Previous strength in the market has led to several projects that will have brought 151,324 sf of new office space onto the market by year's end - the highest level since 188,000 sf in 1995. But with vacancy rates rising from 8.7% to 8.8% during the quarter, according to the latest survey by Coldwell Banker Commercial LLC, and a record amount of space coming online, the development pipeline is shrinking.

Sources tell GlobeSt. that development of some product is being put on hold because vacancy rates are likely going to rise through the fourth quarter, putting downward pressure on rents headed into 2001. Spence Powell, owner of the Salem office of real estate appraisal firm Palmer Groth Pietka, confirmed fears in the Statesman Journal newspaper last week, saying, "I know of at least three or four projects that have been shelved because the market is soft."

As usual, some of the market's success will be determined by government action. While the state could need a little more space if some key ballot measures are passed, Marion County is expected to vacate some of its leased space in the near future, adding to the total availabilities.

Vacancy rates for retail also rose during the third quarter, according to the survey, while industrial availabilities shrunk. South Salem experienced the biggest jump in vacancies, rising from 5.3% to 15.2% in large part due to the closing of a 55,000-sf G.I. Joe's store. Industrial vacancies fell to 4.98% in the quarter due to a few large buildings that were taken off the market.

Multifamily vacancies dropped from 3.1% to 2.7% in the quarter for newer units, thanks to a lull in new apartments building. The lull, of course, means vacancy rates will likely continue to drop, putting upward pressure on rents.

Instant Insights /

Office Market Questionable in Oregon's Capital

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