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PORTLAND-Vacancy rates will drop, net absorption will rebound and overall market conditions will improve as the economy pushes the city’s office sector toward a much welcomed recovery.

“2004 will be a lot like 2003 only better,” Dave Squire, managing director with Grubb & Ellis Co.’s local office, tells GlobeSt.com of a forecast study that paints 2004 as a year of slow and steady improvements. “We’re not going to be doing any 100-yard dashes,but we’ve got the IVs out of our arms and are walking around.”

Employment growth will be a key factor in the office market recovery as corporations continue to gain confidence in the improving economic outlook. “Companies are finally getting back their confidence,” Squire says, noting the increased optimism will lead to job growth that will fuel the need for added office space for the city’s businesses.

That renewed confidence is expected to push vacancy rates into single digits in Downtown and below 20% in the suburbs and spur an expansion in net absorption to pre-boom levels of 800,000 sf, the Grubb & Ellis-commissioned study shows.

The city’s leasing market, however, will remain competitive through 2004 and into 2005 as an abundance of rental space continues to put downward pressure on leasing prices in most submarkets. Concessions will remain part of the package, but could begin to burn off slowly as rental activity heats up. Smart tenants will use the improving market as an opportunity to upgrade their space, leaving building owners with mediocre space and offering even more concessions to keep existing tenants or lure new ones, researchers conclude.

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