The old adage that real estate is all about location, location, location is especially true today in attracting talent to Maine, according to Jennifer Small, partner at Portland-based Malone Commercial Brokers and vice president of MEREDA.
Small shared market insights at Mainebiz’s “Five on the Future” forum, held Jan. 14 at the DoubleTree by Hilton in South Portland, and we followed up with her this week to get more details.
“If you’re a biotech company and you’re trying to lure that graduate from Cambridge, Mass., to Portland, Maine, what’s going to get them here is the location of your office. Is it near places where they can do some shopping at lunch and go to a cool restaurant after work?”
“And we’re seeing a lot of businesses downsizing or ‘rightsizing’ their spaces,” Small said; balancing the needs of both in-office workers and post-COVID work-from-homers.
“Increasingly the demand is for smaller, high-quality spaces. We call it the ‘flight to quality’ as tenants upgrade their offices to attract and retain employees.
“They’re making their offices very cool and attractive, spaces where people want to come to work,” Small said. “We’re seeing a lot of kitchens in offices that look like a Starbucks — very trendy.”
“The downtown office market is still very strong,” Small said, “But in the suburban spaces — in South Portland around the mall, for example — we’ve seen a substantial amount of vacancy in those areas, over the past 12 to 24 months.”
“Single-tenant users are few and far between for those large spaces.”
Small said downtown vacancy is roughly 9%, which is up from last year. The suburban market is 11% now; slightly down from last year. “Lease rates remain steady, but we are seeing more tenant improvement dollars and free rent to get deals done.”
Additionally, some older or underperforming office buildings are being considered for adaptive reuse into residential, hospitality or mixed-use space.
Industrial market, hot since COVID, now cooling a bit
Demand for industrial space in Greater Portland has been high for the past four years, and lease rates surged over the past 24 months from a long-time consistent rate of $3.50 per square foot to $12 to $14.
More recently, there’s been some weakening. “The industrial market has been our strongest since COVID,” Small told Mainebiz, “but things are softening a bit now.”
Industrial vacancy is at roughly 3.4%, up from 2.6% last year. “Demand has slowed and inventory seems to be sitting around much longer, especially on the lease side. Sales seem to show more demand and supply still remains fairly low.”
Spaces that are 5,000 square feet and under are still in demand; larger spaces less so.
Small was talking largely about the Greater Portland market but she sees similar patterns across the state.
New development focused on multifamily housing and hospitality
“If we’re seeing construction happen, that’s a strong indicator that there’s confidence in the market,” Small said.
“Unfortunately what we’re seeing a lot of is developers moving forward with permitting for projects, but they’re shelving them and delaying their decisions from moving forward right away.
“They’re not stopping, but they’re dragging their feet to see how construction costs go and how interest rates look.”
Small said she is seeing development for multifamily and hospitality projects, “which is good news for 2026.”
“And we’ll see two to three more hotels. I said six hotels ago that we were done, ‘Maine can’t have any more hotels’, but I was wrong!”
Generally, across all sectors, businesses are “holding tight for 2026,” Small said.
“We’re not seeing a lot of movement, people are being pretty cautious, to see what happens. Stagnation and patience are the trends in real estate for 2026.”
