Oregon industry leaders say vacancy rates are down and rent will likely increase

PORTLAND, Ore. (KATU) — Vacancy rates in the Portland metro and suburban areas have decreased since spring of 2024 and industry experts expect rents will likely start to increase as a result.

According to a spring housing report from Multifamily Northwest (MFNW), the vacancy rate in the Portland metro dropped from 6.17% in the spring of 2024 to 5.91% and rent averages have increased by one cent per square foot so far across the metro. The report, which collects data by surveying 605 properties representing 43,295 units, is published twice annually.

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Vacancy rates decreased significantly in Hillsboro (from 5.82% to 4.92%) and in Northwest Portland (from 8.7% to 7.01%). In Eugene/Springfield the vacancy rate is only 3.56%.

Bend saw the biggest decrease across Oregon going from 8.05% to 6.02%. MFNW had predicted this would happen as the areas' vacancy rates had increase significantly as a result of new apartments coming online, with those now occupies vacancy rate are steadily decreasing in a highly desirable market in Oregon.

"Vacancy rates also vary by unit type, with studio apartments generally experiencing higher vacancies compared to one- and two-bedroom units," the report reads. "For example, Northwest Portland’s studio vacancy rate remains at 11.56%, while one-bedroom units have a lower rate of 6.52%. Larger units, such as three-bedroom apartments, tend to have the lowest vacancy."

The reason for the higher vacancy rates in the spring of 2024 was that a slew of building permits came in just before Portland changed its laws on how many affordable units new developments had to include. Those rentals all became available at the same time which increased vacancy rates for a stint, those are now stabilizing.

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While Oregon policy makers have pushed to keep building more housing in an effort to decrease rent costs, experts weighing in the report suggest wage growth would need have to play a factor in equation when it comes to enticing developers and investors.

"Portland’s sluggish job and wage growth...has consistently lagged the national average. As development costs rise, so does the rent threshold required to justify new construction. Yet, without meaningful wage and employment gains, rent growth is likely to remain limited—further suppressing the feasibility of new supply," writes Patrick O. Barry, an appraiser with Barry & Associates cited in the report.

This industry take suggests that while new construction is ultimately expected to drive down the average cost of rent, developers scoping for profitable markets are overlooking Portland because rents remain below what it takes to swiftly recoup the cost of new construction during a time when costs to build remain high.

MFNW has said the downward pressure on rents as a result of new construction generally occurs within the older construction portion of available rentals. Meaning, as newer apartments are built, people with higher incomes will rent those and open up occupancy for older apartments with cheaper rents for people with lower incomes. However, without wage growth that is not likely to happen.