Portland multifamily rent growth has cooled due to more than 5,000 units coming online in 2018 with rents increasing only 1.9% year-over-year through February, below the 3.6% national average, according to the spring report from Yardi Matrix.
However, the outlook is good.
“Backed by solid job growth and in-migration boosted by a healthy quality of living, Portland’s multifamily market continues to be strong,” the report says.
“Oregon has attracted national attention due to its enaction of statewide rent-control limits,” the report says. “The law limits rent increases to 7% plus inflation and capital expenses and applies to properties older than 15 years. Although the immediate impact might be slight, the concern is that it will lead to tighter limits down the road,” the report says.
Portland multifamily rent growth to rise 1.9 percent in 2019
Economic growth is healthy.
“The metro added 27,500 positions in 2018, a 2.4% year-over-year employment growth rate. The construction boom taking place in the metro is supported by the office sector, which has more than 2.4 million square feet of space under construction,” the Yardi Matrix report says.
“With more than 9,320 units underway and some 6,900 units expected to be delivered this year, there are major concerns about oversupply, but a strong occupancy rate is indicating that there is a rapid absorption of new deliveries and demand for housing outpaces supply. The high occupancy rate and steady rent growth are drawing investors to the metro.
“With demand high, we expect rents to rise 1.9% in 2019,” the report says.
Portland multifamily rent trend
Rents in Portland have decelerated in recent months, according to the report, which shows:
- Year-over-year, rents were up 1.9% through February, though down 70 basis points from December. February’s rent growth was 170 basis points below the national average, and Portland’s $1,382 average rent was below the $1,426 U.S. average. Occupancy for stabilized properties decreased by only 10 basis points year-over-year through January, indicating that demand continues to be strong in the face of an influx of new supply.
- Affordability has been a major issue in Portland, and the working-class Renter-by-Necessity segment led rent gains. RBN properties increased rents by 2.5% year-over-year, to an average of $1,226. Lifestyle units rose 1.7%, to an average of $1,540. With the bulk of deliveries in the upscale segment, the need for RBN assets is likely to remain robust.
- The Pearl District ($1,960) and Downtown Portland ($1,956) had the most expensive rents in the metro, while the Hazeldale (15.1%), Stafford (10.4%), Kelly Creek (7.3%) and Madison South (6.2%) submarkets saw the largest year-over-year increases. Oregon’s recently applied statewide rent-control limits, which allow a rent growth of 7% plus the rate of inflation (exempting properties less than 15 years old), may further limit rent increases. Yardi Matrix expects Portland rents to rise 1.9% in 2019.
Portland apartment supply
Portland’s multifamily pipeline has been robust in recent years, and that is expected to continue, the report says:
- More than 9,000 units are under construction, with some 6,900 units likely to be delivered this year. Although construction is expected to decrease – new permits for multifamily development are hitting the cycle low after the inclusionary housing passed in 2017 – demand for housing remains robust, especially for affordable units.
- Roughly 5,100 units were completed in 2018, a major increase from the 3,887 units delivered in 2017. Despite the large new supply, occupancy for stabilized properties increased by only 10 basis points compared to last year—95.3% as of January, indicating that demand remains strong, keeping up with the consistent incoming inventory.
- Most projects are geared toward the northern area of Portland. The Kerns/Buckman and Piedmont submarkets are the busiest, with more than 2,500 units currently under construction. Killian Pacific’s Goat Blocks, a 347-unit community in the Kerns/Buckman submarket, was the largest project in the metro.
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