Industrial Market Report | Q3 2019

The Industrial market in Portland closed out the third quarter 2019 with a vacancy rate of 4.6%. Net absorption totaled a negative (117,073) square feet and vacant sublease space decreased. Rental rates increased from $8.84 in the previous quarter to $9.21 at the end of the third quarter. A total of 5,800 square feet were delivered to the market and 4,318,696 square feet still remain under construction at the end of the quarter.

The overall Portland Industrial market absorbed negative (117,073) square feet, compared to negative 31,616 square feet in the third quarter 2019.A net absorption of negative (15,783) square feet was recorded for the flex building market for the third quarter 2019, which compared to positive 19,877 square feet from the previous quarter.The warehouse building market recorded net absorption of negative (99,822) square feet in the third quarter 2019, compared to negative (331,429) square feet in the second quarter 2019.

The Portland area vacancy rate incresed to 4.6% at the close of the third quarter 2019, up from 4.2% at the end of the second quarer 2019.The vacancy rate for flex projects increased slightly from the previous quarter, from 7.3% to 7.4%.The vacancy rate for warehouse projects in third quarter 2019 was 5.2%, up from 4.7% in the previous quarter.

PORTLAND MARKET SNAPSHOT

VACANCY

OVERVIEW

ABSORPTION & DELIVERIES

Vacancy Rates by Building TypeYears 2014 - 2019

Absorption & Deliveries2013 - 2019

900 SW 5TH AVENUE, 17TH FLOOR | PORTLAND, OR 97204 | 503.223.3171 | WWW.NORRIS-STEVENS.COM

VACANCY RENTAL RATE

CONSTRUCTION ABSORPTION

4.6%

4,318,696 SF

$9.21

(117,073) SF

Source: CoStar Property

Source: CoStar Property

Net Absorption Deliveries

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2019 Q32019 Q12018 Q32018 Q12017 Q32017 Q12016 Q3

10%

8%

6%

4%

2%

0%2014 2015 2016 2017 2018 2019

Flex Warehouse Overall

DELIVERIES AND CONSTRUCTION RENTAL RATESPortland quoted industrial rental rates increased in the third quarter 2019 to an average of $9.21 per square foot, up from $8.84 per square foot from the previous quarter.The flex sector average quoted rental rates also increased, ending the quarter at $13.89 per square foot and the warehouse average quoted rental rate stood at $8.45 per square foot.

During the third quarter 2019, the Portland market slowed quite a bit from the previous quarter, delivering a modest 5,800 square feet, all in the warehouse sector. There were 4,318,696 square feet of industrial space under construction at the end of the third quarter 2019. Some of the largest projects underway are expansion projects, including the Intel expansion project at 1,500,000 square feet, and the UNFI expansion, at 577,000 square feet.

MarketUnder Construction Inventory Average Bldg Size

# Bldgs Total RBA Preleased SF Preleased % All Existing U/C

Sunset Corridor/Hillsboro 7 1,637,000 1,580,000 96.5% 50,711 233,899

East Columbia Corridor 8 1,142,000 536,000 46.9% 58,328 142,749

Clark County Outlying 2 694,000 577,000 83.1% 60,960 347,208

SE Outlying 1 530,000 530,000 100% 16,183 530,000

CBD/West Vancouver 1 156,000 156,000 100% 46,213 156,000

Orchards 4 61,000 30,000 49.0% 23,903 15,300

Tualatin 1 53,000 37,000 69.5% 38,872 53,000

St Johns/Central Vancouver 1 28,000 0 0.0% 26,669 27,800

Sherwood 1 17,000 17,000 100.0% 28,983 17,000

217 Corridor/Beaverton 0 — — — 32,180 —

All Other 0 — — — 29,747 —

Totals 26 4,319,000 3,463,000 80.2% 33,465 166,104

Construction Activity | Markets Ranked UNDER CONSTRUCTION RBA

Source: CoStar Property

Source: CoStar Property

Source: CoStar Property

For detailed information regarding this report, and to discuss how Norris & Stevens can assist with your real estate needs, please contact us at (503) 223-3171 or visit us at www.norris-stevens.com.

900 SW 5TH AVENUE, 17TH FLOOR | PORTLAND, OR 97204 | 503.223.3171 | WWW.NORRIS-STEVENS.COM

Historical Construction DeliveriesSquare Footage Per Quarter

Market Rent Growth

Mill

ions

of S

F

Deliveries Demolished Net Deliveries

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2014 2015 2016 2017 2018 2019

10%

8%

6%

4%

2%

0%2014 2015 2016 2017 2018 2019

Flex Warehouse Overall