Pandemic creates winners and losers in Maine’s commercial real estate market
Tim Soley closed on three old port buildings on Wednesday, two on Middle Street and one on the adjacent Canal Plaza. They represent his first commercial real estate purchases in more than a decade.
East Brown Cow Management President Soley bought his first commercial property in 1989. He said he’s looking for long-term value, especially in times of recession.
“This is an on-cycle for me,” he said. “When people ‘fire! ‘I’m running into burning buildings to buy them. “
As a commercial landlord, Soley has worked with tenants on rent deferrals or reductions to find resources and support. He said that very few people are making money right now and the vast majority are not.
“The pain so many have experienced as part of the pandemic is beyond question,” he said. “And the economic impact of this medical event is likely to be felt most clearly in the next 12 months.”
Nonetheless, he is optimistic about the future and sees the opportunity in the commercial real estate market in Portland to “find a way for the city that has not existed for more than a century. Urban centers like New York City are now considered risky. And smaller tertiary cities, especially those that offer authenticity and convenience like Portland, have become more attractive. “
Changing the pandemic landscape
Ten months after the coronavirus pandemic, Mainers are still adapting to a changing economic environment. In the midst of a second wave of infections and with vaccination disabilities apparently within reach, the effects of the pandemic are becoming clearer.
On a typical January, the Maine Real Estate and Development Association (MEREDA) would hold its annual forecasting meeting in front of a thousand spectators at the Holiday Inn by the Bay in Portland. Experts would talk about their different industries and areas of expertise. Stands for a fair would be set up below. Bankers, brokers, architects, engineers, lawyers, buyers and sellers would mix and network.
This year this annual event takes place on Thursday in a virtual format. The presenters recorded their games earlier this month at O’Maine Studios on Danforth Street. Shannon Richards of Hay Runner and Craig Young of The Boulos Company – MEREDA Vice Presidents – will host.
The organizers had sold more than 500 tickets on Wednesday afternoon.
“We could see that eight hours in front of a screen it would be painful if someone wasn’t there to associate some relationship with the viewer,” Richards wrote via email. “I had a lot of uncomfortable moments while filming and I’m grateful that we hired a top local production studio to help us (and me). I am looking forward to the finished product. “
Hannah Pingree, Director of the Governor’s Policy Innovation and Future, will deliver the keynote address. James Marple, executive director of TD Bank Group, provides an economic overview and is followed by nine projections for various real estate sectors and geographic regions of the state.
“I think people will really like the message,” said Young. “The real estate market as a whole is healthier than you can imagine.”
The industrial sector looks particularly strong, said Justin Lamontagne, partner at NAI / The Dunham Group, who is speaking on the subject for the tenth consecutive year.
“When you think about it, most industrial companies and uses are essential,” he said. “Everything we relied on, especially in the early days of quarantine, (involved) food production and distribution, and warehousing and storage of goods. So the pandemic really generated a lot more demand this year. “
Add in the still developing cannabis industry along with the biomedical effort led by Abbott Laboratories and Idexx Laboratories, and the result was a vacancy rate in Greater Portland of just 2.44 percent, according to the survey that Lamontagne’s company conducts each year. That survey also found the average rental price spike to nearly $ 8 per square foot and an average retail price of $ 75 per square foot of industrial space.
The new build takes some pressure off, Lamontagne said, but adding a few hundred thousand square feet to a 20 million market is unlikely to have much of an impact.
“The construction costs are still extremely high,” he said. “There is no such thing as speculative real estate. It’s all owner-run new builds, someone who is going to build a building that his company will occupy. “
The hospitality and retail sectors of the real estate market are hardest hit by the pandemic. Malone Commercial Brokers’ Pete Harrington said the current outlook is nowhere near as bad as it was in the first few weeks of last spring when it emerged the online arena could swallow stationary operations.
“Man did not evolve to sit alone in a room,” said Harrington, “not without losing his mind.”
One of the notable aspects of Harrington’s retail display is the impact of a strong housing market on the home improvement environment. Furniture, sports and outdoor equipment suppliers have also done well, and contractors have not been short of work.
Harrington also takes a look at the Maine Mall, where a dozen stores have closed and another nine are unsure whether they can stay open until 2021.
“The mall will find a way,” he said. “There are big retailers who are not in this market yet.”
When it comes to office space, a recent survey found that there is still a lot of uncertainty. Nate Stevens of The Boulos Company noted that the vacancy rate has increased in Greater Portland but has decreased in suburbs. He said he envisions companies that have the same space but have fewer people in them because of the flexibility to work from home and do more podding.
“Instead of having 100 people in one large room, you have maybe 10 people in 10 smaller rooms,” he said. “It’s about giving employees the feeling of being back in the office.”
There’s a lot you can’t do in the middle of a pandemic. However, you can also switch car parks.
Andrew Cook, senior vice president of Skowhegan Savings Bank, noted that in September, when some of the repair shops that had cited five month waiting lists when he inquired 10 months earlier, were immediately available.
Instead of walking half a mile to his office on Commercial Street, Cook can now park within half a block.
“We obviously saw some things that weren’t great from the pandemic,” Cook said, “but there’s a lot of light at the end of the tunnel.”
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