Report: Portland Commercial Real Estate 3rd Worst in Nation

PORTLAND-Hit the brakes and turn around before entering Portland’s multifamily and office markets, proceed with caution into the industrial zone and dive head first into the retail scene. That’s the word from Moody’s Investor Service, which recently released its third-quarter red-yellow-green report on the nation’s commercial real estate markets.

Portland’s green-light market for community and neighborhood shopping centers kept the city from being the overall worst market in the country, according to the report. Portland scored 94 out of 100 to be listed as the 6th best retail market in the country. The nation’s average score was 88.

Portland’s multifamily market, on the other hand, showed by far the sharpest decline in the nation, according to the report, which scored Portland a big fat zero out of 100 for the third quarter, down from 66 in the second quarter, which itself was well below the nation’s average score of 72. Supply has increased 2% from the second quarter while demand is expected to decline by 7.3%, the biggest drop-off in the nation, according to the report. The 9.5% spread is the widest of the 53 markets covered in the report.

“The unusual negative absorption expected in Portland is an artifact of a national trend that is playing out in this city with extraordinary intensity – and is likely temporary,” states the report. “Area residents have an above-average level of stock holdings, which have offered disappointing returns, to put it mildly.

“The result has been a shift of equity from stocks to housing, evidenced in a record volume of mortgage originations well above historical norms for the city and greater than the parallel national trend. This shift in investment behavior could be reversed, in which case absorption of apartments could return to more normal levels from this aberrant environment.”

Portland office market remained in the red during the third quarter, according to the report, posting a score of 30 out of 100, tying it for the nation’s 11th worst office market. Like Atlanta and St. Louis, according to the report, Portland’s negative supply-demand imbalance isn’t so bad at 0.5% to 1.2%, “but this imbalance on top of above-average vacancy contributes to continued weakness.”

The industrial market in Portland also remained relatively unchanged from the second quarter, according to the report, which gave it a yellow ranking and score of 60 out of 100 compared to a national average of 52, which means supply and demand are in balance, at least for the time being.