4.8%
Vacancy Rate
$26.77
Average Rental Rate
1.7%
12-Month Rent Growth
0
SF Under Construction
1Q
2023
Sunset Corridor / Hillsboro
Overview
The Sunset Corridor/Hillsboro is one of Portland's premier office hubs, home to several large corporate campuses and headquarters. A concentration of high- tech manufacturing drives employment, with Intel's semiconductor facility in Hillsboro maintaining a massive presence corresponding to global sales implications. This synergy supports a rich talent base for employers, and stabilizes demand for physical office space to support these large operations.
Nike owns around 3 million SF as well, and both companies have recently completed significant campus expansions. Other companies with large office footprints include Wells Fargo and the headquarters of First Tech Federal Credit Union.
Physical space needs have thrown a wrench into office market growth, but Nike and Intel are committed to bringing most employees back in person on a hybrid basis. Both corporations have the scale to influence others to follow similar models.
Rents in 4 & 5 Star properties are about 15% lower than the metro average for luxury space, despite the heavy presence of corporate entities. One reason for this could be the fact that nearly two thirds of the 4 & 5 Star supply within Sunset Corridor/Hillsboro is owner occupied. The remaining space predominantly reflects 80s and 90s era construction with only scattered updating, likely placing a lower ceiling on rents.
Rental Rates
Strong occupancy figures bolstered by established corporate tenants keep the Sunset Corridor/Hillsboro's fundamentals structurally tight. As such, submarket rent growth has generally matched or exceeded metro rent growth over the past few quarters. Year-over-year, Sunset Corridor/Hillsboro notched gains of 1.7%, versus metro gains of 1.6%.
Over the last decade, Sunset Corridor/Hillsboro asking rents have increased by 52.8%. In comparison, the Portland metro's cumulative rent increase was 42.7% over the same period.
Average asking rents come in at $26.77/SF, versus the metro average of $28.99/SF, despite the submarket's relatively high share of 4 & 5 Star space. 4 & 5 Star rents average $28.35/SF, below the metro average of $34.62/SF. The submarket's somewhat removed location from the Portland CBD, as well as the fact that a large share of non-owner occupied 4 & 5 Star space is reflective of 80s and 90s era construction could explain the discrepancy.
4 & 5 Star space saw rent gains of 0.7% year-over- year, compared with metro gains of 0.9%. 3 Star rents posted gains of 2.6%, versus metro gains of 2.2%. Within the submarket, asking rates for 4 & 5 Star space are just a 15% premium over rates for 3 Star space.
Leasing Activity
Nike and Intel have each added millions of square feet of space in the past few years. Nike's world headquarters in Beaverton recently wrapped up its 1.4 million-SF North Campus addition, featuring the Serena Williams Building. Intel broke ground on a 1.5 million-SF expansion in July 2019, completing the project in mid-2022.
Spaces like these will be occupied by their respective owners, thus, vacancies remain tighter than the larger metro as a whole. In addition, many other large companies outside of Nike and Intel are single tenants in their respective properties on long-term leases.
The submarket does, however, attract a number of interested small and mid-size tenants, as access to talent and technical business synergy are large draws. For example, in 22Q4, SSOE added 5,500 SF to their footprint at the Rock Creek Corporate Center in Hillsboro. Starting asking rent was $28/SF, full service. SSOE is an internationally ranked architecture and engineering firm.
In addition, marine software company Nobeltec signed for 3,000 SF of space at 16100 NW Cornell Rd. The 36,000-SF, 2 Star building was built in 1996.
Longer-standing tenants include Salesforce.com, occupying 118,000 SF at Synopsys Technology Park, and Synopsys, owner/occupant of 115,000 SF at 2025 NW Cornelius Pass Road. Both Columbia Sportswear and movie studio Laika are headquartered in Sunset Corridor/Hillsboro, but they occupy more industrial and flex space than office space. Wells Fargo occupies 103,000 SF at 23175 NW Bennett St., which houses 900 employees, as well as the 212,000-SF 18700 NW Walker Road.
The Hillsboro Enterprise Zone encourages investment in the submarket, offering a 100% property tax abatement for eligible businesses on new capital assets for a three- to five-year period. The city hopes this, coupled with the presence of Nike and Intel, will continue to draw more development to the area.