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Photo / Renee Cordes
Monument Square in Portland is becoming a hot spot for those looking for small Class B office leases. The Fidelity Building, 465 Congress St., which was sold last year and just completed renovation, is at the immediate right, with the Time and Temperature Building, which is also undergoing renovation, to its left.
New construction on the Portland peninsula is getting a lot of attention, but with office space at a premium, and driven by some high-profile building sales, Monument Square is going through its own makeover.
Particularly after the recession, tenants migrated out of the buildings in Monument Square to renovated space and new construction on the waterfront. In recent years, Monument Square, which includes buildings on the plaza itself as well as those radiating a block or two down Congress Street, have accounted for 80% of the office vacancies on the peninsula, said Samantha Marinko, an associate broker with Boulos Co.
A market report issued last week by Boulos shows a 4.9% vacancy rate for downtown Portland's more than 4 million square feet of office space. The total space is almost equally divided between Class A and B, with Class A vacancy rates in 2019 at 0.40% and Class B at 7.72%, for a total of 4.04% overall.
That vacancy rate is down from 1.04% of Class A space in 2018, and 8.59% of Class B space, for a 4.90% downtown vacancy rate. As Class A space has become less available, companies are rethinking Class B.
Nate Stevens, a partner with Boulos, said in the report that the 0.40% vacancy rate represents about 10,000 square feet of Class A space available across 25 buildings, the tightest class market in the city since 2001. The decrease in Class B space "is a result of numerous smaller deals under 5,000 square feet rather than one large transaction or conversion to residential," he said.
"Downtown tenants seeking higher-end Class B product have very few options with less than one-third of the availabilities located in recently renovated or modern buildings," he said.
Marinko said that the options are getting better in Monument Square, which had a reputation for outdated buildings. In the past two years, it's become a magnet or investment and office space is filling up.
Not only are landlords benefiting, but tenants are too, she told Mainebiz. "It's been a real draw for small tenants, like startups and small businesses." That includes tenants who traditionally may have been looking for Class A space, but are squeezed by the tight Class A market.
The vacancy rate in Monument Square has dropped from 170,000 square feet in 2014 to about 80,000 last year. according to the Boulos market report.
Several large Class A buildings on Monument Square, including One City Center and One and Two Monument Square, representing more than 600,000 square feet of Class A space, are almost 100% occupied, according to the Boulos report.
Marinko said while much of the space available now in Monument Square is Class B, a lot of it is renovated and appealing space in historic buildings, and it's in a good location. "There's more parking than on the waterfront, and while you still have to deal with Forest and Franklin (avenues), it's easier to get to Interstate 295," she said.
One building that could be a poster child for the area's transformation is 22 Monument Square, a 23,000-square-foot building that had a number of vacancies when it was bought by Bill Stauffer in January 2018 for $2.1 million. The anchor retail tenant is David's restaurant.
After renovations, nine transactions totaling 10,658 square feet were signed in 2019, Marinko said. The sizes of space leased ranged from several in the 500-square-foot range to a recent 1,257-square-foot lease to Abilis Solutions, a data company. Marinko and Stevens handled the leasing.
"It's not Class A space, but it's charming brick and beam Class B space, and it works," she said. "As people have needed space, they've become more open-minded."
Also among the new tenants is Great Diamond Partners, an independent wealth management firm that launched last spring. Marinko said having a business like a wealth management firm in the building helps remove the stigma of the neighborhood being undesirable for businesses that often want Class A space.
Steve Tenney, a founding partner of Great Diamond, said the firm and Monument Square are a good fit. "We enjoy being close to activity," he said. "Many other professionals we collaborate with are nearby and there are plenty of restaurants to choose from. As for the office space, the quirkiness gives it character."
Marinko said landlords have also become flexible. "Tenants maybe didn't want an entire floor, so a lot of landlords were creating smaller spaces," she said. "Spaces like that are appealing to small businesses, startups, and they can potentially move into bigger suites as they grow."
Marinko said 22 Monument Square owner Stauffer is among those landlords who looks to accommodate tenants looking for a specific size.
"If [a landlord] holds out to lease entire floors, they may fill the building, but it will take longer," she said. "If someone wanted one-third of a floor [Stauffer] did it, if possible, and now he's full."
Another building with a lot of action after a recent sale is 15 Monument Square, which sold for $2.2 million in October. The building, two doors east from Stauffer's building on the square, has two retail and six office spaces, about half of which were vacant at the time of the sale.
Leases since then include 2,000 square feet by Harvest Asset Group and Lady in the Moon, which leased 1,000 square feet of retail space. Josh Soley of Maine Realty Advisors, who also brokered the sale to 15 Monument Square LLC, represented the landlord in the transactions.
At the other end of the square, at 465 Congress St., the 10-story Fidelity Building, with 81,000 square feet of space. The building sold in June to Alta River Properties LLC, of Massachusetts, and Connecticut River Capital, of Lebanon, N.H. The building has been renovated and is actively seeking tenants.
Other recent building deals include 18 Monument Square, 50 Monument Square, and the 14-story Time and Temperature building at 477 Monument Square. Plans for the 14-story Time and Temperature building, bought by Chris Rhoades and Andrew Preston, of TT Maine Venture LLC, haven't been made public let, but owners have said will include a mix of uses.
Marinko said the resurgence of Monument Square is exciting. "It's got such an incredible history, and it's interesting to see the old and new juxtaposed."
And with recent investment in buildings like 477 Congress St., Monument Square's future is exciting. "The pattern will continue," she said.
"Some people are unaware of the transformation," Marinko added. "There's still a stigma of what [Monument Square] was, but they're pleasantly surprised when they see the space."
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