Downtown Portland Class-A Office Update

By Samantha Marinko, Associate

In January of each year, we publish a report which provides an overview of the commercial real estate market in Maine. We highlight significant projects and trends and conduct a comprehensive analysis of the vacancy rates of office buildings, with a particular focus on the 25 Class A office buildings in downtown Portland. With over 2.0 million SF in this market, it is a key indicator of the current strength of the office market.

The vacancy rate has evolved only slightly since our January report, at which time we reported a vacancy rate in Class A office buildings of 5.02%. The current vacancy rate has decreased by 0.81%, representative of the current stalemate in the market. As it did with last year’s mid-year update, uncertainty remains.

Hybrid work environments, most popular at the peak of Covid, are still prevalent, allowing for some office tenants to reconsider their office needs. However, some have found that a return to the office is necessary. It largely depends on the company culture and the collaboration required by specific types of office users. Some are still sorting out their needs, waiting for their imminent lease renewal options before they determine how much, and what kind of space they need in light of hybrid work models, and the desire to provide high-quality amenities to the employees that do come to the office.

At present, the market has 91,747± SF available across 13 buildings. Availabilities range from 855± SF in Three Canal Plaza to 24,060± SF in One Portland Square, with availabilities of varying sizes in between, representing a 4.21% overall vacancy rate of Class A office buildings.

As could be assumed by the minimal change in the vacancy rate of less than 1%, there were no substantial new leases or vacancies to report; the shift is due primarily to a number of 1,000 – 2,000 SF absorptions. No leases over 5,000 SF have been signed since our January 2022 update. The largest new lease was at One Monument Square; Hartford Fire Insurance Company leased 4,829± SF. Jessica Estes represented the landlord and John Finegan represented the tenant (both from The Boulos Company).

Two years ago, we were faced with all-time-low vacancy rates. Tenants in the market had minimal options and depending on their specific size requirements and timing, sometimes zero options. The vacancy was so low that it was near impossible for any significant transaction to take place in the Class A market. Currently, we have just under 100,000± SF available, with availabilities in varying sizes. The demand has shifted, but it still exists – there are tenants in the market, and there are places for them to go.

As leases of current Class A office tenants begin to roll, we will start to see the true effect that the pandemic and hybrid work arrangements may have on the office market of the future, but for now, we remain in a healthy equilibrium.

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