Economy: Labor Market Moderates
Economic conditions in the Portland region moderated during the third quarter of 2026. Total nonfarm employment declined 1.7% to just over 1.2 million jobs, while the Portland unemployment held steady year-over-year – at 5.0%, it remained 80 basis points higher than the national rate of 4.2%. Looking ahead, while employment growth is expected to remain muted, relatively stable labor market conditions should support a gradual recovery in office leasing activity as occupiers gain greater confidence in long-term space planning.
Supply and Demand: Market Continues to Rebalance
The Portland office market continued to navigate challenging demand conditions during the third quarter, as occupiers remained selective and continued to prioritize efficiency in their space requirements. Overall vacancy rose to 23.9%, while quarterly net absorption was minimally negative at 21,000 square feet (sf), bringing year-to-date absorption to negative 627,000 sf. Despite ongoing occupancy hurdles, leasing activity remained relatively active with nearly 1.4 million square feet transacted year-to-date. New construction remains effectively absent, with no office space currently under construction, limiting future supply additions and allowing market fundamentals to gradually stabilize as vacant space is naturally absorbed over time.
Pricing: Focus on Concession Packages
Average full-service asking rents dropped 3.8% YOY to $32.54 per square foot (psf), as property owners continued prioritizing occupancy within a highly competitive leasing environment. Rather than significantly reducing quoted rents, many landlords have focused on concession packages including tenant improvement allowances, free rent and flexible lease structures to attract tenants. Premium Class A properties continue to outperform the broader market, with average Class A asking rents reaching $36.80 psf, reflecting ongoing tenant preference for well-located, amenity-rich buildings that support evolving workplace strategies.
