Greater Portland Office Market Status

By Nate Stevens | Managing Partner, Designated Broker

Greater Portland

The Greater Portland office market showed signs of stabilization amid shifting dynamics in 2025, with performance varying significantly between Class A and Class B and suburban and downtown properties. The direct vacancy rate (excluding sublease space) increased from 8.1% to 8.84%, once again pushing the rate to its highest point in 12 years. Despite that increase, the market recorded approximately 139,000± SF of positive net absorption. This simply means that new supply outpaced demand, a position the Greater Portland hasn’t been in since pre-2020.

Demand was offset by nearly 240,000± SF of new inventory—mostly due to the 200,000± SF Rock Row Medical Campus—resulting in a rise in the direct vacancy rate. While the rise in vacancy may show a difficult office market, it signals that underlying demand was positive. Overall demand was strong throughout 2025, just not enough to fully digest the new supply in a short period of time. In tandem, there were no office buildings removed due to conversions for the first time in eight years.

The sublease vacancy rate also decreased for a second consecutive year, an encouraging signal for the market since sublease availability majorly contributed to elevated vacancy levels post-pandemic.

Downtown Portland

The contrast between Class A and Class B properties is most notable in downtown Portland. The Class B market has shown steady improvement over the past four years as vacant office buildings were removed for conversion, however tenants are increasingly gravitating toward the top tier of the market, leaning into the “flight to quality” trend as they seek higher-quality space, better amenities, and more central locations. Diversified Communications and RM Davis both signed leases in Class A buildings, demonstrating the move into higher quality buildings in premiere locations. The flight to quality trend supported absorption and kept Class A supply comparatively tight, with vacancy falling from 5.6% to 4.1%. This resulted in a sharp increase in downtown Class B properties, however, as the vacancy rate increased from a ten-year low of 6% in 2024 to 12.41% at the end of 2025.

The increase in Class B properties pushed the overall downtown market vacancy rate up from 5.8% to 8.22%. The slowdown of conversions in the Class B market combined with tenant flight to quality placed additional pressure on Class B inventory, where older buildings continue to compete against recently renovated or better-amenitized alternatives in higher-demand locations.

Suburban Markets

Unlike the downtown market, suburban markets generally experienced a decrease in vacancy rates and a healthy positive net absorption, speaking to both tenant demand and falling inventory. Rates adjusted from 11.36% to 9.99%. Sublease inventory also fell by roughly 30% after increasing dramatically since 2020. Much like downtown Portland, Class A markets outperformed B markets. Class A vacancy fell from 13.24% to 10.92% and all but one suburban submarket had a decrease in rates. Asking lease rates dropped slightly, by roughly 3%, but the flight to quality was another contributing factor in the market. This is promising for suburban properties, especially the Maine Mall submarket which had risen to the highest recorded rate in 20+ years. While Class B vacancy increased (not to the same degree as downtown Portland), the strong Class A suburban improvement carried the market. With an increased market size of 100,000± SF and a 10% drop in Class A vacancy, it’s clear that demand is exceeding new supply.

Medical Office Space

The medical office space market has remained very tight over the last 8 years with limited inventory added despite healthcare market growth. As vacancy rates remained below 3% for several years, it was inevitable that new supply would be added—as previously mentioned, Rock Row in Westbrook added 200,000± SF of new medical space. While there is still vacancy in this new complex, and the Class A medical vacancy increased from 1.5% to 7.11%, there was 135,000± SF of positive net absorption in just the past 12 months and the increase in rates was entirely supply-driven due to historic high demand and low supply. The additional Class A supply may create higher vacancies in the near future for the Class B market as these tenants may prefer newer, modern facilities. How the Class B market responds depends entirely on its demand level moving into 2026.

2026 Outlook

Overall, the Greater Portland office market is becoming more predictable than in recent years, but long-term performance hinges on how effectively owners adapt to shifting tenant expectations and economic conditions. The flight to quality, location, and amenities will continue and may even affect the medical market moving forward. Class A markets are positioned to remain the healthier segment, supported by tenant preferences and limited new supply. Class B properties—particularly older downtown assets—may continue to face headwinds unless repositioned, improved, or repriced. The lack of new conversions last year adversely affected the downtown market which may need more conversions to keep up in 2026. We should expect continued absorption for the market as a whole. Well-priced, high-quality office space should continue to lease but is dependent on new supply staying in check. Despite the increase in rates last year, demand remains strong, showing that the office and medical office sectors are holding up well heading into 2026.