NWV Group recently attended the Spring Apartment Report hosted by Multifamily NW. Our team appreciated hearing from several excellent speakers, including economist John Lehner, appraiser Patrick Barry and Portland mayoral candidate Rene Gonzalez.
As many know, our local real estate industry as a whole has been tumultuous in recent years – residential sales, commercial leasing, residential leasing have all faced headwinds for numerous reasons. Last week’s conference confirmed the difficulties that we and our clients have been facing. However we also heard about some surprisingly positive regional outlooks for the near future. In this article we cover specifically vacancy and market rents for residential apartments. We are also including a copy of the Spring Apartment Report for our ownership.
Recent Headwinds
The report reveals a significant increase in vacancy rates since the fall report, with rates climbing from 5.47% to 6.17%. Our owners have felt these challenges with our leasing efforts the past 6 months as we faced longer vacancy times.
While some areas such as Aloha, Tigard, Tualatin, and Sherwood continue to maintain sub-5% vacancy rates, the urban core, particularly NW and Downtown Portland, are experiencing higher vacancy rates, with NW at 8.7% and Downtown Portland at 7.48%.
Vacancy has varied widely by unit type, with Studios in Downtown Portland surpassing a 12% vacancy rate in past years, and still over 8% currently:
These rates match reporting from Zillow indicating that just 9% of prospective renters in Portland are seeking a Studio apartment – perhaps moreso than ever before, unit type is very important to consider as renter preferences shift post-pandemic:
These climbing vacancy rates and reduced renter interest in Studios and to a lesser extent 1Bdrm units in Portland are due to multiple factors:
- Renter migration to suburban locales, out of Portland
- Portland’s reputation suffering from both perceived and real safety and security issues
- Economic factors changing shifting preferences towards roommates and larger units
- Continued pipeline of new apartments coming online
This is good information for current and future property owners to plan ahead for unit type considerations, lease up considerations and future acquisitions.
Improvement Coming?
Its not all doom and gloom, however. After a continued softening in late 2023, rents have stabilized or risen slightly in early 2024, lending hope that we are setting off on a slow but steady recovery:
Most experts are forecasting rents continuing to turn positive in 2024, and for vacancies to improve in 2024 as apartment completions slow down significantly in the coming year. With Portland’s safety and homelessness recovery happening slowly but still happening, demographics are expected to improve as well, with renters returning to the urban core.
Near term the outlook is still potentially rocky – there will still be instability in 2024 as the timing of the above improvements is difficult to pin down. However in the next 12-24 months, the headwinds we have all faced in 2023 should hopefully be in the rearview mirror.
Have any questions? Our team is glad to discuss this – get in touch today!
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