Thursday, April 24, 2014
This year's forecast extends the industry's cautiously optimistic tone that's been characteristic of the past few years. Granted, office vacancy rates are still relatively high compared to where they were before the recession. But tenants are finally taking advantage of the renters' market, consolidating their operations and upgrading to higher-quality buildings.
This chart from the report shows recent regional trends in vacancy rates for the fancier "Class A" office space, compared to more affordable "Class B" spaces:
CBRE | The Boulos Company
Note how Class A vacancy rates peaked in 2010. CBRE broker Drew Sigfidson (who also serves as the president of MEREDA) writes that "we’re starting to see signs of tenants from Class B buildings moving into Class A opportunities at lower price points."
Empty offices downtown are also slowly finding new occupants:
CBRE | The Boulos Company
CBRE's survey also notes several new office developments in the pipeline — the big "Forefront at Thompson's Point," as well as smaller developments, like the office development that received planning approval last year on West Commercial Street in Portland's West End. Both projects seem to be waiting to sign a lease with a big anchor tenant before they break ground. Still, even though there's still a lot of existing office space on the market, there are at least a few developers with enough confidence to believe that there might be an opportunity to sign big tenants and finance brand-new buildings.
And some big non-office developments are also in the works, from the apartment towers of the proposed "Midtown" development in Bayside (pictured below) to the numerous hotels being approved for construction in downtown Portland.
Sketch of the proposed "Midtown" development in Bayside, by architects Perkins Eastman. Courtesy of the City of Portland.
CBRE notes that record-low interest rates, along with stronger banks that are increasingly competitive in their search for solid investments, are making commercial properties more attractive for investors and developers. And while the region's offices still have a lot of space to fill, niche markets like hotels, multifamily apartment buildings, and retail space are substantially harder to come by, and more conducive to new construction.
There's a lot more detail in the full report: download it here.
Commercial Confidential tracks Maine's business leaders and economic indicators.
I'm an economics wonk and an online content producer for the Portland Press Herald.
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