INDUSTRIAL MARKET REVIEW
By Justin Lamontagne, Partner, Designated Broker
Greater Portland’s overall industrial vacancy rate fell below 2% for just the second time, continuing a decade-long boom in the industrial market. NAI The Dunham Group is pleased to present here our mid-year update of the annual Greater Portland Industrial Market Survey. The statistics as of July 1, 2021 are staggering and confirm our anecdotal and transactional workload.
Today, the vacancy rate for over 20,000,000 SF of industrial space is a paltry 1.98%. This is the first time in a very short time in 2017 that stocks have been so low. In the first two quarters of 21, over 250,000 square feet of space was absorbed. Much of this can be explained by a small handful of large occupied buildings, most notably 203 Read Street in Portland. The 167,000 square foot building has been fully leased to Bath Iron Works, removing from the market the only vacant building in all of southern Maine over 100,000 square feet.
This larger industrial space shortage has stifled several other large end users who are now forced to consider new construction or pivot production in order to wait for this space shortage to end. Further proof of this is the 85,640 square foot rental at 1 Eagle Drive in Sanford to Volk Packaging, a company headquartered in Biddeford. Sanford was not originally within Volk’s search parameters, but the quality building, affordable rental rate, the conducive business environment, and further study of logistics made the property a choice. ideal.
As you would expect, when the supply and demand scale is so heavily weighted in the direction of homeowners, rental and selling prices continue to rise. Most quality industrial spaces and parks cost on average over $ 8.00 / SF NNN with several examples of peak prices close to $ 12.00 / SF NNN. These rates are comparable to the office market and are rapidly gaining ground as the two sectors are on opposite trajectories.
Demand to sell remains historically high as investors and owners / users compete and continue to drive up prices. Average selling prices are between $ 75 and $ 85 / sq. Ft., Depending on size and quality. And many industrial buildings sell well above that. The industrial sector has not only proven to be pandemic proof, but the pandemic itself has in fact exacerbated the importance of industrial labor. Critical businesses like food production, product warehousing and shipping, domestic manufacturing of PPE and general goods got us through this terrible year.
In summary, what was already a competitive landscape flourished during what was otherwise a difficult 2020. And today, midway through 2021, we face the same challenges that we have seen over the past decade: limited supply, constant demand, increasing leases and sales. prices and cautious speculative development. We continue to coach our end buyers and tenants to remain patient, creative, flexible but, at the same time, aggressive when the opportunity arises. It is a homeowners market and there is no sign of that changing.
OFFICE MARKET REVIEW
By Sam LeGeyt, Associate Broker, NAI The Dunham Group
Over the past 16 months, many have contemplated, hypothesized or even hoped for the death of the office market. In southern Maine and more specifically in Portland, the office market has stagnated but certainly not dead or dying.
Compared to Boston or New York, Portland does not experience the drastic ups and downs of a primary market. Things are much more stable, and although we have seen lease terms decrease during the pandemic, prices remain very similar to pre-pandemic levels. What used to be a standard 5-10 year lease term has typically been 1-3 years, so local businesses and corporations can make decisions based on how offices will look after the pandemic. Over the past 4-6 weeks, we’ve seen several tenants who have pursued one-year COVID-19 renewals, come back to the market in search of longer term deals.
The other recent trend that we are seeing is the increase in demand in small spaces, both downtown and in suburban markets. Many users, and especially those who continue to work from home, are flooding the market, for spaces to escape the home office.
Likewise, in the leasing market, prices have remained constant in the sales market in and around Greater Portland, however, the number of sales transactions has declined in the office market over the past year and during the first half of 2021. In some cases, I think this can be attributed to the shorter terms of new tenants or renewal which prevents investment sales, and to owner-users who fear that the next 12-18 months will bring to their business.
For their annual and biannual industrial and office market reviews, NAI The Dunham Group tracks over 20,000,000 sq. Ft. Of industrial space in the Greater Portland market, including Saco and Biddeford. Visit dunhamgroup.com to view available properties.
Market Summary Sources: NAI The Dunham Group Industrial Market Survey and New England Commercial Property Exchange
Featured Property: Office / Warehouse Complex in Westbrook