January 27, 2022
Maine’s economy has been unsettled over the past 20 months, much like the rest of the United States. But unlike the rest of the country, Maine, and more specifically, Cumberland and York Counties, have unique challenges and opportunities.
Coming economic shifts will impact commercial real estate, as the built environment adapts to changes in how we live, work, and play. Here are a few predictions for Southern Maine’s commercial real estate market:
Downtown Office
While the office market will continue to evolve and remain somewhat difficult to predict, we do not expect to see a staggeringly high vacancy rate, like in some larger cities—New York recently hit a 30-year high of 18.6% vacancy. In Boulos’s recent “Where’s Maine Working?” survey, released in September 2021, 49% of respondents reported that their companies were fully back to working in the office, compared to the national average of 33.6% (as reported by Bloomberg in October). On the bright side, we entered the pandemic with a 6% vacancy rate, and a certain amount of increased vacancy is actually healthy for the market, allowing businesses flexibility to meet their needs.
Demand for residential and hospitality space far exceeds demand for office space, and we expect some older office product will be converted to residential. In fact, there are already some high-profile conversion projects completed or underway in Portland.
Logistics
Maine has long been regarded as the “end of the line” in shipping. That is going to evolve with climate change. Portland’s port may become a lot more significant in the movement of goods globally, as industries reconfigure to increase the efficiency of getting products from manufacturers to consumers. The ports are not the only piece to this puzzle. Busy ports need warehouse space to store those goods until they are on their way to consumers. With industrial vacancy hovering between 1-2% percent, there is little availability. Shifting demographic patterns could be what ultimately sparks new additional industrial development beyond build-to-suit, but given geographic constraints, it will likely take place off the peninsula. Greater Portland communities with convenient access to I-95 could be the next hot markets.
Education
Portland is seeing some major investment in education, with three prominent projects announced this year:
- The Roux Institute at Northeastern’s anticipated move to the B&M site will transform the look of the northern gateway to Portland with a $300 million investment.
- The University of New England is investing $70 million to bring its College of Osteopathic Medicine to the Stevens Avenue campus in Portland, where they will construct a new 110,000± SF center, bringing 500 students to the area.
- The University of Maine recently inked a lease to temporarily move its law school to the former CIEE headquarters building on Fore Street.
This is particularly exciting, as these educational hubs will bring additional investment diversity, as well as dynamic new companies to the area. One of the biggest challenges faced by local companies is attracting and retaining talent. Most businesses with whom I have spoken in the past year have indicated that their biggest inhibitor to growth is the ability to hire new people. An influx of 35,000 new residents to Cumberland and York Counties is a good start – we need to embrace population growth to support business growth. That means additional housing, better public transportation, and more incentives for talented new transplants to work for Maine companies, rather than remotely for giant tech firms.
Jessica Estes, Partner, Designated Broker
