Chris Romano / December 21, 2022
Earlier this month, I had the pleasure of attending the latest rendition of ICSC events at the Javits Center in New York City. While concerns over in-person events had hindered the event for the past two years, the East Coast’s premier retail real estate conference was back in full force. The conference itself is not the only thing that’s back with a vengeance – retail real estate has come all the way back from the dark days of early 2020. Below are my insights and takeaways from ICSC and how they affect the Maine market.
Recession is coming, if not here already
It is difficult to discuss real estate, or really any aspect of the economy, these days without broaching the topic of recession. Though the economy will take a hit, in reality most economists point to this recession being far less severe than those in the past. One sector has little to fear with looming recession – QSRs.
Colloquially referred to as fast food, Quick Service Restaurants (QSR) tend to be more insulated from economic downturns. As consumers limit spending, they tend to opt for lower-cost alternatives to sit-in, full-service restaurants. Additionally, corporation-backed QSRs are better equipped to handle distribution and supply chain issues, as well as being better insulated against shaved margins, in the face of rising supply and labor costs.
Maine is on the map
In the past, colleagues and peers have lamented that national conferences and their attendees often paid little mind to Maine as a target market, or even a market of interest. For years, Maine has lacked the population density necessary for many large-scale retailers to consider as a new or expansion market. With an increasing population driven largely by out-of-state transplants, Maine has grown in both population and notoriety.
One recent example is the development at Rock Row. Waterstone Properties Group has experienced great success in filling the retail spaces and pads with national credit tenants, including heavy-hitters in Market Basket, Starbucks, Chick-fil-A, and Chase Bank.
Land is cheap(ish)
Further driving the activity of retailers and retail developers in Maine is the cost of land compared to that elsewhere. Speaking with various development groups while in NYC, they all cited the attractiveness of high-quality retail sites available for $400k-$800k here in Maine. This stands in stark comparison to comparable sites in New York and New Jersey on the market for $1.5-2 million or more.
With the cost of construction still exceedingly high, the ability to acquire sites at a low-cost basis allows developers and investors to pencil these speculative or build-to-suit deals. This also keeps lease rates from becoming prohibitive to the majority of retailers and restaurants.
We look forward to a continued push from national retailers looking for space in Maine in 2023. We can hope that construction costs and interest rates stabilize, and responsible development can continue to provide Maine with a balance of great local and national retailers.
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