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The downtown Portland office market appears to be 鈥渢reading water,鈥� but is not showing wild swings in vacancy rates, according to Mike Williams, director of research at Cushman & Wakefield.

The downtown Class A office space vacancy rate, which Williams said leads the market in indicating trends, is 鈥渁 little flat over the first part of this year鈥� and is essentially unchanged in the last two quarters, hovering just under 5 percent. The Portland metro area has a vacancy rate of about 11 percent, according to Cushman & Wakefield.

Compared with the last economic downturn, between 2001 and 2003, Williams said the current downturn is not accompanied with an oversupply of office space.

鈥淒emand can change quickly,鈥� he said. 鈥淭he economy can dip down and you can get caught in a supply over-hang. Businesses [in this downturn] have been much more conservative in their leasing decisions.鈥�

A sure sign that vacancy rates are going to spike appears when tenants begin sub-leasing because their business is contracting, but Williams said he has not seen that trend.

He said there is more speculative office construction downtown than in the suburbs. 鈥淚n the suburbs, there’s not a lot of construction going on, so we’re not caught in a supply trap,鈥� he said.

Ryan Pennington, a broker with Colliers International, said downtown Portland and the close-in neighborhoods had a combined office vacancy rate of about 7 percent in the second quarter of this year. That includes Class A, B and C space.

He said rental rates should continue to increase because of the tightening commercial real estate market. In the second quarter, Pennington said there was a net absorption of 60,000 square feet in the central city, which includes the Lloyd District, Northwest Portland and the North Macadam/South Waterfront areas.

He predicted that leasing activity will increase among tenants looking for 2,500 and 10,000 square feet.

The average leasing rate in the central city was around $21, including Class A, B and C categories. Portland Class A average rate was about $26.

The lowest vacancy rate in the second quarter was found in the Lloyd District, with 3.6 percent, where the average square-foot rate was about $19.

Seattle’s vacancy rate was about 8.6 percent and its Class A average rental rate was $38.

Williams said he thinks that despite the economic downturn, downtown Portland will fare well in the next few years, even as new buildings such as Park Avenue West and First and Main add to the inventory in 2010 and 2011. With the cost of gas above $4, Williams said employers will continue to see the advantages of being downtown as more people are willing to take mass transit.

The strength of new industries, such as solar and wind power, should also boost the local commercial real estate market in the near future, he said.

鈥淭enants in the last five years have been very conservative in their leasing patterns,鈥� Williams said. 鈥淲e don’t have the same dynamic as we did after the dot-com boom and bust. The wind is blowing right for the downtown office market.鈥�