Portland's real estate market continues to struggle in the eyes of national investors, ranking 80th out of 81 major U.S. cities for overall prospects for the second consecutive year. A new report highlights persistent challenges that have kept the city near the bottom of investment and development lists, despite local efforts to change its narrative.
The annual "Emerging Trends in Real Estate" report, a joint publication from the Urban Land Institute and PwC, paints a stark picture for the city. Based on a survey of over 1,200 real estate professionals, Portland's appeal remains significantly diminished, with only Hartford, Connecticut, receiving a lower score for investment and development potential.
Key Takeaways
- For the second straight year, Portland ranked 80th out of 81 U.S. markets for overall real estate prospects.
- The ranking is based on a survey of more than 1,200 investors, developers, and other industry professionals.
- Local leaders are actively trying to court investors, but concerns over job growth, income disparity, and high taxes persist.
- Despite the low ranking, some discounted sales of downtown properties suggest a potential for future recovery.
A Persistent Negative Perception
The latest ranking confirms that efforts by city and state officials to restore confidence in Portland have not yet shifted the national perception among key industry players. The survey, which gauges sentiment for the upcoming year, shows that investors and developers continue to favor other markets for their capital.
This prolonged period at the bottom of the list presents a significant hurdle. Local economist Mike Wilkerson, a partner at the consulting firm ECOnorthwest, expressed his surprise that the city hadn't seen at least a modest improvement.
"That’s the most influential indicator at this time," Wilkerson said, noting that he had expected Portland to climb into the mid-70s. He described the situation as a "self-reinforcing challenge," where a poor reputation makes it difficult to attract the very investment needed to improve that reputation.
The city's struggles are a sharp contrast to its boom years in the 2010s, when it was a darling of the real estate world, fueled by a thriving cultural scene and rapid growth. However, a combination of factors, including nationally televised protests in 2020 and the economic shifts from the pandemic, caused its ranking to plummet.
Economic Headwinds and Investor Concerns
To understand the low ranking, it is crucial to look at the economic data that informs investment decisions. In a September meeting with Governor Tina Kotek and Mayor Ted Wheeler, real estate executives identified job and income growth as primary requirements for reigniting apartment construction and broader investment.
Income Disparity in the Metro Area
Recent U.S. Census Bureau data from 2023 shows a growing income gap within the Portland metro region. While Washington and Clackamas counties saw median household incomes surpass $100,000 for the first time, Multnomah County, where Portland is located, lagged behind at approximately $83,000 and showed slower growth.
This sluggish income growth in the city's core county is a red flag for investors who rely on rising wages to support rent growth and property values. Compounding this issue is a slower job recovery in Multnomah County compared to its surrounding suburban areas.
Other factors contributing to investor hesitation include:
- High Office Vacancy: The persistence of remote work has left a significant mark on downtown Portland. According to real estate firm CBRE, about a third of the city's office space remains empty.
- Tax Burden: Business leaders have frequently cited Multnomah County's taxes, which are among the highest in the nation, as a deterrent to new investment and business relocation.
- Public Safety Concerns: While not explicitly detailed in the report's summary, ongoing public perception about safety and livability in the downtown core continues to influence business and investment sentiment.
Signs of Life Amid the Gloom
Despite the overwhelmingly negative report, there are indicators that a market correction is underway, which some experts believe is a necessary step toward recovery. Several downtown skyscrapers have been sold in the past year, often to out-of-state buyers at substantial discounts.
A notable example is the October sale of the PacWest Center. The tower was purchased by Fairbanks, Alaska-based Fountainhead Development for a reported $55.7 million. Such transactions, while reflecting a steep decline in property values, are seen by some in the industry as a vital repricing of the market. This reset could eventually make Portland's real estate attractive from a value perspective, luring in investors who are looking for bargains with long-term potential.
A Tale of Two Markets
While the overall real estate prospect ranking is low, Portland's position in one specific category offers a slightly different perspective. The city ranked 30th for homebuilding prospects, a position it has held for two years. This suggests that while commercial investment remains tepid, the underlying demand for housing is still recognized by the industry, even if development faces its own set of challenges.
Wilkerson noted that the ULI report may not fully capture this recent positive momentum. "You need some positive momentum to get you out of dead last," he commented, suggesting that these discounted sales are the first steps on a long road to recovery.
For now, Portland remains in a challenging position. The city's leadership must continue its efforts to address the fundamental economic and social issues that are keeping investors away. Rebuilding confidence will require not just a new narrative, but tangible progress in job creation, income growth, and downtown revitalization that can be clearly measured by the national real estate community.
