The fallout from the COVID-19 pandemic has rekindled old fears that Portland is losing economic growth to its neighbor to the north.
Residents moving to the Portland metro area are more likely to choose Washington state’s Clark County over Multnomah, Washington or Clackamas counties in Oregon, according to a new economic report from the Portland Business Alliance.
And Clark County’s job growth since the pandemic began exceeds that of Multnomah County, said Mike Wilkerson, partner and director of analytics at ECONorthwest, who presented the report’s findings at an event Tuesday.
“Portland is not one of the fastest growing cities nor one of the fastest growing regions as it used to be,” Wilkerson said. “Where the growth is happening is across state lines.”
Portland’s struggles are especially clear in its business core. After three years of a pandemic that resulted in hundreds of thousands of workers working from home, the region’s economic engine has struggled to lure people back.
That’s been reflected in the low foot traffic in the city’s central business district, which extends to the Lloyd District and South Waterfront. Employee foot traffic is still 48% below 2019 levels and visitor foot traffic is down 30%, according to the report.
Portland’s downtown has struggled, Wilkerson said, in part because it has relatively more offices and fewer residents.
“If you look at other downtown areas that have recovered more quickly, they often have a mix of residential use buildings,” Wilkerson said.
At the same time, Portland’s reputation has taken a beating over the past couple of years. Last week, the Portland Business Alliance released its annual downtown business survey results, which found that 87% of businesses say they’ve lost customers due to persistently negative views of downtown.
The survey also found 77% of participating businesses had to repair windows, doors and other parts of their building because of vandalism.
Office buildings, meanwhile, are at about 40% to 50% of their pre-pandemic occupancy on any given week, according to a 2022 fourth quarter report by commercial real estate services firm JLL, citing numbers from the data company Placer.ai.
At the end of last year, the city’s central business district had more than 8 million square feet of vacant office space, according to the Portland Business Alliance report. That’s about double the empty office space from the fourth quarter of 2019, which was estimated at 4.3 million square feet.
The alliance expects the level of vacant office space to increase as leases come up for renewal and some companies opt to downsize their office spaces, saddling landlords with millions of square feet in vacant space.
That could be bad news not just for the city’s economic recovery, but also for its finances. Like many major cities, Portland derives a considerable part of its revenue — the Portland Business Alliance said about a third — from taxes tied to the value of commercial office buildings within the central business district.
Last year, property tax receipts from Portland’s central district fell for the first time since 2005, as more building owners had their properties reassessed to reflect lower property values, Wilkerson said. He said property tax receipts are expected to drop even more in 2023.
Higher business taxes in Portland might also be weighing on the city’s recovery, the Portland Business Alliance said.
Wilkerson said that businesses paid 32% more in business taxes in 2021 compared to 2019, with much of the increase attributable to a new 1% tax on retail sales for the Portland Clean Energy Fund and a business income tax for homelessness services administered by the Metro regional government.
That could drive businesses to relocate, Wilkerson said.
“What that means for individual businesses, effectively, your choice of location now has a big impact in terms of what your profit is,” Wilkerson said
Tax data shows that more people are moving from the Oregon side of the Portland metro area to the Washington side than vice versa. They’re more likely to be high or middle earners, Wilkerson said, suggesting people may be heading to Vancouver for a combination of lower home prices and lower taxes.
But the bigger shift, Wilkerson said, is that people moving to the Portland-Vancouver metro area from elsewhere are more likely to choose Clark County over Multnomah County.
“Policymakers should be thinking about what the city is doing that’s contributing to that and what can be done to help reverse some of that,” Wilkerson said.
–Kristine de Leon, kdeleon@oregonian.com
