Maine’s second biggest industry as healthy as it’s been in 11 years

MEREDA Spring Index Logo 96Maine’s real estate sector reached its highest point in 11 years, with the industry metric that measures the health of the market, The MEREDA Index, coming in at 96. The MEREDA Index grew by more than 7% over 2016, the strongest growth since the recession.

“The most recent quarter marks the eighth in a row — that’s two years — where The MEREDA Index has been above 90, a number not otherwise seen since the height of the market in 2006. That the real estate sector is so strong in Maine, and has been so strong for so long, is impressive,” said Paul Peck, board president of MEREDA, who is also a real estate attorney and real estate developer.

“Real estate is one of Maine’s biggest industries, second only to healthcare, contributing 14% of GDP. The strength of this sector benefits us all.”

The MEREDA Index is a twice-annual metric meant to measure the health of the sector against pre-recession, 2006 levels. It was designed and is compiled for MEREDA by Dr. Charles Colgan, an economist with the University of Southern Maine, and is comprised of three components.

Thanks to the support of Eaton Peabody and SMRT for underwriting this edition of The MEREDA Index, three industry insiders recently joined MEREDA to discuss the latest numbers.

Learn more by watching the following video.

The commercial market, accounting for 50% of The MEREDA Index, grew almost 9% over the course of six months, and was a key driver in the record-setting performance of the metric. “Commercial lease rates and square footage were both strong over this period, offsetting weaknesses in the volume of commercial transactions and sales price per square foot,” remarked Colgan, who also noted that total commercial transactions and median commercial sale price remained near and/or surpassed 2006 levels for this period.

The residential market, comprising 40%, “was unchanged over the past six months as sales of existing units and median price remained strong, but permits for new units dropped by nearly 17%. Estimated quarterly median price 1 hit 195,000 on a seasonally adjusted basis, equivalent to the 2006 first quarter figure … Sales of existing units and mortgage originations were both strong in the fourth quarter of 2016, but fell off in the first quarter of 2017,” according to Colgan.

And construction, measured solely by construction employment, has grown almost 9% in the past six months and almost 6% year-over-year. “This is the strongest growth in construction employment over the past several years,” said Colgan. Industry insiders say there is still strong demand for new construction projects to go online, and that more skilled workers are still needed in the industry, laying the groundwork for even more increases in this sector in the months to come.

“Stable interest rates and prudent lending by financial institutions has set a solid base for continued growth in the months ahead,” concluded Peck.

A full report of The MEREDA Index is available for download here.

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MEREDA’s 5th Anniversary “Strikes for Scholars” Bowl-a-Thon Fundraiser on May 4th Raises Funds for Scholarships for 16 Maine Students!

MEREDA is excited to announce that once again, MEREDA will be providing $20,000 in scholarships to students attending the Maine Community College System and the University of Southern Maine that are enrolled in the building trades and business programs.

MEREDA strongly supports a strong education system. In fact, over the past 4 years, MEREDA is proud to have raised and donated over $47,000 in scholar­ships helping over 30 Maine students by making it a little easier for them to achieve their goal of obtaining a college credential. This year, those numbers will jump to $67,000 and 46!

Many thanks to our generous sponsors Landry/French Construction, AAA Energy Service Co., and Mainebiz, as well as our bowling teams for supporting this worthwhile cause.  Without their involvement, these substantial donations would not be possible!   Check out photos from the event on our Facebook page!

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The Trend Toward Car-Free Cities Is Picking Up Speed

By Blueprint, presented by CBRE

When you think about it, car-free cities shouldn’t seem like such a radical idea. Cities, after all, have been around for thousands of years, while cars date back just a century or so.

And yet, the automobile has so worked itself into our way of life over that time, that doing without it seems all but unthinkable.

That attitude is changing, however, as urban centers around the world have begun to consider going entirely car-free, or at least experimenting with the notion. In fact, says longtime car-free advocate Joel Crawford, the idea has become so popular that it’s started to feel a bit superfluous.

“It’s been gaining momentum to the point where people are no longer very interested in what I’m saying because it’s mainstream now,” says Crawford, author of the books Carfree Cities and Carfree Design Manual.

That might be bad for his book sales, but, he says, it’s good for urban dwellers around the globe.

Perhaps the most obvious benefit of car-free policies is the reduction in automobile-associated pollution. But Crawford suggests that’s just the start of it. There’s also a host of broader lifestyle and aesthetic benefits.

“You get boots on the street. People come out,” he says. “It starts at the pavement level: ‘Well, that doesn’t need to be there if there aren’t any cars.’ And then as you look higher up, dozens and dozens of signs disappear, as do traffic signals. The sidewalks can be wider, with more trees, and on and on.”

Perhaps the easiest way to go car-free is to never have them in in the first place. Take, as an example, Fes el Bali, a portion of Fes, Morocco, founded more than 1,000 years ago that, with no cars and a population of more than 150,000 people, is thought to be the world’s largest contiguous car-free urban area.

Venice, Italy, is another spot whose history and geography have made it something of a “naturally occurring” car-free city. (Though you’ll have no trouble finding a motorboat.)

But localities that have traditionally been more intertwined with automobiles are also looking to cut back, if in a bit more limited fashion. For instance, in 2009, New York City announced plans to ban auto traffic from Times Square, turning large portions of the “crossroads of the world” into a pedestrian plaza. Launched as an experiment, the move was such a hit that the city made the change permanent the following year.

The Spanish capital Madrid is taking things even further, with plans to enact an auto ban across some 500 acres of its city center by 2020. Likewise, Oslo, Norway, aims to eliminate car traffic in its city center by 2019. In Copenhagen, Denmark, city officials have been working to drive down auto traffic by boosting bike use. According to a story from The Guardian, published last November, bikes outnumber cars in the city’s center for the first time, 265,700 to 252,600.

“Copenhagen now has the highest bike share of any city in the world,” Crawford says. “And it certainly doesn’t have the best climate.”

In other words, if you can do it there, you can do it everywhere, and, indeed, that, essentially, is Crawford’s prediction.

“To me, it’s self-evident that in 50 years, most cities will be mostly car free,” he says.

That pretty much narrows it down to two options: everyone will be walking and biking, or else we’ll have finally gotten those jetpacks we’ve all been waiting for.

Article originally published on February 21, 2017 –

“Blueprint, presented by CBRE, is an online magazine dedicated to telling timely and insightful stories about the transformational role real estate plays in the world.”

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MEREDA’s Morning Menu Breakfast Event – Financing the Deal: Forming the Capital Stack

MEREDA Morning MenuFollowing up on the success of MEREDA’s Real Estate 101 and 202 breakfast events, join MEREDA June 22 from 7:30 – 9:00 AM at the Clarion Hotel in Portland as our panel presents Financing the Deal and Forming the Capital Stack, an inside look at what goes on behind the acquisition of a commercial property.

Jed Harris from North Atlantic Properties will present a case study on the acquisition and sale of one of his firm’s investments. He’ll offer a detailed explanation of how investors look at a property, how he approaches investment partners, the particular issues and opportunities with this investment, and ultimately the disposition. Mark Stasium from Camden National will discuss financing from a bank’s perspective and what key terms an investor should consider. Joel Shaw from Bernstein Shur will talk about legal considerations and potential structures that can be used if taking money from third party investors.

If you’ve ever considered buying a commercial property or wondered how investors analyze potential acquisitions this is a breakfast you’ll want to attend.

About the Event:

June 22, 2017
7:30AM to 9:00AM

Clarion Hotel
1230 Congress Street
Portland, ME

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

About the Panel:

Jed Harris left Wall Street in 2004 and moved to Portland to pursue a lifelong passion for real estate. He is the founder of North Atlantic Properties, a firm focused on acquiring and re-positioning commercial properties in downtown Portland. His current major project is the former JJ Nissen bakery building on Washington Avenue in Portland.  Jed is on the MEREDA board and also serves on the board of Rippleffect. He enjoys cycling, skiing, and being on the water.  He is a graduate of Middlebury College. Jed lives with his family in Falmouth, Maine.

Joel T. Shaw, Esq. has been in private practice for 15 years, the last 12 of which have been with Bernstein Shur.  As a Shareholder in firm’s Business Law Practice Group and the Chair of its Private Capital subgroup, Joel focuses on structuring joint ventures and partnerships and assisting operating companies and private investment funds with raising capital.  As a former state securities regulator, Joel has deep experience with federal and state securities compliance, while balancing the practical business needs of his clients.  A moderate portion of Joel’s practice consists of representing general partners and investors in private equity-style real estate funds and targeted real estate investment projects throughout New England.

Mark Stasium is a Senior Vice President in the Commercial Real Estate Lending Division of Camden National Bank.  Mark works with commercial real estate investors and developers and is responsible for originating commercial real estate loan transactions in northern New England and northeastern Massachusetts.  Mark has 28 years of commercial lending and commercial credit experience, and prior to joining Camden National Bank, he was previously employed by Peoples Heritage Bank and TD Bank.  Mark and his family reside in Portland, Maine, and Mark currently serves on MEREDA’s Conference and Seminars Committee.

Registering for this Event:

Member: $45 pp | Non-Member: $55 pp Prices increase by $10 after June 15

Your RSVP is requested by June 15. 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 June 15.

Visit for more information and to register.

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


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

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 June 13 from 7:30 AM – 9:00 AM at the Cross Insurance Center in Bangor 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:

June 13, 2017 – 7:30AM to 9:00AM

Cross Insurance Center
515 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 June 6

Your RSVP is requested by June 6. 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 June 6.

Visit for more information and to register.

This MEREDA “Morning Menu” Breakfast Event is Sponsored by Eaton Peabody and Bowman Constructors.


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MEREDA’s DevelopME’s Lunch & Learn Series – “Analyzing the Deal”

DevelopME is a Committee of the  Maine Real Estate & Development Association

DevelopME is a Committee of the
Maine Real Estate & Development Association

MEREDA is excited to announce the formation of a new committee, DevelopME, for our enthusiastic emerging leaders. The committee is formed with a simple mission: “To engage membership and create professional development opportunities within MEREDA for the next generation of industry professionals”. 

Join DevelopME in their first event of a 3-part, Lunch and Learn Series on June 6, 2017 at Rines Auditorium at the Portland Public Library from 11:30 AM-1:00 PM.

Ethan Boxer-Macomber of Anew Development, Lindsay Harris of Gorham Savings Bank, and Al Palmer of Gorrill Palmer Engineers will walk us through finding and analyzing a deal. The focus will be on projects with low barriers to entry, and their due diligence and financing activities, with a single case study broken down by all 3 professionals. 

About the Event:

June 06, 2017 – 11:30AM to 1:00PM

Portland Public Library

Rines Auditorium
5 Monument Way
Portland, ME

Lunch: 11:30 AM
Program: 12:00 – 1:00 PM

About the Panel:

Al Palmer is a professional engineer, principal and co-founder of Gorrill Palmer. Gorrill Palmer is a civil engineering consulting firm with offices in South Portland and Virginia, offering land development, municipal, planning and transportation services. Al has over 30 years of experience in site selection, design, permitting and construction of commercial, residential, mixed-use and municipal developments.  Notable projects Al has been involved in include: 101 York Street in Portland consisting of 63 apartments, 17,000 sf of retail and 211 parking spaces; Biddeford Crossing consisting of 515,00 s.f. of retail/restaurant users and 2,500 parking spaces; Presumpscot River Place- a 29 lot residential single family development in Portland; and the Refresh of the 1.2M sf Lynnhaven Mall in Virginia Beach, VA, which resulted in expanded restaurant and retail opportunities that included the introduction of Apple and LL Bean to Southeastern Virginia.

Ethan Boxer-Macomber, LEED AP, has over 18 years of experience in real estate, housing, and community development and has successfully led multiple large-scale residential development projects across southern Maine. In 2013, Ethan started Anew Development, a Portland-based real estate development company dedicated to residential infill that provides highest, best community value by adhering to principles of quality urban design, smart growth, and sustainability. 

Ethan formerly was a City Planner for the cities of Davis, California, and Portland, Maine. He earned a BS in natural resources and ecology from the University of Maine and an MS in community planning and development from the University of California, Davis. He is a returned Peace Corps volunteer and was formerly certified by the American Institute of Certified Planners (AICP). 

Lindsay Harris is Vice President, Portfolio Officer II at Gorham Savings Bank with over 20+ years’ experience in Commercial Lending. Upon graduating from Thomas College, she began her career at Peoples Heritage Bank (now TD Bank) where she specialized in small business lending and received several awards from the SBA, FAME and the President’s Club. Today, she is responsible for managing a portfolio of lenders with over $150 million in commercial loans to ensure credit quality, minimize risk, maintain existing relationships, and foster new relationships – all with exceptional customer service.  A resident of Scarborough for 14 years, Lindsay is also involved in various community events and fundraisers and is a mother of two boys.

Registering for this Event:

MEREDA Member: $15 each  | Non – Member: $25 each

Register After May 30:  Member: $25 each  |  Non-Member $35 each

Your RSVP is requested by May 30. 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 May 30.

This MEREDA DevelopME Lunch & Learn Series  Event is Sponsored by Gorham Savings Bank

Visit for more information and to register.


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Need Continuing Education Credits? MEREDA’s 2017 Annual Spring Conference has them!

MEREDA’s Annual Spring Conference – ‘YIMBY’ism: YES in my Backyard – Why Development is Good

Construction Photo from Lucas Royalty Free

In recent years, many American cities and towns have witnessed a renaissance, with destination cities in particular seeing dramatically increased interest.  Typically, the impacts of such demand are felt on a regional scale.  From San Francisco to Portland and beyond, a degree of pressure corresponding to this renewed interest in city life has been placed on communities to build in unprecedented ways. With the rise in popularity of living in urban areas, opinions about how such places should develop are also increasing.

Recognizing the crippling effect of NIMBY, or “not in my backyard”, ways of thinking on housing prices, economic stability and general diversity of communities, some forward-thinking activists have begun to affirmatively make a case for growth and development.  

Coined “yes in my backyard”, or YIMBY, this movement is an overt counterargument to oppositional mindsets–and it’s gaining traction quickly.  In 2016, the first-ever YIMBY conference was held in Boulder Colorado, shining a national spotlight on an often-silent perspective that it’s actually good for cities to grow.  The movement encompasses a variety of vantage points which lead to this conclusion, from those grounded in environmental concerns to social equality and housing prices, and is far from an industry-led lobbying effort.  As such, YIMBYism may represent the beginnings of a fundamental shift in the way a broad range of Americans thinks about growth and its associated elements.

MEREDA is pleased to welcome Jesse Kanson-Benanav -a Boston-area pioneer in the YIMBY movement who has been instrumental as a leader on the front lines of this potential sea change in the conversation about development-for a discussion about its present status and implications for the future.  His perspective will be augmented by a panel of local professionals who will anchor this national trend in local context.  Attendees can expect to gain insight into the near future of community conversations about development, and what it means for the real estate industry more broadly.

Join us on May 18th for what is sure to be an eye-opening and informational event!

Meet our Local Experts:

  • Moderator: Elizabeth Boepple, BCM Environmental & Land Law
  • Jim Brady, Brady Enterprises
  • Jeff Levine, City of Portland
  • Dana Totman, Avesta Housing
  • Patrick Venne, Redwood Development Consulting


Thursday, May 18, 2017

Registration | Exhibits:   

12:00 PM – 1:00 PM


1:00 PM – 5:00 PM


5:00 PM – 6:00 PM

DoubleTree by Hilton

363 Maine Mall Road, South Portland, ME


Registration Fees before May 11th* (per person):

  • Members: $85.00
  • Non-Members: $105.00
  • Non-Profit Rate: $55.00
  • Students: FREE**
  • Municipal Officials & Employees: FREE**
  • Legislators & Agency Employees: FREE**

* Prices increase by $15 after May 11th

** MEREDA is pleased to provide subsidized admission for students and municipal officials. Call MEREDA at (207) 874-0801 for details.


This course has been approved for 3.00 hours of Broker, Legal, Architect and Appraiser Continuing Education Credits.

For more information or to register, please visit

MEREDA’s Annual Spring Conference is sponsored by NBT Bank, PDT Architects, ReVision Energy, AAA Energy Co., Pierce Atwood, Mainebiz, Onyx Owl, Sevee & Maher Engineers, People’s United Bank and Verrill Dana

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Challenges for Marijuana Businesses and their Vendors

by Gretchen L. Jones, Shareholder and Chair, Business Law Practice Group at Eaton Peabody

While Maine has legalized marijuana for both medical and recreational use, the conflict between state legalization and federal criminal prohibition creates challenges for marijuana businesses and their vendors.

Under the federal Controlled Substances Act, 21 USC §§ 801 et seq., it is a federal criminal offense to manufacture, distribute or dispense marijuana.  Therefore, a marijuana business operating legally within the state is nonetheless committing a federal crime.

Knowingly engaging in transactions which involve monetary proceeds derived from violations of the Controlled Substances Act is also a federal criminal offense.  18 USC §§ 1956; 1957.  Therefore, a business that provides goods or services to a marijuana business, even if it is operating legally within the state, and knowingly accepts proceeds from the marijuana business in payment for those goods and services is likewise committing a federal crime.

In 2009, the U.S. Department of Justice issued the first of a series of Memos to prosecutors in states where the manufacture, distribution or dispensation of marijuana for medical reasons is legal.  This Memo, called the “Ogden Memo”, states generally that while prosecution of “significant traffickers” of marijuana is a “core priority” of the Justice Department, pursuit of that priority “should not focus federal resources in your states on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.”  However, the Ogden Memo also specifically cautions that states cannot authorize violations of federal law and that state legalization is not a defense to a charge of a federal criminal violation.

In 2011, a second memo, called the “Cole Memo”, issued from the Justice Department clarifying that the Odgen Memo was not intended to provide a shield again prosecuting persons who are in the business of cultivating, distributing or selling marijuana, or those who facilitate such activities, even if those activities are legal under state law.

In 2013, a second Cole Memo issued which expands on prior Memos in response to states’ legalization of marijuana for recreational use.  The Cole Memo II provides a list of 8 specific priorities of the Justice Department and advises that in jurisdictions with “strong and effective regulatory and enforcement systems . . . conduct in compliance with those laws and regulations are less likely to threaten the federal priorities,” suggesting that marijuana businesses whose activities are appropriately regulated under and comport with State law should not be the subject of federal criminal prosecution.

Finally, in 2014, a third Cole Memo issued which addresses marijuana-related financial crimes.  This final Memo states in general that “it may not be appropriate” to prosecute persons who conduct financial transactions with marijuana businesses if those businesses are not in violation of State law or any of the Cole Memo II priorities.

Reading the Memos as a whole indicates that Justice Department 1) is not interested in prosecuting sick people or their caregivers (Ogden and Cole I); 2) wants and expects states which have legalized marijuana to take regulatory enforcement seriously (Cole II); and 3) is providing somewhat of a safe harbor for the transaction of business with marijuana businesses (Cole Memo III).

The challenges remain, however, because none of the Memos provide a defense to a federal criminal prosecution; they are merely guidance to prosecutors, and the Justice Department can amend or revoke them at any time.

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How to speed up the Commercial Real Estate Appraisal process

by Mark L. Plourde, MAI, Maine Valuation Company

When the parties of interest in a commercial real estate transaction finally reach agreement, and financing is a component of the deal, why does it then take so long to get a commercial real estate appraisal report completed?  The simple answer is there are many obstacles to overcome in the valuation process for credible results. Let’s review some of the all-too-common pitfalls that can add unnecessary delays to completing an appraisal.

First, regulations require that a “financial institution” must be the Client of the Appraiser for all commercial real estate loans in excess of $250,000. Acting on behalf of their borrower, financial institutions usually solicit proposals from several appraisers to find the best fit in terms of delivery time of an acceptable appraisal report and at the most reasonable fee. In this process, the financial institution needs to clearly describe the characteristics of the property to the appraiser to obtain a reliable time/fee quote. Minor mistakes made in this initial step can easily cause delays, and if not corrected, can become a major obstacle in underwriting after work has been completed. So, step one is to accurately describe the property characteristics and scope of work to the appraiser.

Second, even though the borrower typically provides information to the lender in the application process, such information is not provided by the lender directly to the appraiser. The appraiser is usually instructed to request all necessary information directly from the contact person.  Too often, when the appraiser reaches out to the contact person given, that person is not ready to provide the information in a timely fashion.  In fact, sometimes the contact person given by the lender is the buyer (not the broker or the seller). This causes delays in that the buyer has no history with the property to answer questions effectively, and may only have some of the necessary information.  Access to inspect the property itself may be delayed for a week or more while the contact person gets back from travels or notifies all tenants, and/or gathers all the requested information (e.g., leases, expense history, plans/specs, etc.). So, step two is to be ready to respond and provide the information and access.

Third, the due diligence process of finding and confirming current market data gets bogged down when participants do not return calls or Emails, and/or factual information on such transactions is kept confidential for whatever reason(s). Appraisers are bound by professional ethics and strict regulations that require confidentiality, so sharing such data when asked should not be the problem that it is at times. When financial institutions review our reports in the underwriting process, they will seek clarifications and revisions related to such data and analyses in support of the final appraisal report that they will lend on. So, step three is to share comp data.

Finally, if the appraisal assignment includes an “as complete” opinion, such as when renovations or new construction are involved, delays in obtaining final plans, specifications, project costs, time table for completion, etc. are often significant reasons why delays occur.  If only preliminary plans/specs/costs are available, and these are subject to change, a series of delays/updates can occur which invariably puts the appraiser’s schedule in conflict with promised delivery dates on other projects that make it difficult to stay on track.

In closing, appraisers today don’t have the luxury of working on only one project at a time. We must commit to ever shorter delivery times to land assignments in this faster paced business environment. Estimates have to be made as to how long it will take to complete an assignment. Other promised project delivery dates can overlap into the mix if the current assignment stalls for any reason(s).   Appraisers are paid a flat fee, not on a contingency fee basis, and are thus already motivated to complete more appraisals in order to earn more money.  Appraisers, users of appraisal services, and market participants would benefit with a higher volume of better quality appraisal reports being delivered in a timely fashion. To that end, these are some of the common pitfalls that can delay the completion of a commercial real estate appraisal, and may be avoided.

Mark L. Plourde, MAI is the Managing Partner of Maine Valuation Company and a MEREDA member since 1997.  Maine Valuation Company provides unbiased professional opinions of value on commercial real estate along with appraisal review services throughout Maine.

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2017 Greater Portland, Maine Industrial Market Snapshot

by Justin Lamontagne, CCIM, Partner | Broker, NAI The Dunham Group

A “healthy” market is a catchy and common term to describe the current state of the Greater Portland industrial sector. But our experience suggests that the market is only healthy for a select few, primarily landlords and sellers.

For the sixth consecutive year, vacancy rates have dropped. In fact, last year, I called the 3.38% vacancy rate “remarkably” low. Today, that number has dropped a full 100 basis points to 2.32%, which I would call simply “inhibiting”. Throughout the year, we worked with buyers and tenants who struggled to find suitable relocation and growth opportunities. Multiple offers and off-market sales became common, which further frustrated end-users. We coached clients to remain patient, flexible and communicative in this fluid and competitive market.

Accordingly, the limited inventory drastically increased both lease rates and sales pricing for industrial style space. Sale price trends, in particular, deserve a closer look. In 2011, at the tail end of the recession, Class A & B industrial buildings were selling in the $40/sf range. Sales were almost exclusively going to owner-user businesses who were bullish enough to bet the economy would turn. Today, those businesses are competing with a smaller inventory pool, and against investors looking to diversify their portfolios. Quality industrial buildings are now averaging in the high-$50/sf range and we have seen peak pricing at $70-80/sf.

The bright side, and a “healthy” sign of market conditions, is the recent resurgence in new construction, adding much needed inventory. And that trend will continue into 2017 as speculative industrial projects are being built and marketed in Saco, Gorham, Scarborough and South Portland. I expect that over 150,000 SF will be added to our inventory in 2017.  That means busy contractors, architects, engineers, brokers, attorneys, bankers, etc.

New projects do, of course, require higher lease rates, which the market is starting to support.  I predict lease rates will continue to climb for at least another year or two. And, the added inventory will finally slow our plummeting vacancy rates. An important caveat to this prediction is the still unknown impact of recreational cannabis cultivation and retail sales. Anecdotally, our industrial clients still prefer to buy existing buildings when possible. We have advised them to be ready to jump when opportunity arises and be willing to pay a premium in order to win a deal. Therefore, I predict sales price per square foot will again rise, and the gap between existing and new construction costs will continue to shrink.

So, is this a healthy market? It depends on who is asking! On behalf of all us at NAI The Dunham Group, thank you. I hope you find the data discussed herein helpful as it pertains to your particular real estate holdings and business goals.

Originally published as part of NAI The Dunham Group’s Greater Portland Industrial Market Survey, January 2017, 

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