Vacancies in Portland-area office space reached a record-high 15.1 percent during the second quarter of the year, Kidder Mathews stated in a new report.

It was the 11th consecutive quarter of rising vacancies in the Portland market, and the first time that vacancies crested 14 percent.

Leasing activity has slowed just as dramatically, Kidder Mathews reported. It fell nearly 43 percent to 635,000 square feet during the April-to-June period, compared to a year earlier, reaching a record low for the second quarter.

The only period of lower lease volume came in July through September 2020, during the heart of the COVID-19 pandemic.

“It’s pretty dreary,” said Gary Baragona, Kidder Mathews vice president for research, based in San Francisco.

“There’s still some work to do before that market starts to recover,” he said.

The plunge in office values has brought out bargain hunters. Investment activity grew 22 percent in the first half of 2025 compared to a year earlier, Kidder Mathews reported.

“Although institutional buyers have historically made up over 30 percent of the trades, private buyers and owner-users have accounted for over 90 percent of the transaction volume in the past year,” Kidder Mathews stated.

That fits with recent transactions such as the $45 million sale of the U.S. Bancorp Tower to auto dealer Jeff Swickard by Unico Properties, and the $33 million sale of Montgomery Park to Portland-based family investor Menashe Properties.

Asking rents grew to $29.64 per square foot, Kidder Mathews reported.

Many office users have downsized their space as employees’ hybrid work arrangements mean companies use less space. The average lease size is less than 3,000 square feet — approximately 5 percent below the 10-year average, Kidder Mathews reported.

“That illustrates that companies are trying to right-size their space,” Baragona said.

Large leases have become rare in recent quarters, and that trend is expected to continue, the brokerage reported.

Bucking the trend, some newer properties in Portland such as Block 216 and Eleven West have managed to attract tenants — primarily professional services firms. Architecture firm Populous recently agreed to lease a floor above the Bamboo Sushi restaurant at 404 S.W. 12th Ave., and leave a smaller space in the Central Eastside.

Suburban office space has outperformed urban offerings, but even suburban activity has slowed, Baragona said.

“The optimist in me says the cities that figure out how to reinvest in their urban cores are going to be the ones in front of that recovery cycle,” Baragona said, pointing to encouraging signs in San Francisco and Seattle.

“Portland has a little further to go,” he said. “Portland’s a market where we have yet to see much of a rebound in activity.”

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