High Concessions Drive Portland, OR Rents in Reverse Amid $3.4B Maturity Wave
Multifamily in Portland, Oregon, is experiencing some softness — forcing landlords to concede more to lure in tenants, according to a new market report from Colliers.
Occupancy in the second quarter dropped by 30 basis points year-over-year to 95.3 percent. To attract tenants, more than a quarter of building owners in the area offered a concession, which was up by 22 percent from the second quarter on average. The average concession was $138 per month, which resulted in a 2.25 percent decrease in rents to $1,750.
At the same time, demand was at a positive 1,794 units — but that wasn't enough to offset the weakening economic conditions Portland has been facing.
"The increased concessions suggest that, even as absorption improves, landlords are competing for an ever-shrinking pool of renters as the Portland metro continues to shed jobs (employment growth -1.80% year-over-year) and residents (population -0.73% year-over-year)," Colliers noted.
Moreover, things were no better from an investment standpoint, with sales dropping by 29 percent to $338.9 million across 41 deals. Also, quarterly volume lagged 40 percent from the 5-year average. The top acquisition in Q2 was made by Guardian Pacific Coast Capital Partners, snagging a 333-unit property in the CBD submarket for $63.30 million. MG Properties and Laurel Property Group ranked second and third, with $42 million and $30.70 million purchases, respectively.
To add fuel to the fire, Colliers warns of a maturity wall coming up. About $3.4 billion in mortgage debt across 192 properties is set to expire at the end of next year, for multifamily in Portland. Notably, roughly $224 million encompassing 18 assets is either on watchlist status or flagged as potentially troubling. The CRE brokerage noted these developments will be worth watching in the market as financing remains challenging with elevated interest rates.
The other headwind for Portland is that Colliers expects new supply to remain high, with 1,300 more units set to deliver in the second half. At the end of June, 3,412 multifamily units were under construction.
"That continued supply, combined with the substantial wave of loan maturities working through the market over the same period, suggests owners and lenders will remain focused on refinancing execution and capital discipline well into 2027," Colliers predicted.
Source: GlobeSt/ALM