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January 29, 2009
Maine’s Real Estate Professionals Take Cautious Approach To 2009 At Annual MEREDA Forecast Conference

PORTLAND, Maine – An uncertain economy did not stop more than 500 real estate developers, brokers, architects, bankers, attorneys, accountants and other professionals from gathering in Portland on

 January 29th to consider their collective futures at the Annual Real Estate Forecast Conference sponsored by the Maine Real Estate & Development Association (MEREDA).

“The world has changed significantly since we came together a year ago,” said Raymond Cota, vice president of Webber Oil Company in Bangor and MEREDA’s president, adding, “I hope that today we will not just dwell on the downside of what has happened to our economy, but that we will also look ahead to new opportunities that await us. The important thing is that we are all in this together.”

The conference featured forecasts for various real estate sectors in major Maine markets, as well as welcoming remarks from Maine Governor John Baldacci, a look at Maine’s economy by former state economist and Maine Development Foundation President Laurie Lachance, and an overview of capital markets by Larry Wold, president of TD Banknorth in Maine.

“Our presenters all spoke with caution about the economy in the year ahead, but real estate fundamentally remains a good investment and there are opportunities out there, especially for those with good credit and patience,” said Cota. “Many of our members have been through economic downturns before, and our industry will play an important role in getting Maine’s economy back on track.”

Held along with the conference was MEREDA’s Fifth Annual Member Showcase, where 60 MEREDA members exhibited their products and services. The forecast conference and member exhibits provide a major informational and networking opportunity each year for members of Maine’s commercial real estate industry.

The following are some highlights of the forecasts presented by various Maine real estate professionals and other experts at the conference:

Jim Harnden, Ram Harnden Commercial Real Estate, 207-773-3531,

While rentable space in the Greater Portland office market grew by 2% in 2008, the overall vacancy rate was up for the second year in a row, ending the year at 8.6% (compared to 13.5% nationally). While Greater Portland is doing better in terms of lower vacancies than other markets in the region such as Hartford and Boston, the office market remains soft and will continue to experience growth that is below historic averages. No significant new construction is expected to be completed in 2009 and vacancies are expected to increase by 1% to 2%, resulting is a decrease in the absorption rate for existing space.

Paul Badeau, Lewiston-Auburn Economic Growth Council, 207-784-0161,

A diversified economy of financial services, precision manufacturing, transportation, health care telemarketing and retail is helping the Lewiston Auburn area weather the current economic storms. Distribution and logistics will continue to be a major focus for the area which boasts a well developed inter-modal transportation network, a Foreign Trade Zone, and a new office/industrial park, which is permitted and ready for tenants.

Tom Dunham, NAI/The Dunham Group, 207-773-7100,
Greg Hastings, NAI/The Dunham Group, 207-773-7100,

Lay-offs, closings and downsizing have created an oversupply of industrial space in Southern Maine and despite falling lease rates, demand remains low. It’s a tenants’ market and landlords should expect to make concessions. With all the money that will be poured into the economy through federal stimulus programs, higher inflation is likely headed our way. That means tenants should be seeking long-term, fixed cost deals, while landlords should be trying to get shorter terms and cost-of-living adjustments into leases. There is little new construction happening, and even though there is not a lot of space for sale, there is enough property on the market so that those thinking about building should consider buying and renovating instead.

Laurie Lachance, Maine Development Foundation, 207-622-6345,

Maine’s our ability to grow depends on national economic conditions and no one knows exactly when our economy will turn around. This is a highly unusual set of circumstances and far from a "typical" recession. It is virtually impossible to predict how far we might fall and when the turnaround will begin – but we must take action to prepare for the challenges and take advantage of the opportunities that will arise once the storm ends. Tough times will give us the courage to make the hard decisions that we've struggled with over the years. 2009 will be extremely challenging – but with a laser focus and a faith in Maine – we'll emerge stronger.

Lawrence A. Wold, TD Banknorth, 800-462-3666

For the short term, 2009 into 2010, expect to see regulators and risk managers gain more influence over capital markets. Borrowers can expect to see lower loan-to-value ratios, meaning they will have to come up with more equity to get financing. There will be no speculative lending and lenders will be requesting more and tighter loan covenants, as well as shorter amortization schedules. Banks also will require a full banking relationship with borrowers. For 2010 through 2012, liquidity should return to the market, and lending and credit standards should start to relax.

Brit Vitalius, Sullivan Multi-Family Realty, 207-318-2555,

Multi-family sales in Portland should increase slightly in Portland, even as prices drop a little further. Outside of Portland (Westbrook, Saco/Biddeford, Lewiston/Auburn), prices will continue to fall, but sales volume may start to rise by the end of the year. For two- to four-unit buildings, foreclosures and short sales will continue, but low interest rates will increase buyer interest. High quality properties and those on the Portland peninsula will maintain their value. For 5+ units, buyers will push for higher capitalization rates, and a few buyers will emerge to take over low-income inventory. Rental rates will flatten and job losses will leave some tenants unable to make payments.

Anne Weigel, Coldwell Banker Residential Brokerage, 207-253-3159,

Prices will continue to fall in 2009, with another 5% to 10% drop possible. Some areas will perform better than others, but each real estate market will be driven by local economic conditions, including unemployment rates and the effects of foreclosures and short sales. For
buyers, low prices and low interest rates mean this is a great time to get into the market or trade up. For sellers, properties have to be in great shape and priced right to sell in this market. For investors, as prices drop real estate becomes an attractive alternative to other investments.

Matthew Cardente, Cardente Real Estate, 207-775-7363,

Portland’s Old Port area has seen at least ten storefronts vacated in the last year due to closings or re-locations. With more vacancies expected this year, concessions from landlords will likely result in a downward adjustment of rents. Throughout Maine in general, new retail development will continue to slow in 2009 due to the soft economy and saturation in major hubs along I-95 and I-295. Struggling national retailers will continue to pull out of Maine, increasing vacancies which will be slow to be absorbed. Small retail centers with two to five tenants will remain strong.

Sean Riley, Maine Course Hospitality Group, 207-865-6105 ext. 635,

Occupancy rates nationally are predicted to drop slightly and average daily rates (ADR) are expected to see below-average growth. Here in Maine, four new hotels are forecasted to open in each of the next two years, with construction prices taking a slight downward trend. Mid-scale projects in the $7 – 10 million range will find financing, and local lending relationships will be important. Rates may remain flat or go slightly lower, with the health of the economy obviously having an impact on industry performance in 2009.

Founded in 1985, MEREDA is an organization of commercial real estate owners, developers and related service providers, whose mission is to promote an environment for responsible development and ownership of real estate throughout the state of Maine.

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