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With Class A office-space vacancy rates hovering around 5 percent, Patricia Raicht at Grubb & Ellis Co. likes what she sees.

Through the end of 2008, Raicht expects downtown Central Business District Class A vacancy rates to stay at 4.9 percent, which bodes well for landlords.

鈥淎nything under 6 percent and it starts to be a landlords’ market,鈥� she said. 鈥淭he landlords have more leverage.鈥�

Five percent is a dramatic improvement over the office vacancy levels following Sept. 11, 2001. That, combined with the tech wreck of 2000 and 2001, caused Class A vacancy rates to top out at 15.5 percent in 2002.

鈥淲e feel really bullish about the Class A market, barring some major exodus,鈥� she said, adding that the overall vacancy rate including Class B office space is 7.8 percent.

In 2009, she expected the Class A rate to stay around 5 percent, with the addition of new Class A office space in the Machine Works building in the Pearl and the 12th and Washington building. In 2010, the First & Main building will be finished and should push the vacancy rate up to 7.3 percent. And in 2011, when the 33-floor Park Avenue West building opens, the rate is predicted to increase to 8 percent.

In terms of rental rates, she said the average Class A rate is $26 per square foot. When new construction comes online, she expects the rate to increase to $32 per square foot. 鈥淲e see smaller, pocket spaces for $23 to $25, but the average is $26 now,鈥� she said.
Retail in the downtown area also looks strong, according to Megan Doern of the Portland Business Alliance.

鈥淲e have seen a large investment in downtown over the past several years by both major retailers and local retailers, creating a wonderful shopping area for tourists, and people working and living downtown,鈥� Doern said. Columbia Sportswear, Brooks Brothers, the Mercantile and Michael Allen’s have all taken large spaces downtown.

New condos in the Cultural District and the Pearl continue to bring more people downtown. In addition, she said the neighborhood around the Ace Hotel is attracting more retail. 鈥淎nd once the transit mall is complete, we’ll see even greater interest in that area,鈥� Doern said.