The summer of 2023 is proving to be a transitional time in the economy, the workplace and the city of Portland. While we have clearly emerged from specific pandemic-related actions, we are still living in pandemic-era effects. Specifically, the Federal Reserve’s efforts to contain inflation have had a dramatic impact on the commercial real estate sector. The whipsaw of hybrid-work vs. return-fully-to-work has exaggerated the impact of interest rates, particularly on the office market. The transformation and recovery of downtown Portland defines our immediate region and is generating a huge amount of formal and informal analysis and national attention.
Together, what do these three factors suggest about what lies ahead?
In late 2022, two of our retail brokerage veterans, George Macoubray and Gary Litvin, took a deep dive into the impact of inflation and the corresponding government interventions. They agreed that just as consumers are facing higher retail prices, commercial tenants are also having to learn how to adapt to changes in rent and timing expectations, while landlords are struggling with increased material costs, delays in project schedules and possibly smaller profit margins.
These factors have led to the ultimate conclusion that all parties involved must be willing to make adjustments in order to maintain a healthy business environment. The market has changed, in all likelihood permanently. Now, each side of the commercial real estate equation is adjusting their strategies to keep a balance. It's not ideal, but they are adapting.
Collaborate to innovate
The days of required restrictions to in-office work, whether mandated or expected, are well in the rear-view mirror. And yet, a cursory inspection of any major business periodical reveals that “the future of work” is far from decided. Whether employees unify to advocate—or require—an ongoing hybrid environment or a lone CEO mandates a full-return to the office, there is no consensus on what the conclusion to this topic is—or will be. In fact, the search for the answer obscures the heart of the matter, in our opinion.
Instead, the importance of process will persist, and it is crucial to factor in the consolidation of best practices when deciding on the next course of action to meet client expectations, keep employees engaged and produce excellent and market-viable results. Among the practices our Chief of Staff Ash Mitchell identified in their two-part series last year, the key is to engage in company discussions to make decisions. It’s important to take into account the rapid rate of change and varying perspectives across generations. Additionally, maintaining a flexible mindset and regularly re-evaluating strategies can greatly contribute to success, whether neo-unionized employees or lone-work CEOs like it, this is a collaborative conversation.
Portland's diverse industries
And where does the “future of work” conversation play out most intensely? In the hearts of downtown central business districts throughout the country. Here in Portland’s urban core, we have explored how it is necessary to accept that downtown is not what it was and will continue to change in ways we don’t necessarily expect. As Sara Daley explored in her series on the future of downtown, a plethora of factors overlap to cause the challenges the city faces.
And yet, we know that the city’s urban core is essential to the health of the surrounding areas and must focus on the bright spots of innovation and adaptation that exemplify the future. Portland's heart and soul have always been rooted in its diverse industries. Whether it's the vibrant arts scene, bustling retail or award-winning restaurants, these industries have always stood as a symbol of Portland's strength and resilience, as they have managed to turn sour situations into sweet victories. Now, more than ever, we need to hold onto this unwavering spirit and believe that we can overcome the challenges that lie ahead. Though times may be tough, we know that we can find a way out of this predicament and come out even stronger on the other side.
Together, we believe our investigations of these critical elements—inflation, the future of work and the downtown area of Portland—are essential for any forward-looking analysis. These factors indicate a future that will be marked by successful adaptations, a coming together of collaboration and compromise to arrive at compelling solutions—and the emergence of innovation born out of adversity that propels us forward.