Central Oregon has experienced remarkable population growth over the last decade, driven in part by its appeal to outdoor enthusiasts and a robust job market. As a result, developers have responded by constructing hundreds of new apartment units to meet the demand for housing. These new units have brought modern amenities and lifestyle choices to residents, but they’ve also raised questions about the sustainability of this building boom and the impacts of a potential oversupply.
It is estimated that over 1,000 units could come online in the next 18-20 months.
The current vacancy rate in the Bend/Redmond market is 8.7% (the highest in many years). The projected absorption rate is less than 300 units annually, portending even higher vacancies. Population growth, while still steady is slowing from the meteoric rate of recent years.
This is good news for renters, providing more options, more negotiating power, and potentially lower rents. Concessions like a month or two of free rent will be on the table. Rent growth has slowed dramatically across the board. Many Oregon markets are experiencing flat or negative rent growth.
Most local apartment developers are well capitalized and have long-term time horizons. But the high cost of building and capital, coupled with vacancies, concessions, and lower rents may cause some short-term stress. This trend is not unique to Central Oregon and in fact is a common theme in many cities and areas across the country. As with most market cycles, it will resolve over time as apartment development will slow and population growth will continue.
These factors and higher operating costs will put downward pressure on property values. Sales and values will likely stagnate through 2024. A recession looms. Sellers continue to want yesterday’s prices, remaining at odds with Buyers over property valuations. Expect a reset in 2025 with a recovering economy and a resurgence in sales activity. If you are a potential seller, position your property accordingly. Central Oregon is primed to maintain its standing as one of the fastest growing metro areas in the county. Population growth is almost certain to outpace national trends which bodes well for the long-term outlook of multifamily investors.
If you are a buyer, look for opportunities that have not been available for a long time. More properties are on the market, and many are sitting waiting for offers. Cap rates are moving up and some Sellers will need to make deals.
As always, talk to us anytime about the market, buying or selling, positioning for sale, and how to maximize your property benefits.