NORTHEAST SNAPSHOT, JANUARY 2005

Maine Industrial Market

The industrial market in Maine remains healthy, particularly in the sale and leasing of facilities of less than 50,000 square feet. Development in southern and central Maine has been on the rise, due to low vacancies in smaller facilities. There have been several industrial parks developed over the past few years that have proven to be very successful. Due to the increased cost of construction nationwide, and the low vacancy levels locally, existing buildings for sale or lease have appreciated greatly in value the past 18 to 24 months and prices are at record highs.

While no statewide report has been compiled on vacancy rates for industrial property, specific markets such as Greater Portland, Biddeford/Saco and Auburn/Lewiston are enjoying low vacancy levels of 3 to 5 percent for facilities under 30,000 square feet. Larger facilities — those facilities greater than 50,000 square feet — have a higher vacancy level and are remaining on the market longer.

The majority of industrial development is taking place in southern and central Maine in the new industrial growth areas of the state including the towns of Saco, Biddeford, and Scarborough to the south, and Auburn, Lewiston, and Augusta to the north. Each of these municipalities has opened new industrial parks in recent years. Generally, these areas have seen increased growth due to their population base for employers and wealth of available land. Previously sought after industrial markets such a Portland and Westbrook have a very limited supply of industrial land remaining.

One significant industrial development is the new super-regional distribution center for Wal-Mart in Lewiston. The 500,000-square-foot facility — expandable to 800,000 square feet — is under construction and scheduled to be complete in 2006. It has also recently been announced that the U.S. Post Office will move forward with the development of a new regional processing center that will exceed 500,000 square feet. The project will be built in South Portland along the Scarborough town line. Most industrial properties throughout the state are smaller in size.

There is no single major tenant absorbing a majority of space, but rather an overall trend of local businesses expanding and moving from the leasing market to the owned-and-occupied market. The predominant property uses in Maine continue to be manufacturing and distribution. There is an ever-growing trend towards high-tech and biotechnology. Rental rates have been strong as vacancy rates have dropped and demand has increased.

Rental rates in Maine vary, largely based on the location of the warehouse property, as well as the age and utilization of the facility. Newer properties are leasing from $7 to $8 per square foot, triple-net, due in large part to the cost of construction. Older, non-specialty properties in good condition continue to lease from $6 to $7 per square foot, triple-net. Lesser rates are available for larger, older facilities ranging from $3 to $4 per square foot, triple-net.

With the cost of construction remaining high and interest rates on the rise, new construction should stay on balance with demand and continue to push existing inventories upward in both the leasing and sales markets. The southern part of the state will continue to grow its industrial market as cities expand existing industrial parks and provide low cost land alternatives to the more established areas.

— Craig S. Young, Partner, CBRE/The Boulos Company


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