum: With landlords’ ability to reprice leases every year, inflation hasn’t been much of a concern. Rather, rising interest rates have certainly created consternation. Buyers, specifically high-leverage ones, are likely to become more selective in this environment-absent repricing.
In your opinion, what does the future hold for Portland’s multifamily market in 2022?
Tenenbaum: Ultimately, the fundamentals of the market remain incredibly healthy. While the market likely won’t repeat 2021’s record-setting performance, Portland’s multifamily market should see above-trend growth through 2022.