PORTLAND, Ore. (KOIN) — Multifamily NW released its spring 2022 report on Thursday, indicating an “alarming” pattern of low inventory, high demand and increased investor hesitancy in cities across Oregon.
The report shows Oregonians continue to move away from urban centers, which impacts the availability and affordability of multifamily rentals throughout the state. According to the association, new data is in stark contrast to the previous spring apartment report, where vacancies and rents had remained stable from the previous year.
The association is made up of residential property managers, owners and vendors throughout the state.
“The report’s analysis of the Portland Metro rental housing market also indicates new housing production continues to lag behind growing demand, a leading cause of low vacancies and rising rents,” Multifamily NW said in the announcement.
Michael Havlik, the deputy executive director for Multifamily NW, said this season’s apartment report should raise concern among anyone genuinely interested in addressing rising rents around the state.
“The demand for multifamily housing is adding pressure to markets from Portland to Bend to Eugene, and Oregon families deserve elected leaders that are willing to look at all solutions to this shared problem; first and foremost, how we can encourage providers to stay in the game, build new units, and start alleviating the serious supply issues,” Havlik said.
The report highlights that construction has slowed considerably, which helps push vacancies lower and rents higher. Urban areas also face challenges with homelessness, lack of population growth and jobs moving to the suburbs and remote working.
It did credit the government for providing “much needed” rental assistance to help people get through tough times and added that the state’s employment picture and average wage growth are both encouraging.
“Despite these positive signs, inflation is perhaps the biggest concern as it impacts our development pipeline, rent affordability and investment appetite,” Craig McConachie with C&R Management Group and Apartment Report Committee said. “This is compounded by labor shortages and supply chain challenges. But overall, the year ahead looks good for our industry as we chart our course in search of calmer waters.”
McConachie said 2022 is starting off somewhat slower with 86 sold transactions in the first quarter compared to 166 in the fourth quarter of 2021.
However, the association is still seeing strong interest from out-of-state buyers in search of higher yields than other West Coast markets.
“Portland is recovering from negative publicity and rent control laws in Oregon remain a concern for investors,” the report noted.
In Portland and Vancouver, the vacancy factor increased slightly from Multifamily’s NW fall report — 3.36% — and currently stands at 3.56%. According to the report, West and East Vancouver have the lowest vacancy factors, both at 2.1% and 2.6%, followed by Aloha at 2.7%.
“The highest vacancies are found in Downtown Portland (5.5%) and NW Portland (5.2%). Vacancies doubled from the fall report in both Tigard/Tualatin and Lake Oswego, but most surveyed areas remained relatively stable,” Multifamily NW stated in its findings.
Last year’s predictions of vacancy rates in the 7-12% range have not materialized, added the report, as absorption of new products has remained relatively strong due to continued high levels of in-migration.
With deliveries of new apartments projected to decline from the five-year average, and home prices continuing to climb, vacancy rates should remain low throughout 2022, estimated the association.
According to the report, three-bedroom one-bath units continue to have the best occupancy of all unit types, with an average vacancy of 1.9%. Studio units have seen an improvement in vacancy from over 5.2% last fall to 4.7% now.
Overall rent rates increased slightly since Multifamily NW’s fall report, up 1%.
The report says four areas reported decreases — all less than 3% — with 16 areas reporting minor increases. This is surprising, said the association, considering prior predictions of rapidly increasing rates.
“There were some exceptions; Inner and central NE Portland saw a 16% jump in rents which can be attributed to approximately 400 newer units being surveyed this time. Tigard/Tualatin, Clackamas and Outer SE Portland areas all reported increases in excess of 7%,” according to the report.
Downtown Portland, Lake Oswego and inner Northeast Portland lead all areas in rates.
The Salem market is listed as “stable” with a vacancy rate dropping to 2.1%. However, rents continue to see upward pressure and have increased 10% since the association’s fall report.
Vacancies in studio units are particularly low at 1.6%, the report noted.
Patrick Barry, with Barry & Associates, submitted an article outlining apartment fundamentals and trends as part of the overall report.
Barry predicts continued stability in 2022 but cites decreased supply, low vacancies and strong rent growth.
Inflation, economic boom
Oregon’s state economist from the Oregon Office of Economic Analysis, Josh Lehner, discusses the economy in an article attached to the report. He notes that the biggest concern right now is inflation.
Lehner says Oregon’s “allowable” rent increase will likely be around 13%.