If you haven’t visited downtown lately, it’s not the bustling environment you may remember.
Buildings once full of office workers who often shopped and dined during their day are now empty.
The exodus of people who work downtown was prompted by the pandemic, but it seems more and more businesses are choosing not to return.
Those empty sidewalks lead to fewer retail stores and restaurants open, and the ones that stay say they’re faced with nearly daily public safety challenges.
And the forecast for what’s ahead, according to several real estate firms, looks bleak.
“The amount of vacant square feet in downtown Portland, there’s enough of it that it would fill the iconic U.S. Bancorp Tower, Big Pink, over eight times,” said Jamison Shields, a research analyst for Colliers Real Estate firm.
Work from home during the pandemic changed the energy of downtown, but as office workers moved out, something else moved in.
“Up three or four blocks, pretty much anywhere downtown, and you’re going to see a lot of people with foil packets or syringes,” said Robert Simpson, manager at Kassab Jewelers. “It’s not a real comfortable feeling. It doesn’t feel real threatening, but it’s certainly not what you want to see when you come downtown.”
Kassab Jewelers flagship store downtown is celebrating its official grand reopening after shuttering its doors during the spring riots of 2020.
The family run jewelry store is committed to staying downtown but admits the decreased daily foot traffic is challenging.
“You look up in all these windows and all the offices are empty,” said Simpson. “The Sunglass Hut still gets broken into almost daily or weekly.”
Unfortunately, the return of people who used to fill the buildings isn’t likely anytime soon, according to Shields. He says, currently, the vacancy rate of downtown office space is 26.2%.
“Within the next year we anticipate that number to climb,” he said. “If we incorporate shadow space and corporate space, we expect that number to approach 40%.
That painful prediction is the consensus among commercial real estate companies.
“I don’t think we’re at the bottom,” said Jim Mark. “I think we’ve still probably got six months to a year of bottoming out.”
Mark and Nick Ehlen are partners at Melvin Mark, a nearly 80-year-old company who own or manage more than three million square feet of space in the Portland area.
"I think in the downtown office market, things will likely get worse before they get better," said Ehlen. "There are, depending on who you talk to, somewhere between 30 to 40 buildings, office buildings, downtown that are distressed, in the process of going back to lenders right now, and there's not much of a market for investment downtown."
If there’s not a market for big businesses to invest, it’s tougher for the small ones.
“Daily lack of people making it really hard for small businesses, especially to operate downtown,” Simpson said.
But there isn’t just one answer to luring people back.
"In downtown there are three main drivers to elevated vacancy," said Shields. "Number 1: What we're hearing from clients and buyers is public safety concerns. Number 2: Tax burden on businesses and individuals in Multnomah County and those increases that we've seen over the last couple of years, and lastly, certainly not understated, the driver of remote work revolution of where and how people work over the last few years."
For Kassab Jewelers, the recovery of downtown starts with a change of expectations.
“I see a lot of people hopeful, who want the downtown to come back,” said Simpson. “I think everyone has to realize it won’t be what it was before when it is back.”
There is some movement into the central part of the city. The hope is Portland’s latest high-end development that started in 2019 will be a positive draw for people and businesses to travel back to the downtown core.
"Ritz Carlton's opening up quickly, the 11W, so there's over a billion dollars of investment along Alder Street in the next six months," said Mark. "You know, safety, we can hire all the security we want to hire, but the biggest thing we need is people. Yeah, people on the streets, so that makes the biggest difference."
The Ritz is set to open this summer.