Portland is in bloom this spring. With a vibrant economy, a young and educated workforce, and high affordability compared with other West Coast markets, the City of Roses is fast becoming a favored destination for apartment investors.
All of these factors contributed to a strong 2012 for Portland’s multifamily market, with low vacancy rates and strong rent growth encouraging a new apartment construction cycle after a period of limited building in the MSA in the past few years.
Rents have grown consistently, at 6 to 7 percent annually since the last quarter of 2010, yet still sit well below the rents in other West Coast cities, such as Seattle and San Francisco.
Approximately 6,000 new market-rate apartments should be delivered to the market in 2013 and 2014, most of which are located in the suburban west side and close-in Portland submarkets. This much-anticipated new inventory will drive competition for tenants and satisfy strong investor demand for newer Class A properties in the area.
Portland has long been recognized for its well-designed urban core, reputation for innovation, and beautiful natural surroundings, including Mount Hood and the Columbia River. The city was rated America’s greenest in 2012 by Travel + Leisure magazine based on its cleanliness, pedestrian-friendliness, public parks, and public transit.
Portland’s economy is also looking rather green these days. According to Greater Portland, Inc., Portland’s is the fastest-growing economy on the West Coast, with gross regional product topping $124 billion and showing 60 percent growth in the past decade. The area’s strengths center on four core industries: advanced manufacturing, athletic and outdoor apparel, clean tech, and software and technology.
Several of the region’s major employers have announced plans for expansion, most notably, Intel, Oregon’s largest employer, with close to 17,000 employees; and Nike, which is investing more than $150 million in a capital project that will add 500 permanent jobs. According to the Oregon Employment Department, the seasonally adjusted unemployment rate for January was at 7.9 percent for the Portland MSA, down from 8.3 percent a year earlier.
With about 2.2 million residents, the Portland MSA is the sixth-largest metro area on the West Coast and has increased its population by almost 50 percent in the past 20 years. According to Oregon Metro, the forecast is for as many as 3.2 million by 2030, which will lead to increased demand for multifamily housing.
Young at Heart
A study conducted by Portland State University concludes that the Portland region has consistently attracted and retained young, college-educated migrants at some of the highest levels of any metro in the country. And according to the U.S. Census Bureau, more than 44 percent of housing units in Portland are rented, compared with a national average of 33 percent. The youthful population has contributed to a trend toward micro apartments, which emphasize well-located, efficient spaces with high-end amenities, some with less than 300 square feet of living space.
According to Jeremy Snow, director of valuation services for Colliers, Portland is one of Fannie Mae’s most desirable markets to lend in across the country. He adds that the metro’s average rents have been increasing in all submarkets for several quarters and are expected to continue to grow through 2013.
With Portland’s sustained rent growth, constrained supply, and steady in-migration, the city has risen to become a top West Coast choice for many residents, employers, and investors.