Industrial space is still in short supply in southern Maine, but market is easing

Photo / Courtesy The Dunham Group A 13,000-square-foot industrial building in Scarborough, with 12 loading docks and ceilings up to 23 feet, attracted multiple offers.

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By Laurie Schreiber

In 2022, industrial properties in Scarborough and Gorham saw significant interest from potential buyers who had an eye on the huge demand for industrial space in a tight market.

Ultimately, local investors separately bought a 13,000-square-foot former Frito-Lay distribution center at 26 Washington Ave. in Scarborough and a former tool-making plant at 37 Bartlett Road, in the Gorham Industrial Park. Their bets paid off. The buyer in Gorham had the space back-filled before the deal even closed and there has been leasing activity for both.

Demand for industrial space remains high, according to the Dunham Group’s “2025 Southern Maine Industrial Market Survey.”

But there are positive signs that things are loosening up.

As of Dec. 1, 2024, the overall industrial vacancy rate in southern Maine was 2.49%, up from last year’s 1.93%.

There was a notable increase in inventory within Greater Portland, where the vacancy rate rose to 1.96%, up from a record low of 0.66% in 2023.

The study tracked over 35 million square feet of space across 17 cities and towns in southern Maine, including an additional 2.1 million square feet across 45 buildings in Sanford and Wells.

File Photo / TIM GREENWAY

Justin Lamontagne

“While this increase is a positive development for tenants, it's important to note that a sub-2% vacancy rate still makes it a tough market for businesses looking to expand or relocate,” said Justin Lamontagne, the group’s designated broker and managing partner.

What's more challenging, he continued, is that the majority of available space in Greater Portland consists of medium to large buildings, typically 10,000 square feet or more. For businesses seeking less than 10,000 square feet — most businesses in Maine — options within a 15-mile radius of Portland are virtually nonexistent.

The lack of available inventory is pushing businesses to explore alternative locations and, in some cases, even out-of-state options, he said.

“While new construction and land development remain viable, these projects are costly and time-consuming,” he wrote. “As a result, many users and brokers are turning to the creative repurposing of office and retail spaces.

For example, work is underway to repurpose a former Burlington Coat Factory at the Jetport Plaza in South Portland.

“The property owners are marketing the front retail portion to smaller businesses, while we’re converting the deeper back section with loading docks into light industrial and warehouse space,” Lamontagne wrote.

Overall, 2024 saw fewer sales, but higher values, and a steady leasing market that helped maintain transaction volume.

“I believe the industrial sector is poised for some steady years, as we settle back into the ‘old normal’ market,” he said.

The study tracked 35,681,299 square feet across 1,046 buildings. The 2.49% vacancy rate represents 890,241 square feet of space.

Sam LeGeyt, a partner and broker with the Dunham Group, cited the following:

Greater Portland saw an increase in vacancy this year, up to 1.96%
York County also saw an increase, although much smaller
Sanford has only 50,000 square feet available and Wells only 44,000 square feet
Auburn has only four total properties currently for lease, three of which are over 40,000 square feet.
Lewiston has six properties on the market, four between 30,000 and 65,000 square feet
Scarborough and Westbrook each offer 0.2% vacancy with less than 12,000 square feet available across three properties.
Cumberland, Falmouth, Freeport and Yarmouth markets have no available properties.

With limited space available, the cost to buy or lease industrial space continues to rise, said Lamontagne.

“One notable data point this year has been the sharp drop in the number of industrial sales, despite the continued rise in value, Lamontagne wrote. “The combination of limited inventory, rising interest rates and inflation has resulted in the lowest number of sales our firm has seen since I began tracking this data in 2011.”

However, despite the drop in transaction volume, the values of the sales that did occur have increased significantly, he said.

Lease prices are also on the rise, though not as sharply as sale prices.