Portland Retail Figures Report Q3 2023
October 11, 2023 10 Minute Read
From a brokerage perspective, Portland’s shopping center market in Q3 was a two-sided story: leasing volume, tenant demand, and rental rates remained competitive, while sales volume slowed in the face of macroeconomic headwinds.
On the leasing front, suburban landlords continued to relish the high tenant demand driving vacancy down and rental rates up. In the suburbs, REI plans to occupy the former Bed Bath & Beyond space at Clackamas Town Center, confirming the expectation that vacated Bed Bath & Beyond space will allow opportunities for new high credit tenants. Market-wide gross leasing activity hit 452k sq. ft., well above the 10-year average of 330k sq. ft.
While our statistics highlight shopping centers rather than ground-level or standalone retail, there are positive retail stories emerging in Downtown and close-in Portland: the central city’s culinary scene got a boost, with the much-anticipated Din Thai Fung opening at the Pioneer Place shopping mall. Plus, new food-cart offerings are expected to breathe life into central city neighborhoods: the Expensify and ChefStable collaborative Midtown Beer Garden opened in August, and plans were announced for an outdoor gathering space with food carts, covered areas, and a music stage next to the famous Blumenauer pedestrian bridge in the Central Eastside. In Northwest Portland, Trek Bicycles leased space in a mixed-use apartment building for a bicycle store.
On the sales side, there’s a noticeable scarcity of sellers in the market. However, those that are present are showing a receptiveness to making deals, with sellers testing the market by dropping listing prices, if not necessarily transacting there. Though retail has consistently been ranked as a preferred sector in recent national commercial real estate sentiment surveys, liquidity struggles from both a lender and an equity perspective and prolonged federal interest rate volatility has hampered sales volume.
Economic drivers such as the Chips and IRA act, prompt federal support for banks, and consumer balance sheets have helped the U.S. economy defy expectations. However, the economy is facing intensifying headwinds: higher oil prices, resumption of student loan payments, and a weakening global economy. With the Fed likely finished with its tightening cycle, a clearer path for real estate capital markets is expected to unfold. In turn, valuations will likely stabilize nationally during H1 2024.