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February 7, 2005

The forecast for 05 | Real estate brokers' best bets on the year ahead

Every January, the Maine Real Estate & Development Association holds a forecasting meeting for its members, who, as you might imagine, are residential and commercial brokers, as well as developers from across the state. Like any event that offers crystal-ball glimpses of the future, the MEREDA conference is popular; this year's sold-out meeting, which was held Jan. 27, drew more than 400 attendees.

Although Mainebiz was unable to attend the conference due to a bout of the flu, MEREDA provided us with copies of the speakers' presentations, highlights of which follow.

Single-family residential
"Most industry experts will tell you the market has softened, but the numbers tell a different story," says Tim Seekamp of Harborview Properties in Falmouth. Seekamp calls 2004 a "stellar" year for single-family home sales in Maine, and expects a strong showing in 2005, with an 8% to 12% increase in home values and a six percent to 10% increase in the number of homes sold statewide. The Lewiston-Auburn market area in particular is expected to "start to pull away from the pack" in 2005, with eight percent to 10% appreciation.

Driving this growth, Seekamp says, are a number of factors, including consistently low interest rates, the improving economy, aging baby boomers' need for accessible homes and the relative affordability of real estate in Maine compared to New Hampshire and Massachusetts.

Multi-family residential
Values for multi-family properties with four units or fewer will continue to increase incrementally in Portland as rents stabilize, according to Steve Davis of Steve Davis Real Estate in Portland. Demand for low income and subsidized housing will increase, which will absorb the current inventory in this segment. The vacancy rate for existing units will stabilize at five percent to seven percent, depending on unit size.

Davis adds that interest in multi-family and apartment properties as investment properties will continue. In addition, condominium redevelopment projects will reduce the rental stock, but will be offset by the availability of new units.

Retail
According to Peter Harrington of Malone Commercial Brokers in Portland, vacancy rates for retail space in greater Portland improved significantly in 2004, coming in at just under two percent; the overall retail vacancy rate in 2002, by way of comparison, was just over 10%. The amount of shopping center space in the area also increased, with 78,000 sq. ft. coming online last year.

In 2005, the area will see several new retail projects, as well as a few significant renovation projects in Falmouth and Portland. "Seemingly unlimited capital" and low interest rates are among the factors driving demand in this sector.

Commercial
Two new class A buildings, one in Portland and one in Westbrook, came online in 2004, and the greater Portland office market grew by 215,000 sq. ft., or 2.5%, according to James Harnden of Ram Harnden Commercial Real Estate Services in Portland. In 2005, Harnden expects the market to grow by at least 125,000 sq. ft., with vacancy rates remaining relatively stable. (The overall vacancy rate reached 7.44% in 2004, up slightly from the previous few years.)

Harnden foresees landlords continuing to be "aggressive" with Class A space "until tightening occurs." Finally, he says, "continued economic improvement will boost leasing activity."

Industrial
The industrial real estate market in Maine is in transition, according to Michael Miller of NAI The Dunham Group in Portland, as it moves away from manufacturing and toward distribution and warehousing. However, "logistics and geography will continue to impede the switch to distribution-oriented industrial businesses." New construction will be geared to the needs of owners/users or specific building requirements; speculative development will decrease as new construction costs hit historically high levels. In addition, land prices continue to increase as developable parcels become harder to find.

"Local companies with compelling reasons to remain in Maine should continue to be the backbone of the industrial market," Miller says.

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