Property predictions | A breakdown of Maine's real estate market from MEREDA 2011
More than 500 real estate professionals gathered in Portland in late January for the Maine Real Estate and Development Association’s annual forecast conference. The overall message: Strength in some sectors, and a creeping recovery throughout the industry. Here are the highlights:
Southern Maine retail
The retail market in southern Maine showed a bounce back from the debilitating 2009, when a number of big-box retailers shuttered local operations and smaller businesses also closed, leaving nearly 140,000 square feet of vacant retail space the greater Portland market couldn’t absorb.
That changed in 2010, with 272,000 square feet of retail space occupied compared to the beginning of the year. More than half of that net absorption was due to Marden’s opening at the vacant Walmart in Scarborough, Goodwill Industries opening in the former Circuit City in South Portland and Trader Joe’s taking over the former Wild Oats store in Portland, according to Malone Commercial Brokers.
Retailers in the first half of the year took advantage of higher vacancies and lower lease rates to upgrade to better space or enter new locations previously out of reach. Lease rates inched up over the course of the year in the primary market, while holding steady in the secondary market. Portland’s vacancy rate dropped from 10.8% in 2009 to 8.3% by the end of 2010. Despite this, vacancy rates at class B and C retail space actually increased from 2009 to more than 11%. New retail construction lagged in 2010, and will likely rebound in the near term, according to Malone’s report.
All indicators — vacancy rates, lease rates and new construction — will likely stay flat in 2011, with discount retailers like Goodwill and Marden’s expected to propel the bulk of new growth.
Southern Maine industrial
The industrial market saw more activity in 2010 than in 2009, in part because landlords were willing to make concessions to nab tenants, according to a report from Cardente Real Estate. New development was limited. For 2011, investment sales will stay limited, while lease rates and sale prices will remain steady. 2010’s excellent tenants’ market will continue, and lower construction costs will be a boon for owner-users looking to maximize their space, Cardente reports. More absorption of existing, newer industrial space will likely occur, while vacancies will prevail at older buildings.
Industrial land prices
Greater Portland $60,000-$115,000/acre
Lewiston/Auburn $40,000-$65,000/acre
Biddeford/Saco $30,000-$50,000/acre
Sanford $25,000-$45,000/acre
Industrial properties
Portland:
Active listings 56
Sq. ft. available 787,493
Avg. lease listings available rate (per sq. ft.) $4.36
Cumberland County
Active listings 173
Sq. ft. available 2.6 million
Avg. lease listings available rate (per sq. ft.) $4.53
Maine
Active listings 301
Sq. ft. available 7.6 million
Avg. lease listings available rate (per sq. ft.) $3.95
Source: Cardente Real Estate
Greater Portland office
2009 was rough, but the market didn’t bottom out until 2010, with vacancy rates moving from less than 10% in 2009 to more than 11% by the end of 2010. The performance proved that the region hadn’t seen the worst, according to the report from CBRE/The Boulos Co. More than 1.2 million square feet of office space is available out of a total market size of 11.6 million square feet, with vacancies higher in class B downtown and suburban space.
After dipping or holding steady in 2009, rental rates for downtown office space rose slightly in 2010, while rates for suburban space held flat or continued to slip. Medical space rates were a mixed bag. The report predicts overall rents will stabilize in a slight decrease from 2010, and aggressive landlords will continue offering incentives to lure tenants. Downtown vacancies will increase, while the suburban market will see slow growth.
Hospitality
The weather cooperated in the summer of 2010, bringing more tourists to the state and boosting lodging sales over the dismal 2009. Maine hotels saw occupancy rates rise 3% to 58%, and the average daily rate also rose $3 to just under $97. Revenue per available room ticked up $5 as well, though growth in room rates is expected to be slow, according to Daigle Commercial Group.
But group business travel is still stagnant and will likely remain a sore spot for hotels, especially franchised properties. Older, underperforming properties in less desirable geographic locations and without a national franchise will see more struggles. The future is bright for high-quality properties in strong tourism markets, which will see less competition as new hotel construction tapers off. Coastal, well-performing properties captured buyers’ interests, while sales of properties less than $1 million sharply dropped.
Major hospitality properties sold (over $1 million)*
Total sold 8
Total dollar value $26,840,000
Rooms included 268
Average per-room price $100,149
*Two other properties were sold in 2010 that were likely sold for more than $1 million, but their final sale price was not disclosed.
Source: Daigle Commercial Group
Residential
Home sales were a rollercoaster in 2010, buoyed in the spring by federal tax credits, then plummeting when those credits expired. The median sales price fluctuated throughout the year, while the number of units sold fell during the last six months of 2010. Total home sales volume was $2.4 billion, on par with the state’s 2002 performance and well below the peak of nearly $4 billion in 2005. Home values will likely stay the same for the next two years, and sales will remain varied but overall improve in line with job growth, according to RE/MAX Heritage. The number of multi-family units sold, which had been on the decline since 2005, began to inch up in 2010, along with the median sales price, according to Vitalius Real Estate Group.
Compiled by Mindy Woerter
Regional highlights
MIDCOAST
Planned projects:
Super Walmart: 150,000 sq. ft.
Tractor Supply Co.: 22,000 sq. ft.
Thomaston Green: 42 residential/12 commercial units
Knox Mill Condominiums: 25 units
LEWISTON/AUBURN
Under development:
St. Mary’s medical office building: $7.3M
St. Mary’s surgical suite: $10.6M
CMMC Emergency Medical Services: $45M
AUGUSTA
Recent projects:
MaineGeneral Medical Center: $8.5M
cPort Credit Union: $375,000
Significant transactions
SALES
27 Northport Drive, Portland
Squar feet: 32,500
Sale price: $2.65M
Buyer: Martin’s Point Health Care
1685 Congress St., Portland
Square feet: 32,123
Sale price: $3.8M
Buyer: Stroudwater Associates LLC
10 Southgate Road, Scarborough
Square feet: 109,089
Sale price: $11M
Buyer: Scarborough Medical, DST
LEASES
5 Davis Farm, Portland
Square feet: 80,683
Tenant: FairPoint Communications
90 Spencer Drive, Wells
Square feet: 125,000
Tenant: Village Candle
10 Southgate Road, Scarborough
Square feet: 102,833
Tenant: Binax
SIGNIFICANT VACANCIES
Office:
300 Southborough Drive, South Portland
Square feet: 95,000
Two Portland Square, Portland
Square feet: 59,107
390 Congress St., Portland
Square feet: 61,460
Industrial:
The Pepperell Mill Campus, Saco
Square feet: 546,890
765 Warren Ave., Portland
Square feet: 157,000
90 Spencer Drive, Wells
Square feet: 125,000
Compiled by Mindy Woerter
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