If it feels like Bend is suddenly full of vacant apartments, you’re not imagining it. 1,187 multifamily units have been delivered over the past two years, with another 1,406 under construction. Vacant inventory now exceeds 1,000 units, and at current absorption rates, it could take up to five years to work through the excess, assuming there’s no additional development.
Impact on Market Fundamentals
The combination of oversupply, elevated interest rates, and sharply rising operating expenses has impacted asset valuations. Rental rates have remained largely flat over the past three years, while operating costs have increased significantly, compressing net operating income (NOI). Transaction volume has declined, as buyers underwrite based on in-place income and current financing realities. At the same time, seller expectations remain misaligned with current market conditions, contributing to reduced deal flow. It is important to note that not all product types are performing equally. Newer Class A properties are experiencing the greatest pressure, driven by higher rent thresholds and increased competition. In contrast, workforce housing and Class B/C assets continue to demonstrate strong occupancy and relative stability, reflecting sustained demand at more attainable price points.
Path to Market Stabilization
A meaningful recovery in Bend’s multifamily market will depend on several key variables: Sustained population and job growth will be critical, particularly as growth has slowed from approximately 3% annually during the pandemic to closer to 1–1.5% today. Rent growth must resume, operating costs need to stabilize, and interest rates will need to moderate to support improved valuations and transaction activity.
Strategic Considerations
Despite current headwinds, transaction opportunities remain. Owners considering disposition should focus on stabilizing occupancy and achieving true market rents, as buyers are underwriting based on actual in-place income. Addressing deferred maintenance and pricing realistically—aligned with today’s NOI-driven valuations and financing constraints—are also essential. Seller financing should also be considered. In today’s capital markets environment, it can be a highly effective tool to bridge valuation gaps and expand the buyer pool. Advantages include enhanced marketability, the potential for better pricing in exchange for favorable terms, an ongoing income stream through note payments, and possible tax benefits.
For Buyers: Position for the Next Cycle
While near-term conditions remain challenging, it is important to maintain a forward-looking perspective. Bend continues to exhibit strong structural drivers, including its desirability as a lifestyle and migration destination, long-term population growth trends, and supply constraints tied to geography and regulation. These factors support the view that Bend will remain a premier growth and investment market over the long term, even as it works through the current oversupply phase. Disciplined acquisitions made during this cycle are often those that generate the strongest long-term returns.
The Compass Commercial Multifamily Brokerage Team specializes in Central Oregon multifamily properties of all sizes and types from duplexes to 200+ units. Contact us today for a free Broker Opinion of Value on your property.