NORTHEAST SNAPSHOT, OCTOBER 2005
Maine Industrial Market
Maine has long been a manufacturing-oriented market, thanks in part to its enterprising workforce. However, the struggle to compete in the global environment has caused manufacturing to decline. Overall, the commercial real estate market has had solid years of building value appreciation and an increase in land value and price. The industrial market has experienced the largest changes, in part due to the adaptive reuse and creative rehabilitation of industrial buildings. These creative reuses can offset or avoid new construction costs, which have hit historically high levels.
With buildable land in extreme shortage, new developments have been slow. Wetlands and other conditions have an impact on much of the greater Portland land opportunities. One third of the state is impacted by the wetlands and thus not approved for building. This lack of land has increased land prices.
“Development is taking place in industrial parks,” says Michael A. Miller, senior industrial specialist with NAI The Dunham Group. “Developers prefer established parks with municipal utilities and good highway access.” The Maine local government has also eased restrictions in industrial parks.
Westbrook Heights Business Park and the expansion of Saco and Gorham Industrial Parks are two significant industrial developments that will increase available land. Gorham has a 50 to 70-acre proposed expansion, and Westbrook has already sold five of its eight available lots. Saco has sold Phase I of its industrial park, with three lots available in Phase II. More than 65 acres will be available in the third phase.
The leasing market has softened; with interest rates remaining low, industrial users are looking more towards owning rather than renting their facilities. Additionally, the high construction costs cannot justify lease rates. There is also continued demand for more functional and efficient space to cater to the service and distribution industries.
“Landlords are pursuing distribution and flex type users,” Miller says. There has been a growing transition to more distribution and warehousing throughout the state.
Apparel company L.L. Bean maintains “large blocks of distribution centers throughout southern Maine,” Miller says, including the recent lease of a 97,000-square-foot warehouse in Portland. Current local and regional manufacturing firms, despite the general decline, seem to be responding well to the reinvigorated economy. Natural products company Tom's of Maine has purchased an 110,000-square-foot manufacturing building in Sanford. Joint America recently leased 117,500 square feet at 55 Hutcherson Drive in Gorham. In south Portland, an investor purchased 100,950 square feet of building for leasing and development.
Rental rates in the area range from $3.50 to $6 per square foot per triple net. Industrial vacancy rates are approximately 6 percent.
“The Lewiston and Auburn corridors are attracting longer-term users due to more abundant land at 50 percent of the coast of southern Maine,” Miller says.
“The industrial market continues to be active,” Miller says. “Even with the loss of the manufacturing sector, absorption of space is steady and at a volume equal or greater than previous years,” he adds.
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