Q3 Office Report: Results 'Neither Pretty Nor Unexpected'

PORTLAND-Thanks to 235,000-sf of negative absorption, total office vacancy rose more than one full point again during the third quarter and now stands at 11.2%, according to the latest numbers from Grubb & Ellis’ Portland office. The vacancy rate has risen by more than four full points since the beginning of the year. It is the first time since 1993 that the office market has been in double-digit territory, according to the report.

On the positive side (literally and figuratively), despite two straight quarters of negative absorption, Portland’s year-to-date totals are still in positive territory. Albeit by a paltry 28,000 sf, it’s a feat which few have matched. Grubb & Ellis is reporting positive YTD absorption for only 10 markets across the country through the third quarter.

Vacancy in Portland’s 15-million-sf CBD jumped from 6.8% to 8%, the highest it’s been in almost a decade, according to the report. Class A vacancy hit 8.3%, up more than two full points from the second quarter. Negative absorption in the CBD is expected to continue through mid-2002. It was (137,720) sf in the third quarter, mostly attributable to technology-related companies like ITT Tech, which vacated 30,000-sf at ODS Tower, and Preview Systems, which tossed 20,000 sf back at 1000 Broadway.

In the Sunset Corridor, sublease space and new development has helped launch vacancy rates past the 20% mark to 22.6% after topping out at 19.3% in the second quarter. It’s the same all over the Westside. Of the 135,113 sf of sublease space that was added to the entire Portland-Vancouver market in the third quarter, nearly all of it came from the Sunset Corridor and Kruse Way/Washington Square markets, according to Grubb & Ellis.

No substantial signs of a recovery are expected until sometime in 2002, according to the report.