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With a vacancy rate of about 4.5 percent and businesses and tenants still adjusting to post-COVID workspace needs and uncertain economic conditions, Salem-area experts are cautiously optimistic about the city’s commercial office market.

Curt Arthur, a Capacity Commercial Group principal, said at the company’s annual economic forum on Feb. 12 that the decreasing vacancy rate was a positive sign, and the quickly submitted offers on new space indicate strong demand.

鈥淟ast year, I mentioned it was a little bit of a lackluster year,鈥� he said. 鈥淚 would say it’s a little bit of the same, but we see light at the end of the tunnel.鈥�

The market has shifted over the past 10 years, said Kelsey Oran, a Hancock Real Estate partner and principal broker. Where she once saw multiple offers per space in a low-supply, high-demand market, she now sees spaces lingering unleased for longer.

Office tenants are downsizing or maintaining spaces. Expansion requests are rare, she said. And tenants are shifting away from the standard five-year lease to three-year leases, allowing more flexibility as markets evolve.

Deals are also taking longer to close due to cautious tenants and market uncertainty for landlords.

Oran noted that while asking rents have softened, they have increased nominally 鈥� about 0.5 percent 鈥� since last year.

The average number of months left vacant for lease listings were improving, Arthur noted, falling from 7.1 to 5.7 since 2025.

Oregon’s capital city has also experienced the fallout of state agencies exiting private-sector leases as more people work remotely. The state is opting to focus on its own properties and lease fewer privately-owned office spaces in the city.

The Salem-area office market has about 12 million square feet in its inventory.

The state of Oregon is the biggest office tenant in Salem, Arthur said, at more than 1.5 million square feet.

Post-COVID, the state has worked to bring back multiple agencies into state-owned buildings, but remote-hybrid work remains common. He said two to three more years will be needed to see how the adjustment pans out.

The region is seeing very little new commercial construction compared to previous years.

Only 3,200 square feet of office space was under construction in Salem in the first quarter of 2026, Arthur said. The high cost of construction is a big factor in the slowdown, he added.

Recent successes could lead to more construction. Hunsaker Dental held its grand opening in January; about half of the space in the three-story, 29,841-square-foot building remains available. But the building, south of downtown, now has offers on all remaining spaces, Arthur said.

鈥淓ven though we don’t see any new construction on the horizon, I think what we saw at Hunsaker Dental is going to bring a couple of folks to the drawing table,鈥� he said.

Salem doesn’t experience the same extreme swings as Portland. CoStar real estate analytics described Portland’s downtown core as 鈥渢he epicenter of regional weakness鈥� with an availability rate near 30 percent.

Currently, there聽are 278聽office spaces聽listed as聽available across聽126聽properties in Salem,聽according to CoStar data, Oran said. The city’s office vacancy rate is聽4.5 percent.

The upside is that people looking for office space can have more negotiating power for lease terms and amenities.

鈥淚t’s certainly a tenant-driven market,鈥� Oran said. 鈥淭here are many options that are available out there.鈥�

Tenants tend to seek more amenities in smaller spaces, full-service leases, security upgrades and available parking, she said.

Landlords are聽remaining competitive聽by聽dividing聽larger spaces聽into smaller footprints聽and updating buildings.

Some areas of the city are thriving more than others. People are drawn to the accessibility of the Fairview Industrial area, the Commercial-Liberty corridor going into south Salem and downtown buildings with available parking, Oran said.

鈥淭he current market presents an opportunity to secure high-quality office space at competitive pricing,鈥� she said. 鈥淔or organizations and businesses seeking a presence in the state capital, there’s a range of quality options available.鈥�

Some of the biggest sales of 2025 include Salem-Keizer Public Schools purchasing the former Wells Fargo call center building at 355 Hawthorne Ave. S.E. for $15.5 million and disability care provider DSP Connections purchasing the four-story office building at 5121 Skyline Loop S. for $7.2 million.

With strong investment in senior services like memory care and the looming acquisition of Santiam Hospital by Salem Health, Arthur expects medical office space to be a key commercial factor in 2026.

Leasing should uptick as market conditions improve, he said, adding that he would not be surprised to see a double-digit increase in leasing volume over the next year.

Editor’s note: This article first appeared in the Statesman Journal and then was distributed on the USA TODAY Network via Reuters Connect.