What’s Happening in the Market?

Jessica Estes  /   June 30, 2020

Market Insights


Because of the uncertainty in the business climate, our brokers are regularly asked what is happening in the commercial real estate market, and what to expect going forward. Never have we wished so hard for a crystal ball! However, based on our experience and knowledge of the market, we do have some insight to share. We asked our brokers to contribute their thoughts and here’s what they came up with:

Samantha Marinko: When this all began, the brokerage community collectively held its breath – but particular markets have proven that a pandemic cannot and will not slow down their progress. The industrial market, which was already extremely tight prior to COVID-19, has seen a surge of users looking to break into or expand further into the Maine market, resulting in multiple offer situations and steadily climbing lease rates.

Joe Italiaander: During regular outreach to various businesses and business owners, I am noticing that the overall sentiment regarding the future is optimistic. While many business owners may be experiencing lower sales volume and activity, they are largely taking this period to ensure success for the long-term.

A popular talking point with prospects and business owners has been the ‘sale-leaseback’ – the concept does not require a business to move, expand or shrink their footprint, which is perhaps an unorthodox approach when pitching a company. Rather, the ‘sale-leaseback’ is an opportunity for a business to capitalize on their (historically illiquid) real estate asset, free up funds for future growth, and even take advantage of tax incentives down the road. I believe that this will continue to be a popular concept in the near-term.

On the flip side, it is apparent that certain business owners and segments are experiencing a sharp increase in demand, mainly in the warehousing and distribution space. It will be interesting to see how logistics and e-commerce evolve as a result of new consumer trends sparked by the pandemic.

Kent White: Office and retail have slowed considerably, but the industrial market is still strong. Available space is still limited and demand has not changed much since earlier in the year.

Greg Boulos: Depends on the market segment. In general, when people call and want a “deal” I advise they’re about 6 months too soon. There will be deals, but it will take a while for the economic hit to flush the economy.

Noah Stebbins: Although COVID-19 has negatively impacted certain asset classes (i.e. retail, hospitality), industrial properties of all sizes continue to be in high demand throughout Central Maine and the Greater Portland area. In the future, I expect many industrial companies to start reshoring their operations back to the U.S., as the virus exposed many companies who heavily rely on importing/manufacturing goods outside of the country, which will more than likely lead to even more industrial demand in the coming years.

Craig Young, CCIM: Industrial product in the Portland area remains in high demand, particularly smaller units (2000-5000 SF) or large 100,000 SF facilities with high ceilings. They were pre-COVID-19 and they remain so today. Rates for both have only escalated through the pandemic and vacancy rates are 1% or less. There are slightly higher vacancies as you drive north on I-95.

Retail is tough. It was pre-COVID and remains so today. If you are a developer and represent (i.e. control) the tenant then you control the deal. There are a few isolated deals, but most retailers are seeking rent abatement’s or are just not paying rent. The notable exception might be the quick-care medical industry which continues to expand and look for site. And with the virus still among us, I see this trend continuing.

Dan Greenstein: On a positive COVID note: In trying to put a deal together in Farmington, the seller suggested we all meet, meaning a 4-hour round trip drive for the buyer and myself. When I asked the seller where we should meet, he said, “on a zoom call, of course.” I hadn’t even considered that that would be acceptable for a “face-to-face” meeting. What a relief, and time saver!

John Finegan: Maine is in a unique position to capitalize on the market forces that are impacted by the Coronavirus – most importantly, the increase in telecommuting will provide opportunities for folks to relocate here and enjoy our great quality of life.  This will in turn make Maine even more livable and bring additional income to the state.

John Meador: I’m speaking to a lot of investors and tenants saying the following: “Find me industrial land in NH and ME that has the potential to construct meaningful density (100k + SF).”

As investors try to predict the long-term changes in office demand, Greater Portland is seen as a RELATIVELY attractive place to put capital. The demand trends that will help the office product will inevitably result in an increased consumer base, particularly of a younger demographic. Northern New England hasn’t been a region focused on in scale by e-commerce related companies until now, and that demand is expected to grow.

Tony McDonald, CCIM, SIOR: We see the next few months as an inflection point in the market cycle during which the pace may slow a bit, but once a new direction is established, things will be off and running again. The market goes up and the market goes down—that’s what makes a market.

Derek Miller: My best advice to clients is to just be patient if they can. The suddenness of the pandemic, lockdown and subsequent economic difficulties that have arisen have been unprecedented. Opinions vary as to what the recovery will look like and a lot of that depends on how we balance the reopening with keeping people safe and healthy. Business owners should take advantage of government programs that make sense for their businesses while also trying to be nimble in terms of how they work with customers and clients (such as investing in new technology or e-commerce initiatives). The real estate business always bounces back, and by working with landlords and lenders, folks can hopefully avoid making rash decisions that will have adverse long-term effects.

Jessica Estes: Downtown Class A office space had less than 1% vacancy prior to the pandemic, and we haven’t seen speculative construction in the market so we’re not overbuilt. Because we started from such a strong place, and we don’t rely on public transportation (which is a barrier for sending folks back to the office in other places), we expect Portland’s office market to fare better than many other northeastern cities over the next 24 months.

Nate Stevens: In many conversations I’ve had with office occupiers in the Greater Portland region, many have reported that while they have seen some success with employees working from home, they still see value in a physical office location for collaboration, efficient communications, and boosting office moral and comradeship. While almost all of our office occupier clients have some employees working from home now and for the foreseeable future, this doesn’t necessarily mean reducing their office footprint but utilizing spaces differently as adjustments to office space programs are needed in this time. Over the last several years, there was a trend for less square feet per employee and we will likely see a reverse in this movement as companies try to give employees more room. Taking the long view with their current office square footage, companies may opt to not downsize and keep the ability to increase employees to pre-COVID numbers at some point in the future.