Thanks to build-to-suit and owner-build projects in the warehouse and distribution sectors, net absorption was positive at 427,457 sf in the second quarter, which is a big improvement from the first quarter, when negative absorption totaled 883,680 sf. Average net absorption in industrial over the last five years has been 3 million sf per year, according to the report.
The largest industrial submarket here, with 21.3 million sf, is the Northeast-Columbia Corridor, which saw its vacancy rate rise during the second quarter to 10.3% on negative absorption of 277,631 sf. The Westside submarkets, the 19.6-million-sf Sunset Corridor and the 1.l-million-sf Highway 217 Corridor, also saw negative absorption and are sporting the region's highest vacancy rates at 12.2% and13.8%, respectively.
Breaking it down by building type, the region's 77.5-million-sf of warehouse, manufacturing and distribution space saw nearly 600,000 sf of positive absorption and was sporting a vacancy rate of 8.7% at the end of the second quarter, according to the report. Meanwhile, the region's 34.3-million-sf of R&D-Flex product saw 167,000-sf of negative absorption in the quarter and now sports a vacancy rate of 10.5%.
"Economic indicators suggest that the U.S. economy is in recovery-mode, although it sure seems to be taking its time trickling down to the Pacific Northwest region," states the report. "Small improvements in Portland metro area employment and job growth are welcome news; however, after a year and a half of bleeding, the local market still needs a few more solid quarters of positive news, especially as it relates to the manufacturing and semiconductor sectors, before it wipes the sweat off its brow.
"In other words, while the economy no longer appears to be contracting, the slow pace at which the economy is expanding has created an extremely competitive market tilted strongly in tenant's favor."
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