Residents of Portland, Oregon are notorious for rejecting umbrellas despite the region’s reputation for wet weather. Visitors to “The City That Works” can be seen under portable canopies, while locals opt for rain-resistant outerwear to deal with persistent rain and wind.
This stoic yet practical outlook can also be found in today’s business mindset that struggles with an excess of uncertainty.
“The present moment feels less like a slump and more like a period of recalibration and waiting for opportunities,” says CannonDesign’s Kevin Nyhoff.
The caution is related to a significant recent decline in the region’s AEC market. Project starts fell by $2.3 billion in 2023 to less than $5.7 billion, according to Dodge Data & Analytics. A recent report from the Portland Metro Chamber found that Portlanders feel deeply uncertain about their city’s economic outlook.
From the AEC’s point of view, the slump looks more like an outlier than a hallmark of the slump. Last year’s $9.1 billion in startups marked a 60% increase from the nadir two years ago.
The shift can be traced to an explosion of environmental public works projects that grew from less than $400 million initially in 2023 to more than $2.3 billion in 2024. That initial increase was driven by projects such as the $420 million Willamette Water Supply System Water Treatment Plant and the Willamette River Crossing Project.
Although the environmental public works sector has come down from such lofty heights, it remains robust with nearly $1.5 billion projected by 2026. More importantly, the overall numbers appear to be on a steady upward trend. Dodge expects the overall value of startups in the region to top $9.3 billion this year.
Despite the prospect of steady, if not spectacular, growth, the region’s AEC industry remains wary. The most pressing concern is the fear that growing financial uncertainty, both regionally and industrially, will cause a drag on investment.
“Higher borrowing costs and more conservative lending environments, as well as continued increases in the cost of construction have created a landscape where many projects are struggling to move forward,” Nyhoff says. “Even owners with strong, long-term confidence are moving cautiously and delaying commitments or reassessing project scope.”
The financial concerns are compounded by recurring industry bugaboos of labor prices, material fluctuations, insurance requirements and ongoing supply chain challenges.
Budget tightening has led to a landscape where projects are moving more slowly, which in turn has led to longer planning timelines and closer scrutiny of project economics, he explains.
That doesn’t mean Portland’s backlog of projects has completely dried up.
The Broadway Corridor Redevelopment, a downtown affordable housing tower, is slated to begin construction this year. In addition, Nyhoff notes that development discussions about projects aimed at revitalizing the city’s core continue, including the Lloyd Center site, the Expo grounds and a potential Major League Baseball stadium. In addition, regional companies have unique strengths such as solid wood expertise and sustainability.
“While solid wood is still considered emerging or experimental in other parts of the country, in Portland it has become a mainstream design and construction strategy supported by a deep pool of innovative and experienced designers, engineers, fabricators and contractors,” says Nyhoff.
Not surprisingly, examples of such projects include the new Portland International Airport.
Opportunities remain for alert companies, such as bond-financed projects, school modernization efforts, health care investments and infrastructure reinvestment.
“The emphasis seems to have shifted from rapid expansion to reinvestment and modernization of existing assets,” he says.
In order to protect against immediate market constraints, Nyhoff has seen other AEC companies diversifying geographically into neighboring and emerging markets such as Idaho and Montana.
“There is talent here and people choose to live here for the community, but we often have to look beyond what the local market alone can sustain,” he says.
Staying hands-on about the business environment doesn’t suggest a lack of faith in Portland’s AEC community, Nyhoff says.
“There is a shared belief that Portland’s defining qualities, particularly its vibrant culture, livability, creativity and design values, remain intact,” he explains. “These foundations will continue to position the region for future investment and the next generation of innovative development.”
