The office recovery has been a slog in Portland, Oregon, and in Seattle, two markets held back by high downtown vacancy rates as companies and people moved away from those areas since the early days of the pandemic largely because of safety concerns and a lack of activity.
While there's been an uptick in leasing as some large companies have re-committed to having downtown offices, a promising sign, it could take years more for the market to fully recover in the Pacific Northwest’s two most populous metropolitan areas, CoStar analysts say.
Downtown districts in Portland and Seattle have taken the brunt of millions of square feet of office occupancy losses since the pandemic upended city life in early 2020. Some economists and analysts have said in recent years that the downtown areas of the two cities were headed into a so-called doom loop — where empty offices and streets lead to restaurant and retail closings that in turn prompt more companies to move out of the city.
A recent survey of downtown Portland businesses reported progress in improving public safety and cleanliness. In Seattle, such moves as Amazon's return to full-time office work and cleaner streets have helped avoid the doom loop by boosting downtown street activity.
But there's still a long way to go before the office markets in the cities fully recovery to pre-pandemic occupancy.
“We are starting to see some green shoots, but we're still in the midst of a prolonged downturn,” Elliott Krivenko, senior director of market analytics in Seattle for CoStar, said during a recent presentation. “We anticipate that the reset could take years.”
More Seattle businesses have moved into space than have moved out in the past two quarters, with expectations that the trend will hold for the rest of the year, Krivenko said. Portland is in worse shape, with occupancy down more than 5 million square feet from pre-pandemic levels as tenants have fled from some of the city’s largest office towers.
“As the [downtown] core goes, so goes the market,” John Gillem, CoStar's director of market analytics in Portland, said during the presentation. “It is the engine of the region so until we see some improvement there, the larger overall figures will look weak.”
Portland's recovery
Portland's downtown vacancy rate of 27% is expected to keep rising for the next few quarters. More companies have put offices up for sublease or have shrunk their footprint by consolidating into smaller spaces, offsetting an uptick in leasing activity in the second half of last year, according to CoStar analytics.
Over a third of greater Portland's net occupancy loss in the past five years has been in the downtown and surrounding urban areas.
Downtown's half-vacant U.S. Bancorp Tower — known locally as "Big Pink" — was recently put up for sale by its owners, Unico Properties of Seattle and a fund managed by UBS.
Its namesake tenant, U.S. Bank, announced last September that it would not renew its lease of five floors at the 1.1 million-square-foot tower. The bank that has had a downtown presence for over a century and is one of the district's biggest tenants said the decision to move employees out of downtown and into such suburbs as Gresham is "part of our work to manage our real estate presence," according to a statement provided to local media at the time.
Portland's job growth remains stagnant, especially for office-using jobs — though there's been a modest uptick in information employment recently, Gillem said. Information sector employment rose a modest 1.1% year over year in the first quarter of 2025 in a "good sign that maybe the bottom has been reached for our tech sector, and that we're on our way back up again," Gillem said.
Some businesses are signing deals in bets on the future of Portland's urban core and its surrounding districts. Instrument, a homegrown design and technology company that works with Google, Nike and other corporate giants, recently signed a lease to move its headquarters to a nearly 20,000-square-foot space in the Field Office building in northwest Portland.
JLL Executive Vice President Cayla Wardenburg, who represented Instrument in that lease with colleague Niall Travers, said companies have more certainty in making office real estate decisions than they did in pandemic-era years.
"Companies are willing to make long-term investments for the right size and location of offices in the urban core," Wardenburg told CoStar News.
Seattle's bright spots
Downtown Seattle has been among the Puget Sound region's worst-performing office districts with a vacancy rate of about 30%, according to CoStar analytics. Occupancy has dropped by more than 7 million square feet over the past five years as businesses such as Walt Disney and Warner Bros. Discovery have shrunk their downtown offices or moved to nearby cities like Bellevue.
In Seattle, the "bleeding" of office tenants hasn't stopped, "but it's slowed," Krivenko added.
The return to full-time office work by Amazon, Seattle's biggest employer and office space user, has fueled hopes that artificial intelligence companies and other businesses could follow suit as downtown activity picks up again.
Downtown foot traffic has reached daily averages not seen since before the pandemic hit in early 2020 in recent months, according to the latest data from the Downtown Seattle Association.
Seattle officials such as Downtown Seattle Association CEO Jon Scholes have said the rising activity is evidence that downtown has barely avoided the doom loop.
"I would suggest that we're on the precipice of a 'bloom loop,' but we can take nothing for granted," Scholes told CoStar News in March. "All of this is incredibly fragile."
With Seattle's office occupancy down by millions of square feet from five years ago, recovery will require a variety of approaches, Krivenko said.
Some older buildings can be converted to multifamily, while others will need to be torn down and rebuilt as offices, apartments or other types of buildings.
“We’re already seeing a lot of permits being submitted for demolishing older office buildings,” Krivenko said.
Tenant demand is gradually increasing in greater Seattle and the office vacancy rate may be on the verge of stabilizing as job growth returns to the region, especially in the technology sector, Gary Baragona and Brian Hatcher of Kidder Mathews said in the brokerage's first-quarter 2025 office report.
"While work from home and hybrid work policies will persist, there is expected to be a methodical shift to a more balanced workforce," according to the report. "If this trend continues to gain momentum and employees continue to fill office buildings, the office market may begin to shift to recovery and growth sooner than expected."