Portland office sales will drive millions in property tax losses: year in review

The invisible hand of the free market isn’t done boxing Portland.

The city’s office market, in particular, had a bruising year that foretells a contentious 2026.

A look back at 2025 shows a year of big building sales across the skyline that city officials and real estate leaders say will eventually nudge Portland back on track as office property values “reset” and new owners invest millions into buildings to bring employees back into the urban core. But in the meantime, the plummeting values of commercial properties will mean millions less for city services.

The plunging real estate prices come as Portland’s economic rebound is taking longer than other cities’. City of Portland economists wrote earlier this month that Multnomah County has lost nearly 20,000 jobs since June 2023 and is down 40,000 jobs since before the COVID-19 pandemic. Business leaders have blamed the shift to remote work, drug overdoses, homelessness and lasting reputational damage from 2020 protests that occasionally turned into riots.

Yet, real estate insiders are accustomed to waiting out the ups and downs of business cycles. Those are defined by lengthy periods of ownership that can extend several years.

Some of Portland’s most recognizable buildings have traded hands in the past two years. Southwest Fifth Avenue high-rise Big Pink sold in July for $45 million, barely one-tenth of its 2015 sale price, to a Nevada auto magnate who promised new building investments to lure back tenants.

The developer of Block 216, the tower that houses the Ritz-Carlton hotel and condos, has said it cost $600 million-plus to build. But poor performance forced developer BPM Real Estate earlier this year to hand the keys back to lender Ready Capital, which has claimed private appraisals valued the building at $425 million.

The PacWest tower reportedly sold for $56 million in October, according to Willamette Week, a steep drop from the $170 million that the building last traded for in 2016.

Those deals piled on top of the sale of Montgomery Park, another of the city’s largest office buildings, to the Menashe real estate family last year for $33 million. In 2019, it sold for $255 million.

Still, it could take years for new owners to overcome work-from-home inertia and downtown’s lingering reputational damage to bring life back to Portland’s largest office towers. Nearly 36% of offices in the urban core sat empty in the third quarter of 2025, according to real estate brokerage firm CBRE, ticking up from about 31% the same time a year ago.

And to many outside real estate investors, Portland remains a bad bet – be it in perception or reality – according to the closely watched Emerging Trends in Real Estate report, published annually by the trade group Urban Land Institute and accounting firm PwC.

The latest survey showed real estate investors and other industry professionals still prefer nearly any other city to Portland. The Rose City placed 80th of 81 markets for the second year running for overall real estate prospects across property types. Only Hartford, Connecticut, ranked lower.

City budget officials said that the low-dollar Big Pink sale and other major office deals like it will contribute to a decline of $7.7 million in property taxes compared to earlier forecasts. That’s due to a host of factors including Oregon’s unique form of so-called property tax compression, which The Oregonian/OregonLive explored in a deep-dive in August.

The $7.7 million also contributes to a nearly $67 million general fund shortfall City Hall must contend with next fiscal year, a budget gap that will likely widen in coming months as financial estimates become clearer.

Much of the downtown Portland “reset” has been about old owners wiping out bad debt.

New owners of downtown buildings won’t have negative equity, shorthand for when borrowers owe more money on a property than it’s worth, also known as being “upside down” on a mortgage. And some new owners, as at Big Pink, have said they plan upgrades to lure tenants.

“While this is a necessary step towards full-scale recovery, it does have a material impact on the City’s property tax revenues in the near-term,” the City Budget Office wrote in its revenue forecast.

Previous forecasts assumed office values would bottom out this fiscal year, then begin to recover.

“However, the timing of these recent sales pushes out the projected recovery at least one more year,” the City Budget Office wrote.