The Market Timing Mirage
Written by broker Adam Bledsoe
“There are only two types of people when it comes to market timing: people who cannot do it, and people who have not realized that they cannot do it.”
— Terry Smith, Investor
Market timing has long been as elusive as it is important, yet as Terry Smith wryly points out, few succeed in “timing the market”. Nowhere is this more evident than in Central Oregon’s commercial real estate market, where fundamentals have collided with macroeconomic forces in ways that have left even seasoned investors scratching their heads.
For the past three decades, Central Oregon has enjoyed steady and at times explosive demand. With few exceptions – most notably the fallout from the 2008 financial crisis which lingered locally until at least 2012 – the region has seen robust growth. In basic economic terms, where demand is high and supply is tight, prices rise. And right now, the region faces an extreme imbalance: strong demand with nearly nonexistent supply, which has pushed both prices and lease rates to all-time highs.
But price, the linchpin between supply and demand, doesn’t function in a vacuum. It’s also shaped by inflation, an often-overlooked force that’s playing a bigger role than many realize. According to the Bureau of Labor Statistics, it takes $135,000 to have the same buying power as $100,000 had in 2015. The culprit? A bipartisan addiction to monetary expansion. No matter which political party we prefer to blame, both have played their part in ballooning the money supply, and in turn, devaluing the dollar.
Following more than a decade of artificially low interest rates between 2008 and 2021, we are now in a correction. The Fed’s response to inflation has been swift and aggressive, with interest rates rising dramatically since Q1 2022. Yet something unusual has happened – capitalization rates, which typically move in lockstep with borrowing costs, have remained relatively static.
One silver lining of the low-rate era was strong returns on real estate investments. Many fortunes were made, leaving cash on the sidelines. As interest rates rose, investors were forced to contribute more equity and rely less on debt, often painfully.
In Central Oregon, this has left buyers and developers in a holding pattern, anxiously watching rates and market signals. They are, as Smith noted, stuck trying to time a market that defies logic. And the truth is, the turning points in cycles are almost always unpredictable. Consider: how many “experts” forecasted that a global pandemic would double residential prices in secondary markets?
Many property owners who financed before 2022 are now “married” to historically low mortgage rates in the 3–4% range. Meanwhile, Central Oregon’s population growth has accelerated. Contractors, retailers, distributors, and service providers have largely outgrown their current spaces but can’t justify moving. Lease rates are too high, interest rates too punishing, and new inventory too scarce. Demand continues building like pressure behind a dam.
The Fed has dropped the funds rate a full percentage point in the past year and faces pressure to continue in 2025. The dam is weakening with each cut. When it breaks is anyone’s guess, but one thing remains clear: Central Oregon’s fundamentals are strong. Investors who prioritize demand, demographics, and long-term positioning over market timing will be rewarded.
Bend Office Market
Compass Commercial surveyed 225 office buildings totaling 2.78 million square feet for the second quarter office report of 2025. The market experienced negative absorption for the third straight quarter with 10,061 SF of negative absorption in Q2. As a result, the vacancy rate increased from 6.05% in Q1 to 6.28% in Q2. Available sublease space did decrease from 59,535 SF in Q1 to 46,603 SF in Q2. The cumulative result is a small decrease in the availability rate going from 8.18% in Q1 to 7.96% in Q2.
LEASING: Leasing demand remains flat with sporadic activity across all property types and segments of the market. The West Side and Downtown submarkets both experienced negative absorption of 7,699 SF and 4,541 SF respectively. The outlier was the Highway 97/3rd Street submarket which experienced 2,179 SF of positive absorption.
RENTS: Lease rates continue to remain flat with the high end of the market ranging from $2.00 to $3.05/SF/Mo. NNN and more affordable space ranging from $1.40 to $2.00/SF/Mo. NNN.
CONSTRUCTION: Construction is in the final stages for two Taylor Brooks developments in NorthWest Crossing. The first is Shevlin Crossing – Building B, a 26,000 SF, two-story, Class A office. This building has three suites pre-leased and another pending. The second is a 6,413 SF single-story medical office building directly across the street from Shevlin Crossing. This building has one suite pre-leased with one remaining.
SALES: There were three notable sales this quarter. The first, a 7,200 SF single-tenant office building at 2680 NE Twin Knolls Drive, sold in April for $1,800,000 or $250/SF. It was purchased by a local non-profit for their own use. The second, a 3,433 SF single-tenant medical office building at 2195 NE Professional Court, sold for $1,000,000 or $291/SF. The buyer was an owner/user. The third, a 7,953 SF multi-tenant office building at 18 NW Oregon Avenue, sold for $2,500,000 or $314/SF. The buyer was an owner/user and existing tenant in the building.
Written by partner and broker Jay Lyons, SIOR, CCIM
Bend Retail
Compass Commercial surveyed over 4.61 million square feet of retail space across 275 buildings in Bend to compile the second quarter retail report of 2025. Bend experienced a large decrease in overall retail vacancy falling from 6.17% in Q1 to 3.41% in Q2. This significant drop is due primarily to the exclusion of the Former Costco location on the East Side from our survey, which was the result of the 156,729 square foot building only being listed for sale by Costco as an owner/user, and no longer being listed for lease.
LEASING: Due to the removal of the former Costco from our survey, Bend’s East Side market again showed the most change this quarter, dropping from 24.66% to 8.76% vacant. Downtown vacancy fell from 1.80% to 0.48%, while the Old Mill District sustained its 0% vacancy rate. The North 97 Submarket in Bend also saw a notable vacancy drop from 2.46% to 2.16%. Bend’s West Side experienced the largest increase among submarkets, rising from 3.10% to 4.38% vacant.
RENTS: Asking rental rates in Bend range from $1.00 to $3.75/SF/Mo. NNN, averaging $2.20/SF/Mo. NNN. The only property excluded is the under-construction retail pads at Gateway North, priced from $4.17 to $5.00/SF/Mo. NNN.
CONSTRUCTION: Retail buildings adjacent to the new Costco at Bend Gateway North neared completion at the end of Q2. Once finished, they will add 23,000 SF of retail space to Bend. Killian Pacific’s Jackstraw mixed-use complex remains on track for October 2025 completion, featuring 313 apartments and 16,885 SF of ground-floor retail, of which 7,910 SF is leased.
SALES: Notable Q2 sales included the former Kevista Coffee building (now Fox and Fern) at 130 SW Century Drive. The 6,240 SF property sold for $2,340,000 ($374.20/SF). A 2,127 SF drive-thru at 515 NE Bellevue Drive, occupied by Subway, sold for $1,100,000 ($517.16/SF). The former Becerra’s Bistro at 638 SW 6th Street in Redmond sold for $900,000 ($410.96/SF).
Written by broker Eli Harrison
Bend Industrial
Compass Commercial surveyed 325 Bend industrial buildings totaling 4.72 million square feet for the second quarter of 2025. The market experienced 17,422 SF of negative absorption during the quarter resulting in an overall vacancy rate of 3.89%, up from the 3.52% recorded in Q1 2025. There is now 183,468 SF of industrial space currently available in Bend.
LEASING: Industrial leasing activity remained relatively stagnant this quarter. The number of industrial tenants in the market has declined over the last several months. Those tenants that are looking for space have more options than they’ve had in several years. As the leasing market continues to cool, we expect more inventory to come online and as a result, a softening in asking rates.
RENTS: The average asking lease rate for raw industrial space was $1.09/SF/Mo. NNN at the end of Q2 2025 which is unchanged from the average asking lease rate recorded in Q1 2025. Asking lease rates for new construction are starting around $1.75/SF/Mo. NNN, assuming a basic shell delivery. Rents for second generation flex space and highly improved industrial spaces are in the $1.50-$1.65/SF/Mo. NNN range.
CONSTRUCTION: There are only a couple of speculative industrial projects underway in Bend. The Midway project located at the corner of SE Wilson Avenue and SE 9th Street consisting of 23,000 SF is under construction with delivery slated for late 2025. Taylor Brooks is under construction on NOCO at Juniper Ridge. The first phase, comprised of three industrial/flex buildings totaling 62,429 SF, is slated to be complete in early-mid 2026.
SALES: A couple of notable sales occurred during the quarter. An industrial building at 20511 Builders Street sold to an owner/user for $1,561,400 or $331/SF and a building at 1045 SE Paiute Way sold to an owner/user for $2,842,838 or $244/SF. Owner/user transactions are fetching the highest prices per square foot due to the availability of creative and attractive financing options for those borrowers.
Written by partner and broker Graham Dent, SIOR
Redmond Industrial
Compass Commercial surveyed 94 buildings totaling 1.79 million square feet for the second quarter Redmond industrial market report of 2025. The Redmond industrial market experienced 13,542 SF of absorption resulting in the vacancy rate decreasing from 4.12% in Q1 2025 to 3.36% in Q2 2025. There is now 60,202 SF of available space.
LEASING: Demand for industrial spaces in Redmond remained steady, with interest in units ranging from 1,500 to 5,000 SF. This aligns with the previous quarter’s observations, indicating a consistent preference among tenants for small to mid-sized spaces
RENTS: Lease rates in Redmond’s industrial sector have stabilized, with average asking rates between $0.90 and $1.25/SF/Mo. NNN, depending on the condition and size of the space. Notably, some landlords have continued to offer short-term reduced rates as incentives to attract tenants.
CONSTRUCTION: Redmond’s industrial pipeline saw notable movement this quarter. The Red Barn Industrial Center, a 17,048 SF flex development on NE Jackpine Avenue, is under construction with completion slated for October 2025. In addition, Amazon announced an 83,559 SF delivery station near East Antler Avenue and NE Ninth Street. The facility, which will be owner occupied, will support regional logistics and create approximately 170 jobs when it opens in spring 2026.
SALES: Two Redmond industrial properties changed hands last quarter. 246 SE Franklin Avenue, a 4,801 SF warehouse, sold for $735,000 or $153/SF. 209 SW 3rd Street, a fully leased 1,300 SF building sold for $272,010 or $209/SF.
Written by broker Pat Kesgard, CCIM
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