Overall average vacancy in the region hit 7.6% in the third quarter and is expected to reach 8% by the end of the year; by year-end 2004, despite rising employment, vacancy will average a record-high 8.2%, according to the report.
Of course, that means downward pressure on rents. The overall average asking rent at the end of the third quarter stood at $689 per month, off 0.9% from the end of the third quarter 2002, according to the report. Rent is expected to stay flat through 2004, as employment is expected to begin a comeback.
While the city's overall employment level is forecast to fall by 0.9% in 2003, which is slightly less than 2002, a 1.8% rise in employment is expected in 2004. The report predicts that manufacturing and education and health services employment will increase by more than 1,000 and 3,500 jobs, respectively, and that professional and business services will gain over 5,600 new positions.
Developers delivered 350 units in the third quarter and another 450 units are expected by the end of the year for a year-end total of 1,300 units. In 2004, 1,500 new units are expected, including the 128-unit Museum Place tower located adjacent to Downtown in the West End.
Downtown has been one of the best performers in the market. The Northwest/Downtown submarket posted the lowest vacancy rate of the quarter, 6%, albeit up from 5.3% this time last year. The high-tech-laden Hillsboro/Forest Grove submarket suffered the highest vacancy rate during the third quarter, 8.7%, followed by the suburban submarkets of North Clackamas, Outer Southeast Gresham and Beaverton, which are all holding vacancy rates above 8%.
As for the investment market, prices have risen despite subdued activity in 2003, as record low interest rates are producing multiple buyers for relatively limited listings, states the report. Overall, the median price per unit in the market increased 6%, to $53,000, during the first nine months of 2003. The majority of sales this year have taken place in suburban Outer Southeast Gresham, followed by Northeast Portland. The majority of transactions year-to-date consisted of older structures built in 1980 or earlier, with an average price of $1.5 million.
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