Just 252,000 sf of new construction was delivered in the first quarter but it was delivered with 30% vacancy, pushing up the overall vacancy rate. Another 2.3 million sf is scheduled for delivery throughout the rest of the year, much of it speculative; combined, the space will be delivered with 25% vacancy.
It is telling that of the 2.3 million sf to be delivered this year, just 107,000 sf is flex space and none of it has been pre-leased. While the overall industrial vacant rate is 11.1%, the region's 33.7-million-sf flex market is 12.8% vacant.
The largest flex market is the Sunset Corridor, where 2.34 million sf is unoccupied for a vacancy rate of 14%. The submarket's weighted average asking rate is $0.84 per sf per month. The worst flex market is the nearby 217 Corridor/Beaverton submarket, where vacancy is 20%. The best flex submarket is Milwaukie/Clackamas, which has just 285,000 sf vacant for a 9.2% vacancy rate.
"It is expected that the flex sector will recover at roughly the same pace as the office market, which could take several more quarters to fall below double-digit vacancy rates," states the report.
In the region's 88.6-million-sf warehouse, manufacturing and distribution market, some 9.2 million sf is available for a 10.4% vacancy rate. The region's largest submarket in the non-flex category is the NE/Columbia Corridor, which has 19.7 million sf of inventory and a 9.2% vacancy rate. It was the only submarket to see significant net absorption (366,640 sf. The only other submarket with more than 10 million sf and less than 10% vacancy is the I-5 South Corridor, which is sporting a svelte 7% vacancy rate. The worst among the 10-million-sf and over category is Rivergate, an 11-million-sf market with a 13.5% vacancy rate.
"The warehouse distribution and manufacturing sector continues to grapple with vacancy in functionally obsolete buildings and otherwise second-generation space," states the report. "The upside in all this is that business consolidations and downsizing/relocations seem to be nearing completion."
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