OutLook For 2009
source: Pacific Real Estate Partners
- Although the vacancy level is only up slightly at 9%, we believe the market is much softer.
- Free rent, moving allowances, discounted rent and additional tenant improvement allowances will be the norm in 2009.
- Concessions will vary by market. The Sunset Corridor, for instance, is seeing upwards of 12 months of free rent whereas the CBD, Pearl District and Lloyd Center submarkets are giving modest free rent.
For now, the impact on the CBD appears to be less dramatic. With a lack of inventory and relatively strong demand, rates are not backing off by much. Once new inventory is added starting in mid-2010, this could change.
With an eye toward the future, it should be noted that in past recessions, the Portland market didn’t bottom out for two years after the peak. Since we peaked in Q407, based on this historical data, our market should bottom out at the end of 2009, followed by a slow recovery in 2010.
Landlords have, historically, had shorter periods of time (avg. 14-16 months) to raise rates in an escalating market. So, we don’t expect to see rents increasing at any sustained pace until 2011.
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