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PORTLAND-Vacancy in the Portland’s class A office market fell from 18.4% to 17.5% during the second quarter due to 289,000 sf of positive absorption, according to the just-released mid-year market report from Grubb & Ellis. Class A rental rates continued to fall, dropping from $22.77 to $22.54 this quarter.

Class A space in the Portland’s 16.7-million-sf CBD is 13.5% vacant, as is the 5.4-million-sf Washington Square/Kruse Way submarket. The tech-heavy Sunset Corridor, the region’s third largest class A office market with 3.75 million sf, had a vacancy rate of 31% as of the end of June, according to the report.

The average full-service asking rate for space in the Portland CBD is $23.23 per sf per year. In the Washington Square/Kruse Way market, the average class A asking rate is $22.39. In the Sunset Corridor, the average class A asking rate is $20.03.

According to the report, the drop in class A vacancy is the result of tenants upgrading to newer space. As a result, class B vacancy rates increased this quarter from 16% to 17.4% on 163,543 sf of negative net absorption. Class C vacancy rates rose from 13% to 14.8% on 99,000 sf of negative net absorption. Average vacancy across all classes climbed 20 basis points to 17% on 26,683 sf of positive net absorption, according to the report.

“Anecdotal evidence suggests that moderate growth is returning in earnest,” writes Research Director Patricia Raicht in her forecast for the rest for the year. “Deals on the street have increased and activity has picked up somewhat in the last 30-60 days; expect vacancy to begin to decline slowly in the next quarter and beyond.”

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