Office Market Overview

by Nate Stevens, Associate Broker at CBRE | The Boulos Company

The Greater Portland office market continued to improve in 2016 as the vacancy rate fell for the 7th consecutive year for a direct vacancy of 6.17 percent and total rate of 6.77 percent including sublease space. This vacancy rate includes both Class A and Class B office and medical office space across seven towns in Greater Portland with a total market size of almost 12 million SF. While the market continued to improve throughout 2016, only half of the 14 submarkets we track experienced a drop in vacancy. The total net absorption in the market was slightly less than last year, indicating a fairly stable pace of improvement over the last 24 months.

DOWNTOWN

The downtown Portland office market is one of the areas to experience continued improvement with the direct vacancy rate dropping to 6.6 percent from last year’s 7.65 percent. The majority of the absorption can be attributed to the Class A office market which continues to perform at a historically low vacancy rate and is currently 2.62 percent. Interestingly, this is not due to large leases, but smaller to medium sized transactions as availability in this market is sparse. There were only two new transactions over 15,000 SF, which were FC Beacon’s lease of 17,300± SF at 280 Fore Street and AVANGRID’s lease of 16,462± at One City Center. There are currently no existing direct Class A availabilities with over 10,000 contiguous SF on the market. As expected, the largest downtown transactions in 2016 were lease renewals, as relocation options simply didn’t exist. The Class B market experienced just a slight drop after a much larger decrease the year before, however did dip below 10 percent and stands at 9.95 percent. The majority of the vacancy in the Class B market, roughly three quarters of the total, is concentrated in the Monument Square/Congress Street area while the Old Port area has very little vacancy.

SUBURBAN

The suburban market as a whole, which encompasses South Portland, Scarborough, Westbrook, Falmouth, Yarmouth, and Cumberland, had a slight increase in the vacancy rate for a total rate of 6.53 percent. This uptick in the vacancy rate is largely due to the South Portland and Scarborough areas, and more specifically Class B office space. As was the case with the downtown market, there were no large new lease transactions to help balance a couple recent large vacancies including 30,000± SF at 75 Darling Ave and roughly 26,000± SF at 8 Science Park Road in Scarborough. A large vacancy remaining unchanged from last year is 134,000± SF at One Riverfront Plaza in Westbrook which continues to be a large hole in an otherwise healthy Class A suburban market.

MEDICAL

The vacancy rate in the medical office market across Greater Portland fell again to 2.81 percent, down from 3.34 percent the year before. This accounts for just a slight absorption of 6,876± SF as this submarket, especially Class A medical space, has very few options for expanding companies and new construction may be required for any tenants requiring a significant amount of space. An example of this is the recent construction of 19,000± SF of medical space on Route One in Scarborough for Martin’s Point. At the time of this report the Class A medical market was nearing 100 percent occupancy.

SUMMARY

The Greater Portland Class A and Class B office markets continued to improve in 2016, albeit at a slower pace, and with that tenant incentives became less apparent and landlords continued to have the upper hand in negotiations. The downtown Class A market was certainly the driver in the overall drop in the vacancy rate. Despite limited vacancy, areas of opportunity still remain for tenants in the Class B markets in downtown and South Portland area. The next 12 months will likely continue to see improvements in the overall market but will be somewhat constricted as options, especially over 15,000 SF, will remain limited.

Over the last few years there has been speculation that increasing demand and falling Class A vacancy rates would spur new construction in Greater Portland, especially downtown. The market finally responded to this demand with the ground breaking of a 55,000 SF building at 16 Middle Street, the first significant new construction in downtown Portland in 10 years. With about 50 percent of this building already committed, there could be additional new buildings constructed and/or planned in 2017. Possibilities include the permitted 50,000 SF office building as part of the Intercontinental site at Fore and India Streets as well as opportunities within larger developments at Thompson’s Point and the former Portland Company Site at 58 Fore Street. Expanding suburban companies are constructing new buildings to respond to their growing needs including a 94,500 SF expansion for Tyler Technologies and a new 34,500 SF building for Patriot Insurance, both of which are located in Yarmouth. In addition to these large scale developments there will likely also be numerous small-scale projects to respond to specific tenant requirements in 2017.

Posted in Business, Member Articles, Networking | Leave a comment

MEREDA Index shows Maine’s real estate industry reach its highest level in ten years, signifies “worker gap”

“The second quarter of 2016 saw the Maine real estate industry reach the highest level in ten years, led by a 10% growth in the residential component” said Rick McCarthy, consultant with Eaton Peabody and board member with the Maine Real Estate & Development Association (MEREDA). McCarthy made his remarks at MEREDA’s sold out conference in mid-January, while unveiling The MEREDA Index, the economic indicator that measures the health of the state’s real estate sector.

But, all told, The MEREDA Index, which covers the middle two quarters of 2016, came in slightly lower than recent editions, at 93. “​The highwater mark gains were not sustained throughout, with a 4% drop toward the end of the period,” said economist Dr. Charles Colgan, of the University of Southern Maine, who compiled the report for MEREDA.

“Overall, The MEREDA Index has grown in the last years, though we are seeing the first plateau since the post-2007 recovery,” said Paul Peck, MEREDA president, a real estate developer and an attorney at Drummond & Drummond.

Peck and other industry insiders attribute these shifts to the “worker gap,” with a dearth of qualified candidates available to fill electrician, plumbing and other subcontractor positions, driving up the cost and increasing the timeline of construction.

The MEREDA Index is compiled biannually and is widely regarded as the primary tool for insiders to track changes in the market. Four experts from the state’s real estate sector offered commentary on the state of the market.

Following keynote remarks from Derek Langhauser, president of Maine’s Community College System, about that organization’s efforts to cultivate additional tradespeople in Maine, Peck announced that MEREDA has recently launched a subcommittee, alongside AGC Maine, to effect change in that area. “The ‘worker gap’ issue must be addressed if Maine is to benefit from continued economic investment, an expanded tax base in our neighborhoods and communities, and a robust tourism economy,” he said.

Download the full Index report:

http://mereda.org/documents/miscdocs/MEREDA_Index_Fall_2016.pdf .

This edition of The MEREDA Index was underwritten by Eaton Peabody, with support from CBRE | The Boulos Company, Wright-Ryan Construction, and The Press Hotel.

The next edition of The MEREDA Index will be released at the organization’s spring conference on May 18; visit www.MEREDA.org for details and registration.

This edition of The MEREDA Index was underwritten by Eaton Peabody, with support from CBRE | The Boulos Company, Wright-Ryan Construction, and The Press Hotel.

Posted in Business, MEREDA Resources | Leave a comment

Shelly Clark honored for 20 years at MEREDA

At its sold-out forecast conference earlier this month, Shelly Clark was honored for two decades of service to the Maine Real Estate & Development Association (MEREDA), the trade association that advocates for responsible development and ownership of real estate throughout the state. Clark, who serves as the organization’s vice president of operations, was invited on stage for the presentation, where she was surprised by approximately two dozen of MEREDA’s board presidents from through the ages, while the more than 700 in the audience offered a standing ovation.

“If there were ever a ‘who’s who’ of Maine real estate, all these people on stage with us would be on it. Yourself included,” said Paul Peck, current board president with MEREDA.

DSC_8310

Pictured from left to right: Mike O’Reilly, Dick McGoldrick, Drew Sigfridson, Tim O’Neil, Jamie Whelan, Larry Wold, Rick Stauffer, Gary Vogel, Paul Peck, Bill Shanahan, Tom Lea, Shelly Clark, Renee Lewis, Roxane Cole, Jason Favreau, Drew Swenson,
Andrea Cianchette Maker, Dennis Keeler, Brian Curley, Peter Anastos.

“In 20 years, you have made a big impact on all of us, stewarding the organization from a small interest group into a real force with which to be reckoned, selling out conferences and making headlines as we influence the economics and policy priorities of this great state,” continued Peck. “[Y]ou have cultivated amazing personal relationships, and time and again, have gone out of your way, and in some cases stretched out of your comfort zone, to keep us on stable financial footing and to maintain the infrastructure upon which we all rely.”

Clark was initially hired for an executive assistant position at MEREDA and has been tapped for progressively responsible roles over the years. She now serves as the most senior member of MEREDA’s staff, overseeing the statewide organization with more than 300 member companies.

Clark, a native of Houlton and resident of Portland, is a graduate of Thomas College with a bachelor’s of science degree in business management.

Posted in Business, Networking, People | Leave a comment

MEREDA’s Morning Menu Breakfast Event – “Parking for Successful Development: Threading the Needle”

breakfast-logo-for-press-releases-social-mediaDevelopments usually need parking. Whether provided on-site or nearby, many people drive to their destination and expect to be able to park when they get there. But parking is expensive. Surface spaces in the city can cost up to $10,000 each and structured parking can be over $25,000 a space. Parking can also take up land that could be used for additional net floor area or other amenities. So it’s more important than ever to find that balance.

This event brings together professionals from the parking business, local government, and the development world to discuss parking. Should it be free or priced strategically? Should cities require parking or let the market handle it? What about alternatives to driving? Will self-driving cars reduce the need for parking? Join MEREDA on March 14th from 7:30 – 9:00 AM at the Portland Regency Hotel for an interesting discussion about a topic we often take for granted.

About the Event:

March 14, 2017 – 7:30AM to 9:00AM

Portland Regency Hotel
20 Milk Street
Portland, ME

Buffet Breakfast: 7:30-8:00 am
Program: 8:00-9:00 am

About the Panel:

  • Jeff Levine, AICP, Director, Planning & Urban Development Department, City of Portland
  • Jim Bennett, City Manager, Biddeford, ME
  • Dan McNutt, Owner, Unified Parking Partners

Registering for the Event: 

Members: $45 pp | Non-Members: $55 pp
Prices increase by $10 after March 7

Your RSVP is requested by March 7. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after March 7.

Visit www.mereda.org for more information and to register.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Norway Savings Bank.

Posted in Events, MEREDA Resources, Networking | Leave a comment

New Initiative Launched to Reduce Energy, Water and Transportation Emissions

Downtown Portland Property Owners Band Together to Save Money and Resources

Portland is joining the ranks of forward-thinking cities across the U.S. and Canada as it launches the Portland 2030 District, a groundbreaking high-performance building district in downtown Portland that aims to dramatically reduce the environmental impacts of constructing and operating commercial and large multi-family buildings, while strengthening Portland’s economy.

The built environment – commercial office buildings, municipal buildings, and multi-family housing — consumes 75% of all the electricity produced in the U.S. In Maine, transportation emissions account for 42% of all greenhouse gas emissions.

The Portland 2030 District is a program of the Greater Portland Council of Governments. Kristina Egan, Executive Director, said, “This project gives property owners, managers and developers tools to save resources and money. We expect the new Portland 2030 District will be good for the bottom line and for the planet.”

“I’m excited to be part of a joint venture that has proven successful in many other major metropolitan areas that will encourage and facilitate utility and greenhouse gas reductions in the private sector,” said Drew Swenson, President of Paragon Management and President of the recently-created Portland 2030 District Board of Directors. “We can follow in their footsteps to reduce energy and water consumption as well as transportation emissions from some of the largest buildings on the Peninsula in Portland and collectively reduce emissions 50% by 2030.”

Currently, the cities of Seattle, Cleveland, Pittsburgh, Los Angeles, Denver, Stamford, San Antonio, San Francisco, Dallas, Toronto, Albuquerque, Grand Rapids, Ithaca and Austin have established 2030 Districts.

The Portland 2030 District’s first actions will be to:

  1. Hold events for property owners and managers to learn about various strategies to reduce energy and water usage;
  2. Develop strategies to reduce the number of people driving to and parking in downtown Portland;
  3. Work with local utilities to help ensure utility data is available; and
  4. Create an information hub on best practices, case studies, financing, incentives and preferred vendors within the District’s boundaries.

The Portland 2030 District founding members include the following building owners, managers and community partners: Avesta Housing, Boulos Asset Management, J.B. Brown & Sons, Paragon Management, LLC, Portland Housing Authority, and The Press Hotel.

These founding members have agreed to voluntarily benchmark, monitor and track their buildings’ resource consumption, working with national experts to meet measurable reductions of greenhouse gas emissions, driving trips to the downtown, and water consumption.

If you would like more information or your business is interested in becoming a member please contact Jennifer Brennan with the Greater Portland Council of Governments.

To read more about the initiative – http://www.2030districts.org/portland-maine

Posted in Business, Member Articles, MEREDA Resources, People | Leave a comment

MEREDA’s Morning Menu Breakfast Event – “Darkness into Light: Cannabis and its impact on Commercial Real Estate in the Post-Prohibition Era.”

breakfast-logo-for-press-releases-social-mediaIndustry experts suggest that no new-to-market use has had as large an impact on Maine’s commercial real estate landscape in recent years as has cannabis cultivation. Starting as a niche industry five years ago, the marijuana growth business has morphed into a well regulated and complex professional system in some respects and an unregulated and “wild west” environment in others.  Rapid growth has put a significant strain on Maine’s existing industrial inventory and regulatory systems (both state and municipal).  And with the 2016 election legalizing adult use recreational cannabis, further stressors are anticipated.  Beyond adjusting to industrial impacts, Maine’s retail corridors need to prepare for inevitable retail store and further cultivation facility demand.  Importantly, efforts to implement the recreational cannabis program will provide Maine with an opportunity to “get it right” and enact a safe, robust, and fair regulatory system giving Maine the opportunity to establish a unique and successful economic sector in which many professionals will be comfortable operating. 

Join MEREDA for breakfast on February 16 from 7:30 AM – 9:00 AM at the Holiday Inn By the Bay for a panel discussion and presentation on how this industry has evolved, where things stand today and what the future may hold. The panel will be moderated by Justin Lamontagne, a Partner at NAI The Dunham Group specializing in commercial industrial brokerage. It will feature presentations by Dan Walker of Preti Flaherty and Gretchen Jones of Eaton Peabody, two legal experts with extensive experience in representation of both cannabis landlords and end-users.

Discussion points will include a legislative update on current laws, an overview of financial and insurance hurdles, and pros and cons for property owner Landlords to consider. We will also have perspective from cannabis industry experts with Jacques Santucci from Opus Consulting Group and Brett Messer General Manager, Caregiver at Brigid Farm completing the panel.

About the Event:

February 16, 2017 – 7:30AM to 9:00AM

Holiday Inn by the Bay
88 Spring Street
Portland, ME

Buffet Breakfast: 7:30-8:00 am
Program: 8:00-9:00 am

Registering for this Event:

Member: $45 pp | Non-Member: $55 pp 
Prices increase by $10 after February 9

Your RSVP is requested by February 9. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after February 9. 

Visit www.mereda.org for more information and to register.


This MEREDA “Morning Menu” Breakfast Event is Sponsored by Norway Savings Bank and Preti Flaherty.

Posted in Business, Events, MEREDA Resources, Networking, People | Leave a comment

Surprises expected in reveal of Maine’s real estate performance on Jan. 19

Real estate industry to gather for annual conference

 

MEREDA_Index_80The economic indicator that measures the health of Maine’s real estate sector will be revealed on Thurs., Jan. 19 at a day-long conference of the Maine Real Estate & Development Association (MEREDA), expected to draw more than 700 from the industry. “We expect this edition of The MEREDA Index to reveal changing market conditions and emerging trends for the first time in a while,” said Paul Peck, president of the board of MEREDA and an attorney at Drummond & Drummond.

The MEREDA Index is compiled biannually and is widely regarded as the primary tool for insiders to track changes in the market. “Maine’s economy is very dependent upon the health of the tourism sector and small businesses, both of which rely heavily on a real estate infrastructure, so this update will have reverberations for the entire state,” explained Peck.

The conference will also feature more than half a dozen forecasts of future market activity by property type and geography. Presentations are expected from top experts in the following categories: Maine’s vacation and hospitality industry; southern Maine industrial, office, retail and residential; plus specific forecasts for the midcoast, Bangor area and central Maine markets respectively.

Additionally, MEREDA’s popular member showcase will offer an excellent opportunity for marketing of commercial real estate-related products and services.

The annual conference brings together the largest gathering of commercial real estate professionals in Maine, and is well-known as a “must attend” for anyone involved in, or touched by, the real estate industry.

Registration is now open for the 2017 MEREDA Forecast Conference, set for 9:00 am on Thurs., Jan. 19 at the Holiday Inn by the Bay in Portland.The event has been approved for 4.0 hours of real estate broker, legal, architect and appraiser continuing education credits. For more information and to register, visit www.MEREDA.org.

Posted in Business, Events, MEREDA Resources, Networking, People | Leave a comment

MEREDA’s Morning Menu: Maine Legislative Update: MEREDA’s top policy initiatives and how you can help!

breakfast-logo-for-press-releases-social-mediaEvery year, the Maine Legislature and Governor consider over a thousand bills, and chances are high that some of them threaten to impact your business.  Savvy business leaders today stay informed of the current issues, and know how to engage individually and through MEREDA to influence the outcome of issues that could impact their business.  Additionally, MEREDA continues to propose policy changes to improve the real estate development environment in Maine in big and small ways, helping to pave the way to your business success.  Come to this session to learn more about how to be informed about the issues that matter, and how to engage effectively individually and through MEREDA to influence the outcome of those issues of import.

MEREDA is well-known and well-respected in Augusta for representing commercial real estate interests. Our Legislative Committee and Public Policy Counsel work together closely during Legislative sessions to protect your real estate business interests, and to advance them.

MEREDA will be assembling a panel of members and legislators to take part in this forum that will be moderated by MEREDA’s Public Policy Counsel, Andrea Cianchette Maker, Partner and Government Relations Practice Group Leader at Pierce Atwood, LLP.  Additional details will be posted to our website as they become available.   In the meantime, make plans to join us for breakfast on February 7, 2017 from 7:30 – 9:00 AM at the Hollywood Casino Bangor to hear more about how we do it, as well as how you can easily remain abreast of policy developments and become more involved.

About the Event:

February 7, 2017 – 7:30AM to 9:00AM

Hollywood Casino Bangor
500 Main Street
Bangor, ME

Buffet Breakfast: 7:30-8:00 am
Program: 8:00-9:00 am

Registering for this Event:

Member: $25 pp | Non-Member: $35 pp
Prices increase by $10 after January 31

Your RSVP is requested by January 31. Payment is expected at the time of registration. No refunds will be granted to anyone who registers, but fails to attend or who cancels after January 31.

Visit www.mereda.org for more information and to register.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Bangor Savings Bank, Bowman Constructors, City of Bangor, Epstein Commercial Real Estate and Pierce Atwood.

Posted in Advocacy, Business, Events, MEREDA Resources, Networking, People | Leave a comment

Tenant Funded Leasehold Improvements: Hidden Risks

By Raymond A. Pelletier, Esq., Verrill Dana LLP

In most cases, significant tenant fit-ups and renovations are financed by means of a per square foot tenant improvement allowance paid by the landlord and amortized over the term of the lease. Occasionally, however, a landlord may not be willing to take on the financing of the improvements for a variety of reasons, and the tenant may consider contracting and paying for the improvements itself.  Doing so creates a number of risks for the tenant beyond the risks ordinarily assumed in having construction work performed. These risks stem from the nature of the leasehold relationship and the typical form of commercial lease. Depending on the amount expended by the tenant for these improvements, these risks can have disastrous financial consequences.

Termination Provisions.  Virtually all leases contain provisions that can result in a termination of the lease in certain situations. Examples include default, events of fire or other casualty, or takings by eminent domain. A termination of the lease will result in the tenant forfeiting the money it has spent on leasehold improvements.  In some cases, the tenant may be able to negotiate a modification to certain termination provisions that would allow it to recover from the insurance or eminent domain proceeds the depreciated value of its leasehold improvements. The tenant’s degree of success in such negotiations may depend partly on whether the improvements are of the type that generally benefit the landlord’s property, rather than improvements unique to the use to be made by the tenant.

Mortgage Foreclosure.  A foreclosure on the property by the landlord’s mortgagee also could result in a termination of the lease. Just as in the case of a termination pursuant to a provision in the lease, a termination caused by a foreclosure of a mortgage would result in the tenant forfeiting the money it has spent on leasehold improvements. It is always advisable for a tenant to obtain a so-called non-disturbance agreement from the landlord’s mortgagee when it enters into a lease in order to prevent a termination of the lease in the event of a foreclosure. The issue is much more complicated, however, when the tenant has expended large sums of money for leasehold improvements. The reason is that even with a non-disturbance agreement in place with the landlord’s mortgagee, the lease might be terminated pursuant to a lease provision, rather than due to a foreclosure of the mortgage. For example, suppose there is a fire or other casualty that results in the lease being terminated. Perhaps the tenant has managed to negotiate a provision in its lease that allows it to recover the depreciated value of its leasehold improvements in such a case.  The landlord’s mortgage, however, is sure to contain provisions giving the mortgagee the right to decide what happens to those proceeds. Therefore, a tenant investing significant sums toward leasehold improvements will want the mortgagee to agree to honor the provisions in the lease, allowing it to recoup the depreciated value of its leasehold improvements. Obtaining such an agreement from the lender may be very difficult.

Title.  If the tenant is making a significant financial investment in the property, the quality of the landlord’s title to the property becomes a concern. The risks are analogous to a purchase of real estate, and a title search becomes more important than it would be in a more routine leasing situation.

Conclusion.

Tenants should think very carefully about the risks they will be taking before investing significant sums of money in leasehold improvements. If at all possible the transaction should be structured with a “tenant improvement allowance” paid for by the landlord and amortized over the lease term. If the tenant feels it must go ahead with a transaction in which it will be paying for the improvements, it should consult with legal counsel to discuss the risks more fully and try to address them in the documentation.

Posted in Business, Member Articles | Leave a comment

Where Healthcare Credit meets Retail Rent: Why you should be adding Urgent Care Facilities to your Tenant Mix

By Cameron Woodford, Associate Advisor at SVN | The Urbanek Group

In the last few years the “urgent care” or “quick care” industry has been on fire and with good reason. Key market changes resulting from the Affordable Care Act as well as shifting consumer expectations with regard to healthcare, have created an environment for these businesses to thrive making them a great addition to any tenant roster.

The requirements of the ACA have forced further specialization within the industry.
The financial and administrative costs of providing urgent care in an emergency room setting have become prohibitive and both the medical field and consumers are looking for alternatives. Existing urgent care clinics are able to service a portion of the emerging market this has created, but it is only the beginning. Only a small percentage of the 136.6 million annual ER Visits require hospital admission (1), and every year more and more patients will turn to urgent care specialists to save time and money.

Consumers put more priority on convenience than their relationship with their doctor.
Many young people simply do not have a connection to their primary care doctor, never signed up at a new practice when they relocated or they never had one at all. For a quick prescription refill, employer drug test, physical or travel medicine, quick care providers will be able to schedule an appointment sooner and take care of patient needs faster.

The facility requirements can make use of otherwise marginal pads.
Most quick care companies want “corner of Main and Main” visibility so they can remain top of mind for their current customers and use their signage as a marketing opportunity. Many providers only need between 2,000 and 4,000 square feet and prefer stand-alone buildings. Since they do not have the parking requirements of traditional retail they can make use of pads that might be too small for other more traditional tenants.

Your other tenants will thank you…

Especially in grocery anchored or neighborhood shopping centers. Quick care facilities are a destination type use and will drive traffic to shopping centers. Time previously spent in the waiting room can be used to catch up on errands in the center or do some more impulsive shopping at specialty retailers. Sales should increase across the plaza which is only a good thing when it comes time to renew a lease.

(1) http://www.cdc.gov/nchs/fastats/emergency-department.htm

Original article can be found here: http://theurbanekgroup.com/why-you-should-be-adding-urgent-care-facilities-to-your-tenant-mix/

Posted in Business, Member Articles, Networking | Leave a comment