Reports: Maine real estate market brightening
While the national and regional economies are showing modest signs of growth, real estate industry watchers at the annual Maine Real Estate & Development Association forecasting conference said they are seeing bright spots in key markets, particularly in the southern part of the state.
Across a day of forecasts, here’s what analysts had to say about key areas of activity in Maine’s real estate market in 2014.
Multi-family homes
Multi-family sales in southern Maine continued a strong rise in key markets like Portland and Saco/Biddeford over the past year, while Lewiston-Auburn saw flats sales volume, transactions and median prices, according to Brit Vitalius, principal at Vitalius Real Estate Group in Portland and president of the Southern Maine Landlord Association.
Sales volume for multi-family units rose 8% from 2012 to 2013 in Portland, 14% in South Portland, 20% in Saco/Biddeford and were flat in Lewiston-Auburn. The median price rose by the same percentages in each of those areas. In Portland, three-unit commercial buildings were in high demand, with the average price rising 18% over 2012. Notably, South Portland saw a 40% rise in the number of transactions. “South Portland had an incredible year,” he said, noting that Westbrook also was up a strong 28% in transactions.
Half of the properties that sold in Portland went under contract from March to May. “In the spring it felt like there was a mini bubble,” he said.
Notably, 2-4-unit sales saw a rebound. “For the first time in a bunch of years we’re finally getting back some of the value we’ve lost,” he said. “It’s the first significant increase since 2007.”
One interesting development in Portland’s tight rental market is short-term rentals with services like AirBnB and VRBO. Vitalius said landlords are discovering this relatively new market and competing with hotels for guests.
He forecasts that multi-family building sales will remain active in 2014 in Portland, but prices will level out. Rising interest rates will be countered by a continued rise in rents, which could go up as much as 5% in the most desirable units. Commercial inventory in Portland will remain extremely tight. He advises watching the East Bayside area for more activity.
Single-family homes
Closed sales of single-family homes in Maine rose 16% in the first three quarters of 2013 over year-before figures for the same periods, according to Mike LePage, an agent at RE/MAX Heritage in Yarmouth. Median prices in the third quarter of 2013 rose 5% from the prior year’s figure.
He expects mortgage rates to top 5% by the end of 2014, dampening national existing home sales and making home ownership less affordable. However, Maine’s housing market recovered more slowly than elsewhere in the nation, and LePage considers it still to be recovering. He predicts, however, that the market will stabilize in 2014, with existing home sales rising 3% to 5% and prices rising 2% to 4%.
New construction of single-family homes and condos also is expected to nudge up, and he anticipates a continued resurgence in the high end of the market. Newly constructed home inventory has been near a 50-year low. “Baby boomers are trying to find their way into Portland,” he said of the condo growth. “It will be a trend.”
Hospitality
The forecast for hospitality is brightening as Maine hotels saw an increase in revenue per available room and average daily rates in 2013, compared with 2012 figures. While occupancy rates remained relatively flat statewide, Portland area hotels saw a 5.3% increase in daily rates to $114.10 and revenue per available room of 10.3% to $70.51, according to an analysis by Matthew Arrants of Pinnacle Advisory Group.
The Portland market is also expected to undergo the most change as the new Westin Eastland opened its doors last December and the new Marriott Courtyard and Hyatt Place are expected to open in May with the hotel in the former Portland Press Herald building set to open in 2015. Across all regions, group travel is expected to bring more visitors to the state. Through October, there’s been an 8.4% increase in booked rooms for group travel compared with last year.
Industrial
Justin Lamontagne, a broker with NAI Dunham Group, reported that 2013 was a very strong year for industrial market sales and leasing in southern Maine, especially in the under-10,000 square feet sector, which saw several properties sold within a week of being listed.
Breweries such as Allagash Brewing, Bissell Brothers, Banded Horn, New England Distillery, Austrin Street Brewing, Foundation Brewing and Baxter Brewing and a new market for medical marijuana cultivation centers helped drive some of 2013’s industrial market growth, Lamontagne said. He characterized the medical marijuana cultivation centers in Yarmouth, Gorham, Biddeford, Saco, Windham and Westbrook as being “great tenants” from a landlord’s perspective, being a well-funded and regulated industry that’s “quiet and secure.”
His survey of 496 industrial properties shows vacancy rates ranging from 2% in Saco and Scarborough, 2.4% in South Portland, 4.3% in Gorham and 5.3% in Westbrook to a high of 8.2% in Portland. “It’s clear we have an industrial inventory crunch right now in the greater Portland market,” he said. “Lewiston-Auburn and Biddeford are starting to take advantage of that.”
Looking ahead to 2014, Lamontagne expects to see a continued rise in lease rates, stabilization of vacancy rates and increased competition among investors seeking to purchase industrial buildings.
Retail
In the greater Portland market, vacancy rates of 4.3% are well below national average of 10.4%, especially in the Old Port, which has a near zero vacancy, according to Karen Rich of Cardente Real Estate. Internet sales will continue to compete against bricks-and-mortar retailers with groceries poised as the next sector to capture online shoppers. Supermarkets will be additionally challenged by new Market Basket stores coming to Maine. Expect to see Dollar General stores make an insurgence into Maine statewide.
Office
The greater Portland office market will continue its recovery as 2013’s overall vacancy rate of 10.04% s inventory edged down almost 0.10% from 2012 and 2.88% from 2011. The tightened inventory is reflected in rents that saw an 8% spike over 2012 , according to Jim Harnden of Malone Commercial Brokers. But with no new construction anticipated for 2014 in the office sector, 2013’s trends are expected to hold steady. He noted that if rents had kept pace with inflation, the average asking rent would be $19 per square foot versus the current $17.50 per square foot.
National, state outlook
Arthur Jones, a senior managing economist at CBRE Econometric Advisors’ regional office in Boston, offered few superlatives, either nationally or for Maine:
Five years into a recovery from the 2008 recession, he said economic growth has been “unimpressive but stable,” with Maine lagging behind the national recovery.
Housing sales, which historically have been the chief driver of an economic recovery, remain below the May 2006 peak of 6.8 million single-family sales, a period when mortgage rates averaged 6.5%. Last September, 4.8 million single-family homes changed hands with mortgage rates at roughly 4.5%.
After losing nearly 9 million jobs in the recession, the nation is still 1 million jobs below the pre-recession peak in January 2008. Average yearly employment growth for Maine the past two years has been 0.5%, compared to the U.S. average of 1.65%. On the other hand, Maine’s unemployment rate is lower: 6.4% in November, compared to 7% nationwide.
Jones reported that Maine home prices have been climbing steadily and are now at slightly more than 90% of their pre-recession levels.
Bright spots for job growth in Maine over the past two years: Leisure and hospitality, up 2.36%; construction, up 1.75%; retail, up 1.95%; professional and business services, up 1.82%. Big losers for Maine: transportation and utilities, down 1.79%, and government, down 1.24%.
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