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PORTLAND-Thanks to an economic slowdown that has kept new product few and far between and the region’s well-known restrictions on sprawl, the Portland-area apartment market will start growing again shortly after the economy catches its breath. That’s according to a mid-year market report by Marcus & Millichap and Jack Estes, regional manager of the firm’s Portland office.

“The Portland-Vancouver apartment market has experienced some softening due to the recent economic slowdown, but the long-term potential for the market is strong,” notes Estes. “Not only has the Urban Growth Boundary limited construction activity in the region, but the downturn has caused further thinning of the construction pipeline.”

By the end of 2002, the Portland-Vancouver region’s employment base is forecast to have contracted by 1% on an annual average basis; according to the report. However, from mid-2002 through mid-2003, the report predicts employment growth will become positive, at approximately 1%–assuming a recovery in the high-tech manufacturing sector spurs economic growth throughout the region.

Vacancy will rise another 0.5 percentage points by year-end 2002 and is then expected to remain relatively stable through mid-2003, according to the report, resulting in a regional vacancy rate of 7.2%. Construction completions from mid-2002 to mid-2003 will increase over the previous year, when just 900 units were delivered, according to the report. Projects reaching completion over the next 12 months, however, will drain the pipeline almost entirely, according to the report.

As for rents, by year-end 2002 the report predicts the average rent in the Portland-Vancouver region will decline slightly to $680 per month, down from the current average of $684 per month. “Similar to markets such as Seattle, asking rents have not been significantly affected by the current economic downturn,” states the report. During the first half of 2002, the average monthly rent in the region declined by just $4 or less than 1%, according to the report.

Transaction activity also will dip in 2002 compared to 2001, “due primarily to a lack of product available for sale,” states the report. During the first quarter of 2002, sales activity matched last year’s first quarter levels, but preliminary second quarter information indicates a decline, according to the report.

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