This article originally appeared in the Portland Business Journal.
Positive things have been happening in downtown Portland, as the city works diligently to overcome challenges. Much of the credit goes to local business leaders, who have rallied around campaigns like “We Believe in Portland” to drive change and build momentum. The work is paying off: This summer, downtown foot traffic and visitors reached a four-year high, with approximately 2.4 million descending on the city each month.
Revitalizing the downtown environment has taken persistence and creativity, and leaders are tackling all angles. With public safety improvements, new public art and popular concerts and events taking place — and a renowned and thriving dining scene — people have many reasons to give Portland and its commercial real estate (CRE) a closer look.
Resilience in the region.
For businesses in downtown Portland, the uptick in activity may make a compelling argument for staying in the city, but it is still a hard sell. Portland leads the country in office vacancies, and in 2024, 23 of Washington Trust Bank’s commercial clients moved out of downtown. Many gravitated toward the perceived safety of suburban areas. Office markets in areas like Lake Oswego, Beaverton and Happy Valley, as well as Vancouver and wider Clark County in Washington, have benefited from the migration, but they are beginning to experience lower inventory and climbing lease rates.
Exacerbating high inventory levels in downtown Portland is the prominence of remote workers: Portland tops West Coast cities with 21.2% of employees working from home, according to CoworkingMag’s interpretation of U.S. Census data. Washington Trust Bank professionals, however, continue to embrace in-person work, and the bank signed a new 10-year lease to underscore its commitment to the area. Considering activity in and around Portland, the regional 2025 CRE outlook is optimistic.
Lower interest rates influence confidence in CRE.
Many businesses have been waiting for market conditions to improve before buying land or structures for expansion, and the Fed’s move to lower rates may help bring down the cost of borrowing. Additionally, some business owners are coming to terms with the fact that the ultra-low rates of the pandemic may not be seen again for some time, and the relatively higher interest rates of today are less off-putting. It’s likely that more cranes will be appearing, particularly in outlying areas.
Portland itself is a creative community and a city of entrepreneurs, and new ideas keep surfacing. Fledgling businesses might strike now to take advantage of lower lease and above-normal vacancy rates, despite taxation challenges. Small businesses, such as restaurants and retailers, have a unique ability to make a community impact — just one bright, new neighborhood place can spur revitalization. Should borrowing rates trend downward, entrepreneurs may have opportunities to grow with the help of an SBA Preferred Lender, like Washington Trust Bank, which understands their business and environment.
New use for existing spaces and sectors to watch.
Washington Trust Bank’s commercial banking experts are monitoring opportunities throughout the market. Some of Portland’s underutilized CRE buildings have the potential to be converted to data centers. Compared to rural areas, the city is better equipped to handle the necessary infrastructure; the city has the electric grid to service the associated high energy demands and is oriented to commercial business activity.
Momentum is expected to continue in affordable housing, with money, time, people and nonprofit organizations committed to efforts. Albina One, with 94 units of affordable housing for families, is underway. And earlier this year, Washington Trust Bank, with the Federal Home Loan Bank of Des Moines, awarded $220,000 in grants to three Portland-based organizations promoting affordable housing and community development.
CRE momentum is expected to continue in other areas. Unlike the office sector, industrial is experiencing strong demand and low vacancy rates, and these conditions are likely to persist. Additionally, as Portland maintains its status as a hub for health care and health care professions, this sector should remain solid. Finally, should it come to pass, the Diamond Project at Zidell Yards could transform and extend the South Waterfront.
Washington Trust Bank has expert advisors.
Washington Trust Bank serves all stakeholders in the Portland metropolitan CRE market, including real estate developers, property management firms, manufacturers, distributors, professional service providers, restaurants and hospitality providers. To accommodate growth in Southwest Washington, the bank recently opened a financial center in Vancouver. Providing regional expertise, Washington Trust Bank is a true partner for any commercial enterprise seeking to achieve its goals.
Alisa Johnston
SVP / Team leader, Portland Commercial Banking