Farewell | In my final column, a look back at this year in Portland commercial real estate
After four years of writing my From the Ground Up column for Mainebiz, I am stepping aside to let others write about their experiences in and knowledge of the commercial real estate industry in Maine. I appreciate the opportunity to have had this platform and thank readers for their gracious comments and insights that added to my ideas for subject matter. While I will miss writing the column, I will enjoy having the extra time to find real estate deals!
The one thing I can say to those in the business community during this time is be positive. Optimism can be contagious and the more optimistic we can all be in our business dealings and work, the better it will be for everyone. Now is the time for tenants and buyers to think about opportunities. Red-hot real estate prices have retreated substantially. I encourage business owners to consider a long-term lease or the purchase of a new building to take advantage of lower rates and motivated sellers. If you have a strong business, think and plan for the long term. As difficult as it may be, take calculated risks that will help your company emerge even stronger at the end of this downturn.
For my last column, I’m going to take a look at the office market in Greater Portland and the deals that shaped our various market sectors this year. While there were more vacancies this year, some sizable deals also were completed.
Each year the people in my company analyze market trends and look back at the past year to compile data and analysis for our annual Office Market Survey. Our market survey covers three major market sectors: suburban office, downtown Portland office and medical office. Here’s some of what we found regarding significant vacancies, leases and new construction in Greater Portland.
Office development, vacant space
This year, Portland benefited from the development of major office projects. Most notably, 84 Marginal Way was completed and occupied by several tenants, including anchors Intermed (70,000 square feet) and law firm Drummond Woodsum (30,000 square feet). This, in turn, created several vacancies impacting our overall vacancy rate. Drummond Woodsum’s move opened up 37,000 square feet at 245 Commercial St. in the Old Port, and Intermed’s move created vacant space in several properties including 15,000 square feet at 238 Western Ave. in South Portland and 21,000 square feet at 1685 Congress St. in Portland.
Further impacting the medical office sector this year was the completion of phase one of Mercy’s Fore River complex. Next to Mercy’s 150,000-square-foot hospital is an 82,000-square-foot four-story medical building. Tenants in this building include Fore River Urology, Maine Plastic and Cosmetic Surgery and New England Foot and Ankle.
While the vacancy of Class A and B medical space increased by 60,000 square feet in Portland, 160,000 square feet of new Class A medical space was also developed. This speaks to the growing demand for medical office space, and it means landlords and owners of older medical space must make improvements to compete with new commercial space.
A tenants’ market
In the suburban office market, there was a big jump in available office space. While there was fairly limited new office development, some office projects were completed, such as 100 Waterman Dr. in South Portland, a 32,000-square-foot four-story office building, and 383 U.S. Route 1 in Scarborough, a 21,000-square-foot two-story office. Other smaller projects were completed as well, primarily for owner-occupants.
But the overall jump in available space is due in large part to a downturn in the economy, and also from the contraction and dissolution of some mortgage companies, title companies and others in the housing industry. In 2008, available Class A and B suburban office space increased by approximately 272,000 square feet. Still, there was some strong market activity. Insurance companies such as Reliance Standard Life and Patriot Mutual leased more than 25,000 square feet each. Sedgwick Claims Services leased 11,000 square feet of newly constructed space at 179 John Roberts Road in South Portland, and Binax leased an additional 17,000 squaer feet of expansion space at its 10 Southgate Road facility.
In downtown Portland, available Class A and B office space was also up, by about 120,000 square feet. This represents a 2.6% increase in vacancies from last year. Landlords consequently continue to offer strong incentives to lease space, and deals over the past year have included 26,000 square feet for Prudential and 11,000 square feet for RBC at 2 Portland Square, and 17,000 square feet at 2 Canal Plaza for KempGoldberg.
I hope that my column has been useful to businesses, property owners and others in the real estate industry. Once again, thanks for reading, and a special thanks to the Mainebiz staff who have helped develop and edit my column over the years.
Drew Sigfridson is a commercial real estate broker with CB Richard Ellis/The Boulos Co. in Portland. He can be reached at editorial@mainebiz.biz.
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