A Message from our Managing Director
CBRE | The Boulos Company is pleased to present the 2017 Market Outlook for Greater Portland's commercial real estate market.
2016 proved to be yet another strong year for commercial real estate in Maine. In this year’s publication, we have explored the key drivers impacting trends across the market, both geographically and within real estate sectors.
In last year’s Market Outlook, we asked “Where will the next major office building be built?” As expected, office vacancy rates continued to fall, and after several years of little to no new product added, we are finally seeing new construction on Middle Street in downtown Portland. Our Class A downtown market in Portland continues to be especially tight, with very few large office moves happening in 2016. Businesses continue to add jobs and signs of increased employment are everywhere – from the long wait list for parking garages downtown to an increase in traffic counts on main commuter routes. Unemployment has been decreasing steadily since 2011. In Cumberland County, the area encompassing Portland, we are at a remarkably low 2.8%. The State of Maine has a 4.0% unemployment rate, which compares favorably to the national rate of 4.9%.
Capital Markets transactions are once again a highlight of robust activity over the past year. Retail investment product is in especially high demand, commanding historically low cap rates, while significant assets traded in multi-family, office and industrial sectors as well. Our market fundamentals remain strong – low vacancy, increasing rents and low interest rates with a competitive banking climate continue to push capital toward commercial real estate. Our craft brewing industry continues to expand rapidly and the rate of growth is increasing at a strong pace. This impacts industrial and retail real estate, both of which are explored further in the following pages.
Multi-family and condominium construction in Portland is exploding with hundreds of units added within the past two years, additional product under construction and even more in the pipeline. Retail expansion is happening more slowly; however, smaller scale projects are being added to the market in several locations and a ±500,000 SF project in Westbrook is fully approved and will commence construction in Q1 2017.
The impact of November’s election on our market remains to be seen. While national policies will certainly affect us, there are also some local referenda that may impact our market. Among them are the legalization of recreational marijuana, which we anticipate creating additional demand for industrial and retail space, an increase in the statewide minimum wage, and an additional 3% income tax on income over $200,000.
Here in Portland we’ve been enjoying a wave of fantastic new restaurants, breweries with tasting rooms, hospitality and residential construction and new retailers in the downtown core. Our gem of a city continues to break records for the numbers of cruise ships and tourist visits in the summer and fall months. The last fifteen years has been a great resurgence for Portland and we can see the ripple effects emanating throughout parts of Maine. To learn more about the exciting developments in real estate over the past year, please read on.
We wish you the best in 2017 and beyond. We are optimistic for the coming year and our team of best-in-class real estate experts stands ready to help meet your business and investment goals.
Drew Sigfridson, SIOR