Apartment Rents Weakening?

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The Editors's picture
Apartment Rents Weakening?

Apartment Rents Weakening?

Rent growth Slowing

By: Cliff Hockley, President, Bluestone & Hockley Real Estate Services

On September 14 of 2016, Mark Barry, MAI local apartment appraiser, updated brokers and investors at a local Morgan Chase Bank presentation. In his speech he highlighted the significant sales volume in 2014, 2015 and 2016, but issued warning signs.

He indicated that apartment rents were beginning to flatten as vacancies were beginning to increase.

He said: Vacancies are beginning to rise mainly in the urban core as new construction goes up, which equals more competition. In Portland we are seeing significant rent concessions in class A properties within urban core. There are many properties offering first month rent concessions with one year leases. (Some are even offering two months free.)

Properties on the outside (farther East, South and West) have more stable rents. As inner core prices begin to rise people will be moving outward. Currently, 9,000 units are under construction, mostly in the

30 units and under range. With 25,000 more currently proposed, competition is increasing no matter what.

Not all new construction currently proposed will be built as not all will be able to get the rents they are planning on. Properties that are pushing rents are seeing higher vacancies because the market is so competitive.

According to Mark Barry’s research, Studios have the highest vacancy rate at 5% with 1, 2 and 3 bedroom units around 2%. (In a recent phone survey (early October 2016) of local residential property managers the vacancy rate has increased to over 3 %.)

Important statistics to consider:


In 2010, The Portland–Vancouver– Hillsboro Metropolitan Statistical Area (MSA) was the 23rd largest in the United States, with a population of approximately 2,226,009. Since then, the Portland metropolitan region added 40,621 new residents from 2014 to 2015, a growth rate of 1.72 percent. The new estimates show the 7-county greater Portland region just shy of the 2.4 million population mark, with 2,389,228 residents as of July 1, 2015. Most of the immigrants are from California, followed by immigration from the rest of the US. Additionally most of the immigrants have a higher education and are root seekers (from 25 -35 years old).


Despite the increase in new residents, unemployment in the Portland Metro areas has stabilized. Household income is averaging $64,000 a year, slightly above the national average of $56,516.

The US economy is slowing down, with a particular focus in the manufacturing sector. American manufacturing barely grew in September as a broader swath of a strong dollar and faltering overseas markets.

The Institute for Supply Management’s factory index reflects this decrease in activity. The index fell to 50.2, from 51.1 in the it has been since May 2013. Fifty is the dividing line between expansion and contraction. Out of eighteen industries, only seven grew in the past month, the fewest since December 2012.

Oil-related weakness among energy companies is now spreading to computer, plastics and machinery makers. The stronger dollar combined with slower growth in emerging markets hurts foreign sales. Auto dealers and construction companies  are insulated by the spending of American consumers.


We are at the top of the market. In Oregon 3 -3 ½ % growth rate is expected due to the relocation of many businesses from out of state. The glut of new developments and lower demand for Class A multi- family properties has increased competition between units as demonstrated by the amount of free is can it continue to grow? With increased vacancy rates it’s hard to judge if we are seeing pre-election jitters or the beginning of an economic downturn? I am not sure facing a rejection of ever increasing rental rates.

Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company. Founded in 1972, Bluestone & Hockley’s staff totals nearly 110 employees, including 20 licensed brokers. The company’s property management division serves commercial buildings, apartments, condominium associations and houses in the Portland / Vancouver metro area, while the brokerage division facilitates both leasing and sales of investment properties throughout Oregon and Washington.
Cliff earned a degree in Political Science from Claremont McKenna College and holds an MBA from Willamette University. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM).
Cliff is a member of the Institute of Real Estate Management and was named Certified Property Manager of the year in 2001 and 2003. Cliff is a frequent contributor to industry newsletters.
Bluestone & Hockley offers customized brokerage, property and asset management, as well as maintenance services to property owners and investors throughout the Portland/Vancouver metro area. The company’s full-service approach benefits busy property owners and investors, who know they can count on Bluestone & Hockley for high quality real estate services start to finish.
A Better Real Estate Experience.
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