Biddeford/Saco has been basking in investment lately. At the Maine Real Estate and Development Forecasting Conference in January, several presenters noted that new money has been pouring into investment properties, such as multi-family buildings, and into retail along Route 1.
Now, many months later, that investment is still going strong. What’s driving that activity? For answers, Portland Press Herald Business Editor Carol Coultas tapped a panel of experts. Sharing their insights at the first Biddeford/Saco Business Breakfast Forum on Sept. 19 were Gary Vogel, partner at Drummond Woodsum law firm and president of the Maine Real Estate and Development Association; Brit Vitalius, founder of Vitalius Real Estate Group and head of the Southern Maine Landlord Association; and Mat Eddy, economic development director of Biddeford who has 35 years of experience in economic development policy and planning.
Here are some of the takeaways:
All the panelists said they are seeing investment prompted by number of sources: investors priced out of the Portland market; the redevelopment of the cities’ historic mills; the removal of MERC, the downtown incinerator in Biddeford; the availability of tax credits; the impact of nearby University of New England; the trend toward urbanization by young people; and more.
Noting that “Portland prices are crazy,” Vitalius said investors are looking for alternatives in places like Saco, Biddeford, Brunswick and Westbrook. He added because the commercial real estate market has been so hot in general, a lot of people are looking for investment opportunities. He sees two levels of investment: in the cities’ historic mills and in the two-three-or six-unit multi-family buildings that need some TLC.
Professional developers, some from Portland, are coming to town attracted by the potential in mill redevelopment, while entry-level investors are looking at the multi-family units.
Moderator Carol Coultas led a discussion about Biddeford/Saco’s busy commercial real estate investment on Sept. 19 at the People’s Choice Credit Union in Saco. Strawberry Moszny photo
Eddy said his office has seen a steady stream of young people, especially from Brooklyn, who are buying housing and businesses as an investment. The city has recently adopted incentives to attract housing investment, he said. Research shows on the rental side of the market, roughly half of the tenants in the redeveloped mill buildings are 20-somethings.
The cost to enter the multi-family market in Biddeford/Saco is roughly half that of the Portland market — the median sale price of $527,500 in Portland versus $265,000 in Biddeford/Saco — but the initial returns are a bit lower. Cap rates in Portland have been running about 7 compared with 8 or 9 in Biddeford/Saco. But investors are motivated to increase those returns by updating and improving their properties, said Vitalius, noting there’s still a lot of opportunity to do that locally.
Vogel said the low-hanging development fruit in Portland is gone, and that many developers are frustrated by that city’s long municipal review process and fees. Incentives like TIFs, state tax credits and density incentives can attract developers, most of whom operate with thin margins. Now that constructions costs have spiked, those incentives matter even more. A developer can get a lot of flexibility by coming to the Biddeford/Saco area, he said.
Eddy said while the area is happy to get some spillover investment from people priced out of the Portland market, or from developers frustrated with doing business with Portland, Biddeford/Saco also has enough going for it independent of what’s happening in the city to the north. He said proximity to Boston has sparked a lot of commuters, and Biddeford has the youngest median age of any city in Maine, which in itself provides an economic and cultural spark.
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