Concessions and Submarket Vacancy Rates

January 3, 2018
Authors: Jennifer Shuch
Publishers: HFO Apartment Investor Newsletter

Rents and vacancy rates are generally highest in downtown, Northwest Portland, and close-in NE and SE. Vacancy rates are lowest in outer NE, Beaverton, Aloha and Oregon City. Some of these outer submarkets offer concessions despite low vacancies while many downtown submarkets offer no concessions despite having the highest rates.

As vacancy rates rise, particularly in Portland’s central core, we have begun to see more owners offering concessions to prospective tenants. This is happening most often with recently opened high-end luxury apartment buildings that contain a high number of small studios and one-bedroom units.

Highest Concentration of Concessions

The lower end of the rental market continues to see low vacancy rates. Special deals are found mostly for units with rents of over $1,000 per month. According to the Multifamily NW fall 2017 Apartment Report, the Portland submarkets with the highest percentages of buildings offering concessions to renters are Southwest Portland (15.22%), Northwest Portland (11.24%) and Tigard/ Tualatin/Sherwood (10.26%). Submarkets not reporting incentives include Hillsboro, Lake Oswego, Clackamas and Outer SE Portland.

Notably, the submarkets with the highest number of buildings offering concessions all have vacancy rates above 5% for studios. The Tigard/Tualatin/Sherwood submarket has an overall vacancy rate of 4.55%, and an extremely high 11.71% vacancy rate for studios.

Despite a low 3.6% vacancy rate in Oregon City, over 9% of buildings there are offering incentives – down from 12.5% six months ago.

The second highest submarket vacancy rates are in NW and SW Portland. Both areas have increased their incentives. Six months ago about 8.5% of the buildings had incentives. NW Portland has seen a 3% increase in incentives; incentives jumped 7% in SW Portland.