September 6, 2019

by Brian Bjornson  •  Chairman


With a great number of legal changes that have occurred and will be affecting your apartment investments in Oregon, many owners are apprehensive about the future.

If you’re feeling totally overwhelmed about managing your property in the future, give us a call and we can give you the assurance that your investment is being handled correctly. We provide management/brokerage, development consulting, financing, property turnaround and market positioning.

As a rule of thumb, Portland lags one or two years behind Seattle in the real estate cycle. Both cities have experienced building booms in recent years. Now those markets show signs of softening due to too much inventory on the market. Has Portland Metro overbuilt?

Between January 2018 to mid-June 2019 there have been permits issued for 13,789 units in apartment buildings, and 1,859 units in mixed retail and apartment buildings (Construction Monitor, 2018-2019). The bulk of these permits are for projects in areas close to Portland center and are typically higher-end units with nicer finishes and higher asking rents. After several years of rapidly rising rents, it does seem as though rents are leveling off for this particular apartment product. Furthermore, due to the lease-up of new properties, more concessions are being offered to fill these apartments. It appears as though we have reached an equilibrium of supply and demand for new luxury units.

However, we still read that Portland Metro is facing a housing crunch. Clearly, the product being delivered is not what is needed for many renters at present. We can see this in our current rent survey. While rents for new product have dropped a tiny bit -.004 – rents for more affordable seasoned properties have continued to climb. The need is there for more housing dedicated to serving working-class renters. This has led to a call for building more low-cost housing that brought about the passage of rent control.

In our opinion, and the opinion of several economists, rent control is not the solution. In some gentrified neighborhoods in San Fran­cisco, for example, rent control has benefited the well-off much more than the population it was intended to protect (New York Times, February 17, 2012.). Some have proposed “means testing” to keep the rich from getting what is essentially subsidized rent. Applied across the board, this could mean owners would likely only rent to wealthier applicants to get full market rent. Furthermore, many owners have demolished their rent-controlled buildings in San Francisco and built condos to increase their return, thus reducing the housing supply. Airbnb also has played a significant role in reducing available rental units.

Due to high development costs, the incentive for constructing low-income housing is not there for private builders. Some feel this is one area that the government should take the lead and incentivize builders, or take over the construction of new housing.

Thus far, there is not the political will or funding for this potential solution; tax credits, bonds sold for the write-offs and resold to Reits at a discount.

Complicating the issue of the need for lower-income housing is Portland’s Sanctuary City status.

Overall, the Oregon economy is good. The unemployment rate is low, locally and nationally. In Oregon, however, many of the new jobs being created are in the service sector. These workers are unable to afford the rents asked for newly-constructed apartments. They, therefore, move into older apartments in the suburban areas, putting upward pressure on the rents there. It could be that looking for investments outside of the City of Portland proper would be the sensible move for investors today.

The key to Oregon’s multifamily housing prospects is job growth in other employment sectors, attracting higher-skilled, more highly-paid workers. Some progress is being made in this regard. The Oregonian reports that Facebook intends to invest another $750 million into its facility in Prineville. Skyworks Solutions has purchased Beaverton based Avnera for $405 million, and investors have poured more than $280 million into Oregon start-ups and established companies in 2018.

This very positive news will lead to an increase in employment in the highly-paid tech sector. This could change as a result of the tariffs impacting the silicon chips that went into effect August 23rd, which impose $500 million in taxes on goods essential to the manufacture of semiconductors (The Oregonian, August 23, 2018.).

These are confusing times. Investors would be well-advised to create a comprehensive strategy to address every potential development in the apartment market. Experienced, competent brokerage and management is the key to success in your multifamily property.


Norris & Stevens, Inc., is one of the largest locally-owned, full-service commercial real estate brokerage firms in Oregon and SW Washington. A member of the TCN Worldwide network, the firm was founded in 1966 and currently employs approximately 75 professionals in investment sales, leasing and property management for office, industrial, retail, land and multi-family properties. The firm’s property management portfolio exceeds 5 million square feet of commercial space and over 9,000 apartment units.