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NORTHEAST SNAPSHOT, OCTOBER 2006
Maine
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James D. Harnden, president,
Ram Harnden Commercial Real Estate Services
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Maine continues to thrive in all sectors of the market, especially in the greater Portland area. Despite the fact that that there has been a slowdown in office leasing activity in greater Portland, the average lease size has increased. For example, since 2004 the number of office leases signed within the range of 2,000 to 6,000 square feet has increased by over 14 percent. On the other hand, the percentage of office leases that have been signed for less than 2,000 square feet has dropped by that same amount.
Office building sales continue to be strong in the greater Portland market, even with the increase in interest rates. While buyers may be slightly more sensitive to the timing of deals with regard to fixing their financing, sale prices are still on an upward trend. In short, there is continued demand for office product in greater Portland from both owner-users and local/regional investors. Buyers continue to be aggressive in this market and sellers continue to enjoy favorable conditions for selling.
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Roxane A. Cole, CCIM, principal,
Ram Harnden Commercial Real Estate Services
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Portland’s Bayside area is poised for the greatest amount of commercial and residential development, as an estimated $244 million is anticipated to be spent in this area over the next decade. Bayside is literally being transformed with the construction of Class A and B office buildings and multiple retail stores. As construction continues in the area, we will see the eventual removal of the many scrap yards and former industrial sites that populate the area. The city’s goal is to transform the area along Interstate 295 and Portland’s Back Bay waterline into a mixed-use corridor that contains a balance of office, retail, medical and residential uses. This revitalization will allow for a more balanced Portland peninsula, connecting the Back Bay area with the Congress Street corridor and the Commercial Street district.
Vacancy rates for the greater Portland area continue to post healthy levels. As of mid-year 2006, the vacancy rate within the greater Portland office market was 7 percent. This percentage is down slightly from the year-end 2005 rate of 7.2 percent. Both of these overall vacancy rates include direct and sublease space combined. Vacancy in the downtown market ended at 8 percent, up from the year-end rate of 7.3 percent.
The changes by class, however, have been far more significant. The downtown Class A sector netted the greatest increase in vacancy due to the now available shadow space at One Monument Square and Two Portland Square. Vacancy in this sector has increased by nearly 50 percent over the past 6 months, coming in at 9.3 percent versus the year-end 2005 rate of 6.4 percent. As of mid-year, the Class B downtown sector was down only slightly, decreasing to 7.2 percent versus 7.8 percent. This decrease represents a continuing stretch of more than 2 years of decreasing vacancy. In the suburban market there was only a slight drop of 1 percentage point down to 6.1 percent. The suburban Class A sector ended at 8 percent, a decrease of more than 2 percent. The suburban Class B sector was flat with year-end 2005 at 4.2 percent. It is important to note, however, that the national forecast for vacancy in the office sector is predicted at just under 13 percent.
Though slightly up from year-end 2005, vacancy levels in the greater Portland industrial market continue to show viable results. The mid-year rate for the greater Portland industrial market was 5.9 percent versus the year-end 2005 rate of 5.3 percent. The city of Scarborough posted a 9.2 percent vacancy rate versus 5.8 percent vacancy rate at the end of 2005. The major contributor to this increase was the Konica vacancy at 71 U.S. Route 1, which nearly doubled Scarborough’s vacancy rate. Vacancies at Wallace Avenue affected rates in South Portland, which also posted an increase. Vacancy in this area was up by more than 2 percent, yielding 3.9 percent. Portland was flat with year-end at 5.6 percent and Westbrook was down by over 2 percentage points ending at 6.3 percent. This dip was primarily due to the lease of 40,000 square feet at 85 Bradley Drive. Once again, though, the Gorham market continues to post the largest drop in vacancy. In 2003, the vacancy rate for Gorham was more than 25 percent; however, the market is now below double digits, with a reduction to 6.7 percent. The national forecast for vacancy in the industrial sector is predicted at 9.5 percent; thus, in comparison, the greater Portland industrial market remains on track.
— James D. Harnden is the president, and Roxane A. Cole, CCIM, is a principal of Ram Harnden Commercial Real Estate Services
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